Dominion Diamond Corporation announces trial results, strategies and departure of CFO

Development opportunities, including the Sable and Jay projects at the Ekati Diamond Mine, will continue to be the focus for Dominion Diamond Corporation. — Photo courtesy Dominion Diamond Corporation

YELLOWKNIFE, NT (July 6, 2016) – Dominion Diamond Corporation (TSX: DDC, NYSE: DDC) (the “Company” or “Dominion”) is pleased to announce an updated capital allocation strategy and the sorting results of a recent production trial of Misery Main ore. Dominion also announces the departure of its Chief Financial Officer, Ron Cameron.

The Misery Main production trial, which consisted of only Misery Main ore feed, was conducted in late May and early June. The trial resulted in the recovery of approximately 130,000 carats. These carats have now been sorted and valued, and the Company’s average estimated market price for this sample is $72 per carat, which includes the impact of the Company’s strategy for liberation of additional small diamonds.

This confirms the Company’s previous estimate of diamond values for Misery Main. Brendan Bell, Chief Executive Officer stated, “We are extremely pleased with the results of the production trial at Misery Main, the highest value ore body on the Ekati property. Confirmation of the average carat values for Misery Main, combined with additional confidence and definition on the development capital program, has confirmed the strength of our mid-term cash flow. Strong existing and future cash flows, coupled with the strength of our balance sheet and cash position, allows us to implement a capital allocation strategy that supports the growth of Dominion while also returning additional value directly to shareholders."

With the approval of a construction decision for Jay, the Board of Directors has now also completed the review that it undertook, with the assistance of its financial advisor, of possible initiatives to maximize shareholder value. After careful consideration, the Board has determined to continue to focus on the development opportunities at the Company’s core assets, including the Sable and Jay projects at Ekati and the A-21 pipe at Diavik, and to prioritize return of capital to shareholders. The Company is therefore pleased to announce an update on its capital allocation strategy, which includes allocating capital to development projects and returning capital to shareholders through a share buyback program. The company will also pursue the divestment of its Toronto office building.

“We are very pleased to provide clear direction on our capital allocation strategy,” said Mr. Bell. “Our business is generating consistent and reliable cash flows which are strong enough to both fund our development opportunities and support a share buyback program, and in the future, an enhanced dividend strategy.”

The Company announces its intention to commence a normal course issuer bid (“NCIB”), subject to approval from the Toronto Stock Exchange (“TSX”). The Company intends to apply for the right to purchase up to 6,150,010 of its common shares, representing approximately 7.2% of the currently issued and outstanding shares and 10% of the current public float, over a one-year period through the NCIB. All shares purchased through the NCIB will be subsequently cancelled.

Purchases under NCIB may be made through the facilities of the TSX, the New York Stock Exchange or other published markets by means of open market transactions or by such other means as may be permitted by the TSX and applicable U.S. securities laws. The price the Company will pay for any common shares will be the market price at the time of purchase or such other price as may be permitted by applicable regulatory requirements. The actual number of common shares that may be repurchased under the program and the timing of any such repurchases will be determined at the discretion of the Company.

The Company believes that from time to time the underlying value of its assets is not reflected in the market price of its common shares, and therefore purchases of the Company’s common shares may represent the best use of shareholder’s capital. Such purchases are expected to increase the equity interest of all remaining shareholders. Dominion has also entered into a process to dispose of a non-core asset. The asset is the Company’s 100 per cent owned office building located in downtown Toronto and the sale is expected to occur in the third quarter of fiscal 2017. The current dividend policy of US $0.40 annually per common share, paid semi-annually, will represent the minimum level of the dividend for the current fiscal year. The Company intends to look at options to enhance the dividend, based on the strength of the Company’s cash flow. However, the current dividend policy will not be changed until the Company has more visibility on the short-term impacts of the June 23 fire in the Ekati process plant.

Ron Cameron, Chief Financial Officer, will leave Dominion effective July 15. Mr. Cameron has been critical in building a successful Yellowknife-based corporate headquarters for the Company. Cara Allaway will fill the role on an acting basis as Dominion conducts recruitment for a new CFO. Ms. Allaway is currently the Company’s Vice-President Group Controller.