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UPDATE 1-Dominion Diamond, Stornoway held merger talks -sources

Tue 21st March, 2017 12:27am
(Adds details, stock move, context) 
    By Nicole Mordant and John Tilak 
    VANCOUVER/TORONTO, March 20 (Reuters) - Dominion Diamond 
Corp  DDC.TO   DDC.N  and fellow Canadian diamond miner 
Stornoway Diamond Corp  SWY.TO  have held talks about a 
potential merger in recent months, people familiar with the 
matter said on Monday. 
    World No. 3 diamond miner Dominion, target of a $1.1 billion 
bid by U.S. billionaire Dennis Washington, and Stornoway, a 
small miner with a diamond mine in Quebec, declined to comment. 
The people declined to be named as the discussions are private.  
    One of the people said the talks were still ongoing.  
    The talks include Stornoway's chief executive officer and 
president, Matt Manson, becoming CEO of the merged group, one 
source said, adding that the discussions on an all-share merger 
started in January. 
    Dominion, which owns the Ekati diamond mine in Canada's 
Northwest Territories and a 40 percent stake in the nearby 
Diavik mine, is looking for a new CEO after announcing on Jan. 
30 that Brendan Bell had resigned.*:nL1N1FK0RC 
    A union with Dominion would give Stornoway, which owns a 
single mine, an avenue for growth, the sources said.  
    On Sunday, The Washington Companies, a group of privately 
held North American mining, industrial and transportation 
businesses founded by Dennis Washington, announced that it had 
made a $1.1 billion all-cash proposal for Dominion.*:nL2N1GX0P3 
    Dominion said in a statement late Sunday that its board had 
considered Washington's unsolicited proposal, but the terms of 
the proposed talks were unusual and unacceptable.*:nBw3wdBHqa 
    The Washington offer comes at a time when some analysts are 
talking of diamond supply peaking as big new deposits become  
harder to find and mines, often in remote regions, take longer 
and are more expensive to build. 
    Shares in Dominion surged as much as 26 percent on Monday on 
the Washington proposal to a session high of $12.53 on the New 
York Stock Exchange. They closed at $12.20 for a gain of 23 
percent, below the $13.50 a share Washington offered. 
    Lawrence Simkins, president of Missoula, Montana-based 
Washington, said in Sunday's statement the group remained "fully 
committed to completing this transaction."  
    The group declined to comment on Monday when asked if it 
would take its offer directly to Dominion shareholders. 
    Washington's proposal puts Dominion into play and brings the 
"long-awaited kickoff of Canadian diamond consolidation," 
brokerage Canaccord Genuity said in a note to clients.  
    In addition to Washington, there are several other "logical" 
potential suitors for Dominion, including global mining giant 
Rio Tinto  RIO.L   RIO.AX  and Anglo American-owned  AAL.L  
diamond giant De Beers, Canaccord said.  
    Rio is already a partner of Dominion, owning 60 percent of 
the Diavik mine. De Beers has diamond mines and exploration 
interests in Canada.  
    Both Rio and Anglo declined to comment.  
    "There is certainly the potential for lots of people to take 
a look at (Dominion). Whether that translates into meaningful 
action I would be somewhat more cautious on," BMO analyst Edward 
Sterck said. 
    Large global miners are still slashing heavy debt loads as 
they emerge from a deep commodities downturn, he said. 
 (Reporting by Nicole Mordant in Vancouver and John Tilak in 
Toronto; Additional reporting by Barbara Lewis in London and 
Susan Taylor in Toronto; Editing by Denny Thomas and Leslie 
 ((; +1-778-374-3854; Reuters 
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