Burgundy Diamond Mines' subsidiary Arctic Canadian Diamond Company has secured a C$115 million senior secured loan from Canada's LETL facility to support operations amid US tariffs impacting diamond markets. The funding enables continued development and operational restructuring at the Ekati mine.
- C$115 million senior secured loan from Canada’s LETL facility
- Loan supports Ekati mine operations amid US tariffs on Indian diamond imports
- Loan includes issuance of over 1.1 billion warrants to CEEFC, partly subject to shareholder approval
- Significant financial restructuring including senior debt subordination and creditor concessions
- Operational adjustments include campaign processing and Antwerp office closure
Strategic Funding Amidst Tariff Pressures
Burgundy Diamond Mines Limited (ASX, BDM) has announced a pivotal financing milestone through its wholly owned subsidiary, Arctic Canadian Diamond Company Ltd. The company secured a C$115 million senior secured loan from the Canadian Large Enterprise Tariff Loan (LETL) facility, managed by the Canada Enterprise Emergency Funding Corporation (CEEFC). This facility is designed to support large Canadian enterprises affected by tariffs, notably the current 50% US tariff on rough diamond imports from India, a key global cutting and polishing hub.
CEO Jeremy King highlighted the critical nature of this funding, emphasizing its role in sustaining the Ekati mine’s operations during a period of significant market disruption. The loan provides a financial lifeline to navigate the challenging diamond market landscape while enabling Burgundy to focus on cost reduction and value optimisation within its Ekati complex.
Loan Terms and Warrants Structure
The C$115 million loan carries a maximum seven-year term with an interest rate tied to the Canadian Overnight Repo Rate Average (CORRA) plus a margin, with interest capitalisation options available for the first two years. In addition to the loan, Burgundy has agreed to issue over 1.1 billion unlisted warrants to CEEFC, exercisable into ordinary shares at A$0.017 each. While a tranche of these warrants has been issued under existing placement capacity, the majority awaits shareholder approval expected in early 2026.
This warrant issuance aligns CEEFC’s interests with Burgundy’s future equity performance, while the loan’s senior secured status places it ahead of existing debt, which has been subordinated and restructured as part of the financing conditions.
Operational and Financial Restructuring
As part of the loan conditions, Burgundy has undertaken significant financial restructuring. Existing senior debt holders have agreed to subordination and extended maturities, with payment-in-kind interest arrangements to ease near-term cash flow pressures. Environmental surety bonds and trade creditor arrangements have also been renegotiated to improve liquidity and operational flexibility.
Operationally, the company is adapting to market realities by implementing campaign processing schedules at the Misery underground mine and preparing to reactivate the Sable open pit and complete the Fox wash plant. These initiatives aim to enhance product quality and focus on higher-value deposits, notably the Fox deposit, which offers a promising 12+ year mine life.
Cost-saving measures include the closure of Burgundy’s Antwerp office, shifting to outsourced auction and tender services, reflecting a strategic pivot to streamline operations amid market headwinds.
Regulatory and Market Implications
Trading of Burgundy’s shares on the ASX remains suspended pending remediation of a prior breach of listing rules related to short-term financing arrangements. The company plans to seek shareholder approval to address these issues at the upcoming general meeting, a prerequisite for reinstatement of trading.
The loan and associated agreements impose several covenants, including maintaining Canadian employment levels, ESG and climate-related reporting, and delivering economic benefits to Canada. CEEFC also holds the right to appoint a non-voting observer to Burgundy’s board, underscoring the government’s active oversight of this strategic funding.
Looking ahead, Burgundy’s ability to leverage this financing to stabilise operations and progress development at Ekati will be closely watched by investors and stakeholders alike, particularly as diamond markets respond to evolving global trade dynamics.
Bottom Line?
Burgundy’s secured funding and restructuring mark a critical turning point, but market recovery and shareholder approvals remain key hurdles ahead.
Questions in the middle?
- Will shareholder approval for the Tranche B warrants be secured without dilution concerns?
- How quickly can Burgundy ramp up underground operations at the Fox deposit to improve profitability?
- What impact will ongoing US tariffs and global diamond market volatility have on Burgundy’s financial recovery?