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Sept 5 (Reuters) - Dominion Diamond Corp is eyeing an expansion that could extend the life of its recently acquired Ekati mine in northern Canada by 10 to 15 years, and may return cash to shareholders.
The company's announcement, released late on Wednesday, gives clues to how it might use its cash reserves after Rio Tinto took its diamond assets off the market in June.
Dominion, formerly called Harry Winston Diamond Corp, also reported a second-quarter loss, hurt by costs related to the Ekati acquisition. It also owns 40 percent of Diavik, a mine in Canada's Northwest Territories controlled by Rio.
Dominion said it plans to kick off the permitting process to develop a new area called Jay Pipe this autumn near the Ekati mine. Dominion will submit a project description to regulators for first comments. It has said that developing Jay Pipe, which is located under a lake, could be challenging. But under the current mine plan, operations at Ekati will wrap up in 2019.
On a call with analysts and investors on Thursday morning, Chief Executive Bob Gannicott said Dominion aims to start production at Jay by 2020. Once more details are finalized, it will consider share buybacks or a dividend.
"We're certainly not going to just sit on the cash," he said, "But we need to have confidence in our economic forecasts going forward through the Jay development."
Dominion agreed to buy BHP Billiton's majority stake in Ekati last autumn, and agreed in January to sell its luxury jewelry business to Switzerland's Swatch, shifting its focus to mining.
Flush with cash from the Swatch deal, Dominion had been widely expected to bid on Rio Tinto's stake in Diavik. But in June, amid rising debt costs and volatile commodity prices, Rio scrapped plans to sell its diamond assets.
Dominion reported a net loss of $16.3 million, or 19 cents a share, compared with a profit of $4.8 million, or 6 cents a year earlier. Excluding costs associated with the Ekati deal, earnings would have been $11.1 million, or 13 cents a share.
Its sales rose to $261.8 million from $61.5 million, boosted by the Ekati acquisition.
Dominion's shares edged up 1 percent to C$13.50 in early trading on the Toronto Stock Exchange.