NWT DIAMONDS: The Year in Review

NWT DIAMONDS: The Year in Review

Natural Resources Canada estimated in March 2012 that Canadian diamond production fell by 8.5 per cent in 2011, mainly due to lower grades at BHP’s Ekati mine. But the value of shipments increased by 6.1 per cent to $2.5 billion nationally. In the Northwest Territories alone, close to 2,785 people are employed in the diamond mining industry. At a very conservative estimate of $65,000 in annual wages for each person employed, close to $181 million is paid out every year. And while naysayers point to Ekati’s slowing production, De Beers’ Gahcho Kué is set to keep the industry strong in the territory for years to come.

Construction expected to commence at Gahcho Kué diamond mine in 2014

“Two significant milestones were reached for the Gahcho Kué Project in 2011. The joint venture management committee approved the feasibility study in June 2011 and later in July 2011, the Mackenzie Valley Environmental Impact Review Board deemed the proposed mine’s Environmental Impact Statement to be in conformity with the Environmental Impact Review (EIR) terms of reference,” the De Beers review states.

The project proposes mining three kimberlite pipes located under Kennady Lake, with a forecast 11-year mine life.

The mine is expected to employ 360 people and cost $550 million to build.

De Beers targets $110M to Northern suppliers

In late June, De Beers Canada released its 2011 Year in Review. According to the document, the company spent $110 million on local goods and services throughout the North last year, with $40 million of that going to Aboriginal suppliers.

De Beers employed 1,023 people throughout Canada in 2011, and 881,000 carats of diamonds were produced at Snap Lake alone over the past fiscal year, the review states.

A revised mine plan was completed in the first half of 2011 that will see Snap Lake open new areas of kimberlite, with steady production through to 2030.

Snap Lake’s new land use permit was issued by the Mackenzie Valley Land and Water Board in February last year, and the company reports an application for a new water license was filed in June 2011, followed by successful public hearings in November.

Snap Lake continued its ramp-up to full production throughout 2011, targeting a design capacity of 1.4 million carats annually by 2014.

The mine came under new leadership late in 2011 when Maxwell Morapeli took over the helm as general manager. A 20-year De Beers veteran who has worked at a number of operations in southern Africa, Morapeli was project manager of the Gahcho Kué Project from 2006-2008.

During 2011, an 11-hole surface drill program was undertaken at Snap Lake, combined with a seismic survey to explore and define an area of the kimberlite located 700 m to 1,300 m from the current site, the review states.

Ekati and Diavik may become one company

Ekati also released its year-end report at the end of June, noting that its mine is in the final stages of production with carat volumes falling by 29 per cent by the end of the fiscal year in late March. However, with 1.37 million carats still being produced by Ekati annually, there are still interested buyers for the mine.

Kohlberg, Kravis and Roberts and Co., Harry Winston Diamond Corp. and Stornoway Diamond Corp. are all rumoured to be in talks with BHP Billiton Ltd. to buy its 80 per cent stake in the mine, media reports state.

The sale of Ekati is estimated to be worth between $500 and $750 million.

Media reports also speculate it is possible BHP Billiton and Rio Tinto may combine their assets in Ekati and Diavik through an initial public offering to develop a new company in an effort to maximize current shareholder value.

Diavik top producer in 2011

Diavik produced 1.6 million carats of diamonds in the 2011 fiscal year, leading the pack of Northwest Territories diamond producers.

In late April, Rio Tinto, operator and 60 per cent owner of the Diavik diamond mine, achieved an important milestone in its transition to underground mining by surpassing one million tonnes of ore produced from underground mining in sub-arctic conditions.

Production from Diavik’s underground mine commenced in early 2010 in conjunction with open-pit operations. The transition to a fully underground operation will finish in 2012, sustaining Diavik production past 2020.

“To prepare for underground mining at Diavik, several years of design and engineering feasibility work were conducted and over $800 million of funding was required from Rio Tinto and its 40 per cent joint venture partner in the mine, Harry Winston,” a company report states.

One month earlier in March, Rio Tinto announced it would also launch a review of its diamond operations and might sell its mines, including Diavik.

The company, which operates three diamond mines, including Diavik, unofficially encouraged bids for the mine in an early-spring news release.

“We are reviewing whether we can create more value through a different ownership,” said Rio Tinto’s diamonds chief executive Harry Kenyon-Slaney.

Rio Tinto also announced on July 12 that it is undergoing an executive shake up. As part of that shuffle, Kenyon-Slaney will move to Brisbane, Australia to become its chief energy executive, commencing Sept. 1.

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