UPDATE: Snap Lake diamond mine snaps shut, 434 laid off

UPDATE: Snap Lake diamond mine snaps shut, 434 laid off
Snap Lake mine is 220 km north of Yellowknife.

More than 400 people will likely be looking for jobs over Christmas after De Beers Canada announced it had suspended mining at Snap Lake.

De Beers Canada CEO Kim Truter confirmed on Dec. 4 the diamond mine 220 kilometres north of Yellowknife, which has not turned a profit since opening in June 2008, would spin down operations for the next one to nine months and move to care and maintenance operations.

De Beers had warned an unexpected water problem at the mine was costing millions to deal with and threatened its viability. High levels of dissolved solids forced the company to capture water leaking into the mine and treat it before discharging it into the lake.

The world’s largest diamond producer, the company has cut global production three times in 2015, and in October said it would move its Canadian headquarters from Toronto to Calgary by next June to cut costs and better support its mines. De Beers also operates the Victor Mine in Timmins, Ontario. The price of diamonds is down about 18 per cent year-over-year.

Suspension work at Snap Lake will require approximately 120 employees, while the care and maintenance phase will require approximately 70 employees. Forty-one employees have been transferred to De Beers’ Gahcho Kué Project, with the potential for another 60 to transfer at some point in 2016. A total of 434 employees have been laid off with 16 weeks’ notice.

“The decision was not unexpected and (employees) were very pleased with the way we handled the situation, the certainty we gave them, and the range of alternatives, either ongoing employment or the actual termination process for those who are ultimately not required,” Truter told reporters in Yellowknife.

Hours later Premier Bob McLeod vowed the territory would survive the “pause in operations” while the diamond market is down.

“Today’s news illustrates the challenges our territory faces when it comes to resource development and the implications for our economy,” he said at a hastily-called press conference at the legislature Friday afternoon. “As a government, we will be taking the necessary steps to address the obligations and commitments De Beers has made under existing legislation, licenses and agreements to make sure that they are honoured … our priority is the individuals and their families who are directly affected by this decision and the impacts that this decision will have on NWT business owners and our communities.”

McLeod said the government encourages NWT residents – about 300 of the mine’s 700-person workforce lives in the territory – to seek GNWT support where it exists.

Employees in 14 NWT towns

There are Snap Lake workers from 14 NWT communities according to a company report that describes employment at the mine in person-years. According to De Beers a total of 489 person-years were worked by NWT residents at Snap Lake in 2014. With 181.3 person-years worked or 70 per cent of the total, Yellowknife residents led the way, followed by 32.8 in Hay River, 13.5 in Behchoko, 8.1 in Fort Smith, 4.8 in Deline and 4.2 in Fort Providence, with smaller totals from Whati, Gameti, Wekweeti, Fort Resolution and Tulita.

Days away from the Dec. 8 swearing-in of MLAs elected to the 18th Assembly, McLeod said the NWT had seen closures before and survived.

“We have been assured that there will be no consequences on the Gacho Kué project – which is also owned by De Beers Canada with Mountain Province Diamonds,” McLeod said.

Diamond prices down 18 per cent

“Construction there is 70 per cent complete and production is still scheduled for late 2016. We know that there will be some challenges but that the economy will recover.”

Senior bureaucrats with McLeod for the press conference said the value of royalty payments by resource companies to the GNWT are kept secret according to regulation.

Yellowknife Mayor Mark Heyck told the Journal it was too early to say how many capital residents would be affected by the closure, or what impact it would have on the city’s budget.

“Our thoughts are with the individuals and the families who are affected by the De Beers announcement,” he said. “It is our hope this won’t be a prolonged move and the mine will reopen at some point in the not-too-distant future.”

NWT and Nunavut Chamber of Mines president Tom Hoefer said the closure was a “shock” the GNWT needs to work to avoid in the future.

Statistics the Chamber shared in the wake of the announcement show Snap Lake spent $182 million in the North in 2014 and $2.2 billion in total since 2005, including $863 million with Aboriginal companies. It has created nearly 7,000 person-years of employment, with 2,309 of them worked by Northerners.

Snap Lake spent $1.8 million on “social investment” in 2014, including $110,000 in financial and in-kind support to the Deninu Kué First Nation (DKFN) Development Corporation, according to De Beers. Through the program, 20 housing units from the former Snap Lake Mine construction camp were donated to the DKFN to support a job training program joint venture between the Development Corporation and Arctic Canada Construction Ltd.

NWT businesses provide critical goods and services to Snap Lake, including personnel for site services support, transport of fuel and supplies on the winter road, logistics and passenger flights, catering, environmental monitoring, explosives, pipe valves and fittings, screening for underground ground support, shotcrete and other supplies, according to the company.

Diamond mines created more than $574 million of GDP in 2014, a 21-per-cent increase over the year before, spending more than $20 million in property taxes and more than $5 million in fuel taxes.

Hoefer said the chamber will continue lobbying government, as it has for years, to improve the territory’s investment climate.

Hoefer said addressing the cost of living, which was identified as a top concern by mine workers in surveys conducted five years apart, in 2010 and 2015, would be a start.

“There’s lots of talk but no action,” he said.

He said infrastructure is the other major concern.

“This year we released a report called Leveling the Playing Field, to quantify the cost of living in the North and to come up with ideas for how they can help,” he said. “It’s a hot topic, has been for a couple of years. There’s lots of talk about building roads, and at one point even power lines, but again the commitments haven’t been made yet. I’m hopeful the Liberal government … would also come forward with something.”

While the premier argued in his statement De Beers was subject to forces beyond the GNWT’s control, Hoefer said there are steps government can take to make the jurisdiction more competitive.

“Of all the factors that kept us down at the bottom (between Yukon and Nunavut, where hundreds of millions of dollars more has been spent on exploration in the last decade), we have changed almost nothing,” he said. “We haven’t settled land claims, we haven’t changed our approach to alienating lands for conservation purposes, as a matter of fact we’re trying to crank that up even more. So you say, ‘all right, let’s say the market changed tomorrow.’ Would that graph improve? I don’t think so. If we get more people up here investing, we’re going to find more robust deposits we can mine.”

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