YELLOWKNIFE – A decline in diamond prices because of lower growth in Chinese jewellery demand is dulling the appeal of Canada’s Arctic diamond industry, with the resulting drop in exploration hurting the region’s long-term prospects.
Exploration spending in Canada’s diamond-rich North-west Territories (NWT), the world’s third-biggest producer, is forecast to drop 54% this year, according to a Canadian government estimate earlier this year. That is bad news for an industry where even profitable deposits can take 10 to 20 years to develop into a mine.
“It is worrisome,” said Tom Hoefer, executive director of NWT and Nunavut Chamber of Mines, which is based in Yellowknife, the territories’ economic hub and capital. “Exploration is the lifeblood of mining.”
Once the engine for booming diamond demand, the growth in China’s appetite for polished gems has slowed alongside its economy.
In an attempt to ease a supply glut, miners have lowered production. Last week, De Beers chopped its global output for the third time this year.
Producers have also been cutting prices, and several different benchmark measurements of diamond prices have been dropping in recent months.
In some cases, spending is being cut. De Beers Canada will close its Toronto headquarters and relocate operations to Calgary, Alberta by the end of next June as part of a restructuring.
Since its first diamond mine opened in 1998, Canadian production by value has boomed, and lags only Botswana and Russia. Most of the industry is based in NWT – which has a land mass bigger than France and Germany combined, but with a population of just 43 600.
Over the past five years, global diamond production grew just 4% to 124,8 million carats, but Canadian output increased nearly 10% to some 12 million carats, according to data from the Kimberley Process, which monitors sales.
Even as prices slump, De Beers is building NWT’s fourth diamond mine, Gahcho Kue, which is expected to have an 11-year life span. On a recent flight over the treeless tundra, the remote site was buzzing with backhoes, trucks and hundreds of workers preparing for production to begin in late 2016.
But companies have no other new mines planned and existing operations are “long in the tooth,” Hoefer said.
“Within 10-15-20 years, we may be seeing some of these diamond mines shut down,” said Mark Heyck, the mayor of Yellowknife, a city established because of gold mining and fortified by the growth of diamond mining.
De Beers’ existing Snap Lake mine, which is not yet profitable, will operate until 2028.
Rio Tinto sees production at its majority-owned Diavik mine ending in 2023. Dominion Diamond, which holds 40% of Diavik and 89% of the Ekati mine, awaits expansion permits that could extend Ekati by 11 years to 2031.
The mining industry also frets that a recent NWT draft plan, to increase land set aside for conservation to 40% from 9%, could restrict future finds.
Unsettled land claims are another concern.
Some 144 000 square kilometres of mineral-rich land is “frozen” because land claims have not yet been settled with aboriginal groups, said NWT minister of finance and environment and natural resources Michael Miltenberger.
To help foster development, the government is proposing a C$170 million (N$1,8 billion) all-weather road on the south end of a winter ice road connecting Yellowknife with the main diamond mining area.
– Nampa-Reuters
