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Jan. 2000

Carol Besler, the editor of Canadian Jeweler, gives DRB an exclusive report from her on-the-scene visit to the new Ekati mine in the Northwest Territories.

Mining diamonds in Canada’s north is so far removed from the hot, dusty pits of Africa and Australia that it might as well be taking place on another planet. Not only is the site old and isolated, developing it has required extraordinary feats of engineering. The northern kimberlites are invariably buried under frigid lakes, necessitating a complex system of dams, dykes and diversion channels, not to mention extensive environmental monitoring and reclamation programs.

Because Ekati is inconveniently out of the way (it can only be accessed overland by driving eight hours on a winter road that is open just three months of the year), getting at the diamonds has involved not just building a mine but an entire self-contained municipality, with its own fire station, hospital, water-treatment plant, generating station, housing facilities, and recreation center, where a staff of 22 cooks serve about 1,000 meals a day and a force of 50 security guards checks any covetous urges. The frenzied structure that sustains the day-to-day function of Ekati-town makes the pits there seem almost beside the point. But the mine, of course, is the point.

The Ekati mine produces 10,000-12,000 carats a day, worth an average of $125 a carat, which works out to $1 million a day. Average production is estimated at three million carats, and revenue is projected at about $400 million a year. Multiplied by 25 years, the mine should generate over $10 billion.

But it’s not easy money. Blasting the gems out of the granite and permafrost is stunningly expensive. The cost to build the mine came to almost $1 billion, and operating costs are over $100 million a year. There is $40 million worth of equipment on site, and much of it has a short life-span. The seven-inch drill bits, for example, that are used to create the blast holes in the pits are worth $7,000 each — they need to be replaced every other day. A fleet of 200-ton 27-meter-wide trucks haul 80,000 tons of rock out of the pit every day — their tires alone cost $30,000 each.

The mine is comparable to De Beers’ Venetia operation in South Africa in that its DMS (Dense Media Separation) plant is the same size and, like Venetia, it’s a sophisticated automated operation that affords workers very little contact with diamonds. The difference in Canada is that employees — 350 at a time — live on site. The isolation, combined with 12-hour shifts that run for two weeks on, two weeks off, and the general proximity in which people live, make it necessary to have rules. There’s no alcohol or parties. People are expected to get along with each other and engaging in any kind of altercation is seriously frowned upon.

The mine also attends to the physical health of its employees. There’s a full-sized, on-site gymnasium, with a running track, squash courts and a weight room. The kitchen is open 24 hours a day, complete with a dessert bar and mini-ice cream parlor. If anyone is injured working out (or over-eating), there is a sick bay on site.

Ekati, and its soon to be neighbor, Daivik, 30 km. to the South, have not only redefined the way diamonds are mined but also how they are marketed. BHP never entertained the idea of marketing its full run-of-mine production through the CSO. And if it had, local and federal governments would almost certainly have prevented it. Anti-trust concerns, a value-added contract with the Northwest Territories government, and the weight of its own market intelligence ultimately led BHP to limit its CSO allotment to just 35%. Less than a year later, Diavik’s 40% owner, Aber Resources, announced it would sell half its share (the best half) to Tiffany, marking the first time a diamond mine has ever sold directly to a retailer. The rest of Diavik’s production (60%) is owned by Rio Tinto, which happens to be the majority owner (60%) of Argyle, famous for its 1996 break with the CSO.

The Northern Territories is dotted with thousand of lakes, many possibly kimberlite-bearing; thousands of square feet have been staked for exploration. The combined production of Diavik (which is expected to generated revenues of $300 million a year for the first seven years) and Ekati already represents 10% of the world’s diamond production, and several mining companies (De Beers’ Monopros among them) are in the bulk sampling stages on their various claims.

Next month: Canada tries for a cutting industry.

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