North 2003
Section Index
Mining in Northern Canada
No more sneaking aroundThe secret is out: diamonds are big in the North
The first decade of Northern diamonds is over. The industry started with a clandestine hunt for gems but today, diamond companies are making a lot of noise in the North - and the rest of the world.
De Beers is topsThe largest diamond company in the world, De Beers, went private in 2001.
DB Investments, owned by the Oppenheimer family, Anglo American Plc, and Debswana Diamond Company, bought out 60 percent of its publicly traded shares.
The deal valued De Beers at US$18.7 billion. It secured control of De Beers to the fourth generation diamond industry Oppenheimer family and freed the company from investor pressure.
It also locked the Republic of Botswana - an owner of Debswana - into a partnership.
Earlier this year diamond competitor, BHP Billiton, spread its exploration wings into Botswana. Along with a diamond exploration program, it plans to increase its open market diamond sales to as much as 20 per cent from eight per cent of its total.
Buying and selling
De Beers provides 45 per cent by value of the world diamond total and about one third by volume. Botswana is the world's major diamond producer. Russia is second. But by the end of next year, Canada should be producing 10 per cent by value of the world output.
The United States is the biggest consumer of diamonds in the world. It accounts for 35 per cent of diamond sales, Hong Kong 26 per cent, Belgium 15 per cent, Japan six per cent, and Israel four percent.BHP Billiton's Ekati diamond mine is in its fourth year of production. It opened Canada's first underground diamond mine last year. The Diavik Mine started production last winter ahead of schedule and on budget.
Nunavut is right behind with its first diamond mine. Tahera Corporation is preparing for an environmental review on its proposed Jericho Mine.
Once all three mines reach full production, the North will produce over 12 per cent of the world's rough diamonds by value, putting Canada within the top five world diamond producers.
And companies are still exploring for new properties. The list of diamond hits keeps getting longer. Diamond-bearing kimberlite has been discovered on Melville Island, the Kitikmeot Region, Baffin Island, and close to Yellowknife.
Governments involved
The Nunavut government offers mineral exploration training and prospecting courses to Nunavummiut. The NWT advocates local hiring for mining and construction and is nurturing a diamond cutting and polishing industry. The NWT government created its own certification program for Canadian Arctic diamonds.
The international problem of "blood diamonds" was tackled worldwide last year with a United Nations effort called the Kimberley Process. Blood Diamonds are mined by warlords from Angola and Sierra Leone who use the proceeds to fund wars. Under the Kimberley Process, gems from 'clean' countries are certified before they are allowed export to a participating country. The North, and its 'clean' gems should benefit.
Gem markets
At the turn of the millennium, the diamond industry was hot, especially in the United States, the world's largest buyer of diamonds.
Rough gem prices rose and De Beers, the world's largest diamond marketer, was able to sell about US $1 billion from its stockpile.
Sales fell with U.S. stock markets. In the world diamond glut that followed, the price of rough diamonds fell by 20 per cent. The terrorist attacks on the US worsened the situation.
But 2002 saw a strong recovery. The industry is growing by between two per cent and three per cent per year according to BHP Billiton's diamonds and specialty products division.
Value of diamonds
A diamond's value can multiply by nearly eight times from the time it is mined until its sale as a piece of jewelry. About US $7.5 billion - 110 million carats of rough diamonds - was mined worldwide in 2000.
The value jumped to US $9.6 billion once the gems were sold for polishing and rose again to US$13.7 billion when the diamonds were sold to wholesalers as polished and cut.
The wholesale value of finished diamonds was US $28 billion but more than doubled to US $57.6 billion when the diamonds were sold as jewelry.
The profit realization from vertical integration has nudged many diamond mining companies - including the North's two diamond miners, BHP Billiton and Diavik - into the jewelry business. BHP Billiton is testing with its Aurius diamonds and Diavik's Aber Diamonds allied with high-end jeweler Tiffany and Co.
Polishing centers
Antwerp is the world's diamond-trading centre. India is the largest polishing centre and employs 800,000 polishers cutting industrial and lower quality gem stones.
Israel is the world's second greatest polishing force. Its industry is renowned for cutting high quality stones. Israel's net imports of rough in 2000 were 4.9 million carats for US$2.8 billion. Net exports of polished diamonds were 1.6 million carats for US$3.2 billion.
Russia is the third largest diamond polisher in the world and its presence is growing. There are about 10,000 Russians employed in the diamond cutting industry.
Canada's diamond polishing industry is still in the infant stages. There are four polishing plants in Yellowknife: Arslanian Cutting Works, Sirius Diamonds, Tiffany and Co. and Deton'Cho Diamonds - now Canada Dene Diamonds.
Branding
Diamond marketers took a lesson from "Coke" and are using slick advertising campaigns to draw buyers.
BHP Billiton created the exclusive Ekati brand for its Canadian cut stones. The brand was an experiment in online marketing. The company has since dropped the brand and is now pushing its Aurius label.
Diamond polishers also promote their brands. Yellowknife's Sirius Diamonds inscribes its gems with a tiny polar bear.
-Updated August 2003
