Northwest Territories Diamond Industry
Brief History • Charles Fipke and Stuart Blousson discovered diamonds in 1991 • Largest staking rush in Canadian History ensued • By 1998, BHP Diamonds and Dia Met Minerals had the first diamond mine, named Ekati, up and running Value • Diamonds are an extremely valuable commodity due to their rareness • Annual Production from Ekati mine is about $600 million, this is set to grow • The diamonds from Ekati are all of high quality, making this operation extremely profitable • The Ekati Mine curretnly accounts for 6% of worldwide production, analysts predict the NWT will acount for 12-15% of yearly production by 2005 • Only 20% of the money in the diamond industry comes from mining • Other 80% comes from "Value-Added Industries" such as sorting, evaluating, cutting, polishing, and making jewellery • The NWT Government made an agreement with BHP Diamonds to do much of the "Value-Added Industries" in Yellowknife • Currently there is a sorting and processing facility in Yellowknife and a few Cutting Companies • 12% of current Ekati Diamonds are cut in Canada, but with the training of new personnel, this number is growing Employment • These numbers appear small, but remember to consider the percentage increases as there are very few people in the NWT • Currently 130 jobs have been created, the majority of these in the cutting industry, 20 more jobs will be available soon • The Ekati Mine provides 800 jobs • The Government of the NWT negotiated that 31% of all employees must be aboriginal, and 61% of employees must be northerners • The Ekati Mine Exceeds these standards as 40% of employees are aboriginal and 78% are northerners • With the Diavik Mine almost completed, and the Snap Lake Diamond Project getting underway, the Diamond Industry is giving a large boost to the Territorial Economy Profitability • The Industry is highly profitable which is why De Beers ranks in the Fortune 500 largest companies list • Dia Met Minerals, owner of 29% of the Ekati Project, reported a 12 month profit of $50 million • The Exploration stages are expensive, but as soon as production begins Revenue makes up for the initial investment • Furthermore, the diamonds in the NWT are all gem-quality making it much easier to turn a profit Environment • The creation of a diamond mine in a pristine environment definitely has an environmental impact • The impact around the mine is significant, due to the pit mining, yet there is so much land in the NWT the impact on the arctic eco-system is minimal Foreign Competition • There are not enough diamonds to go around • The Ekati Mine has chosen not to use the De Beers Central Selling Organization (CSO see De Beers section) • BHP Diamonds shall market their diamonds on their own • However, De Beers reached a compromise with BHP Diamonds and they agreed that De Beers shall market 35% of annual Ekati Production • Due to the incredible demand for gem-quality diamonds, all competitors can find a place to sell their diamonds Soft Markets • The market for diamodns softens when the world economy in general slows or enters a recession • When people dont have money, diamonds are the first thing they stop buying • The CSO is able to keep prices high during slumps by releasing fewer Diamonds • Less diamonds are sold, but prices remain high • For Example during the Asian Recession in the late 1998, the CSO reduced sales of rough diamodns by 41% De Beers • De Beers and its Central Selling Organization (CSO) are the largest diamond companies in the world • Today the CSO controls about 70% of the worlds gem-quality diamond trade • The CSO keeps the price of diamonds high by limiting the number of diamonds on the market during slow economic periods • THis has kept the price of diamonds steady, as opposed to the large fluctuations experienced by other commodities such as gold and silver • 2/3 of the diamonds sold by the CSO come from De Beers own mines • Recently mines such as Ekati have chosen not to sell their diamonds to De Beers and rather market them on their own • This has De Beers worried and is a large reason why they bought a 35% share in the Ekati Mine Production