Canada's North Sees Diamonds As a Best Friend

Canada didn't have a diamond to its name 10 years ago, but by early in the next century it could be one of the three largest producers of diamonds in the world.

"By the year 2005, Canada could be providing as much as 10 percent of the world's diamond production," says Lee Barker, vice president of Southern Era Resources Ltd., a Toronto diamond exploration company with holdings in the Northwest Territories, Canada's diamond zone.

Construction on the first diamond mine in Canada started last month, following a 2-1/2-year environmental review by the federal government. In early January, BHP Diamonds Inc. of Vancouver got the go-ahead to start work.

"The decision is an important milestone in Canada's development as a major producer of diamonds," says John Hainey, an analyst at Eagle & Partners Inc., a Toronto investment company. "It is probably the first of several mines in the region. This is good news for all of the diamond exploration companies in the area."

BHP is a subsidiary of Broken Hill Proprietary Company of Melbourne, Australia. The Canadian company is building the mine 90 miles south of the Arctic Circle, 180 miles northeast of Yellowknife, the capital of the territory.

It is not an easy place to work. Not only is it cold - 50 to 60 degrees below zero Fahrenheit for weeks on end - it is just about inaccessible.

"Most of the year, the only way to get there is by air, Hercules transports or 727s," says Karen Azinger, a BHP marketing executive. "We use an ice road, but it's only open 70 to 90 days a year. This year it opened on Jan. 19."

The ice road is operated by Echo Bay, a gold mine even farther north. Trucks travel across the flat tundra and frozen lakes. Ms. Azinger says BHP has a mineral lease of 1 million acres in the Northwest Territories, and in that area there are 8,000 lakes. When the ice goes out, there is no land transportation.

That is one reason it will cost $900 million (Canadian; US$666 million) to develop the property, which will open in the middle of 1998.

When it does open, it will process 9,000 tons of kimberlite ore a day containing an average of 9,000 carats of diamonds - one carat per ton, or 18 million pounds of earth producing four pounds of diamonds.

They are not just any old diamonds.

"These are gem-quality diamonds," Azinger says. "It wouldn't be worth building the project for industrial diamonds."

In addition to BHP's mine, another nearby project is well along the road to operation: Diavik Diamond Mines Inc. The senior mining partner in the operation is Kennecott Canada Explorations Inc. Company officials in Vancouver say they hope it will open in 2000.

Diamond mining is providing work in an area where jobs are hard to find, especially for native people. The BHP mine will create 1,000 construction jobs and 83 permanent jobs.

"This diamond mining project is important to northerners and to all of Canada," Ron Irwin, the federal Minister of Indian Affairs and Northern Development, said late last year in Yellowknife.