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N. America Diamond Mine Takes Shape

N. America Diamond Mine Takes Shape
The Associated Press

YELLOWKNIFE, Northwest Territories (AP) - For 10 years, Charles Fipke
chipped away at rocks strewn across some of the most desolate land in
North America. His persistence paid off.

In October, the continent’s first world-class diamond mine is scheduled to
begin production on a tract of tundra and lakes in the remote heartland of
Canada’s Northwest Territories.

The industrial complex is designed to operate every day for the next 25
years in harsh arctic weather, producing high-quality diamonds with a
projected value of more than $7 billion.

Other mines are expected to open in the region over the next few years,
and experts predict Canada will soon be producing more than 10 percent of
the world’s gem-quality diamonds.

Fipke, a geologist from British Columbia, wasn’t the first prospector to
hunt for diamonds in the Northwest Territories, but he was perhaps the
most dogged. Starting in 1981, he followed the path of Ice Age glaciers
across the sparsely populated region, looking for tiny mineral traces in
the surface rocks that would signal the presence of diamond-bearing ore
underneath. It took him a decade to find what he was looking for.

Everybody thought he was a nut,'' said Mike Vaydik, general manager of the Northwest Territories Chamber of Mines.But that one guy’s
singlemindness has started a whole new industry for Canada.’’

Fipke’s prospecting company, Dia Met Minerals, entered into a partnership
with Australia’s Broken Hill Proprietary Co., one of the biggest mining
companies in the world. BHP bought 51 percent of what is now known as the
Ekati mine and is spending about $750 million to develop it.

It has been a complicated project, logistically and politically.

The site - 125 miles south of the Arctic Circle and 185 miles from the
nearest supply sources in Yellowknife - is accessible only by air or by an
ice road usable for about 12 weeks in mid-winter.

This winter, before the spring thaw began turning the area into an
impenetrable maze of lakes, bogs and boulders, 2,100 truckloads of
supplies moved over the ice road from Yellowknife, the territorial
capital. The cargo included 15 million gallons of fuel - a year’s supply
for an operation that must keep running even during wintertime bouts of
minus-40 temperatures.

Employees will work two solid weeks of 12-hour shifts, then fly out for
two- week breaks. No alcohol is allowed at the mine, and employees will be
subjected to body searches and surveillance-camera monitoring.

On the political front, Broken Hill has worked out accords with three
Indian tribes and the territory’s community of Inuit. The company is
providing job training and scholarships to the native communities and has
pledged to allocate about 30 percent of the mine’s 600 permanent jobs to

Stephen Kakfwi, a former chief of the Dene tribe and now the territory’s
economic development minister, praised BHP as ``a good corporate citizen’'
that has kept its promises on hiring and local purchasing of supplies.

The company also went through a 2 1/2-year environmental review that
Vaydik, the Chamber of Mines official, described as the toughest ever for a
Canadian mining project.

Some major environmental groups initially were hostile to the project, but
criticism ebbed after Broken Hill detailed its conservation and
reclamation plans. Key challenges include minimizing water pollution on a
tract that contains 8,000 lakes and preserving a migration corridor for a
herd of 450,000 caribou.

The diamonds are buried in cylinder-like deposits of volcanic rock called
kimberlite, covered by shallow lakes that will be drained to create
open-pit mines.

Initially, the mine will process 9,000 tons of ore a day to produce a
quantity of diamonds that would fit in a can of coffee. The projected
yearly output - roughly 4 million carats of diamonds - would earn $350
million and constitute about 4 percent of worldwide production.

Fipke’s discovery triggered a two-year diamond rush in the Northwest
Territories, one of the largest mineral-staking rushes ever in North

The other project closest to fruition is the proposed Diavik mine,
scheduled to begin production in 2001. It is close to the Ekati mine and is
expected to earn comparable revenues for the Anglo-Australian operator,
Rio Tinto Ltd., and its Canadian partners.

The diamond boom couldn’t have come at a better time for the Northwest
Territories, where the important gold industry and other mining sectors
have been battered by falling prices.

``Thank God the diamonds are here, or we’d really be in trouble,’’ Vaydik

One of the key unanswered questions for the Ekati mine is how Broken Hill
will market its diamonds. The company is negotiating with De Beers, the
world’s No. 1 producer and marketer of diamonds, but BHP spokesman Graham
Nicholls said Ekati’s diamonds will be marketed through ``multiple
channels’’ that will bypass De Beers at least partially.

De Beers opened its first Canadian office in Vancouver, British Columbia,
in January, confirming its keen interest in Northwest Territories

Canada will become a very important diamond producer,'' the office's manager, Tom Beardmore-Gray, said in a telephone interview.We would
hope, at some stage, to have our own mine.’’

Nicholls and Beardmore-Gray both indicated some sort of deal was likely
between BHP and De Beers.

You can't be in the diamond business without dealing with De Beers,'' said Vaydik.No matter what the other companies might say, they like De
Beers because it keeps the market stable.’’

De Beers produces about 50 percent of the world’s diamonds and markets
about 70 percent of the world’s gem diamonds through its sales arm, the
Central Selling Organization.

The diamond market has been sluggish in recent months, largely because
economic problems have reduced demand in Japan, which along with the
United States is the biggest purchaser of diamond jewelry. But long-term
prospects are considered bright as demand grows in Asia and Russia.

AP-NY-06-18-98 0111EDT