De Beers Carves Canadian Foothold
Saturday July 19, 9:21 pm ET
By Lesley Wroughton
SNAP LAKE, Northwest Territories (Reuters) - In Canada's barren northern lands, the leading name in diamonds is carving a foothold in the world's fastest-growing diamond market.
De Beers, the African powerhouse synonymous with diamonds for more than a century, has built an airstrip from crushed rock on the frozen table-flat tundra. Huge fuel storage tanks, generators and buildings where diamonds will be extracted are connected by a network of insulated piping.
Prefabricated offices and sleeping quarters for workers stand next to piles of crumbled green kimberlite rock that contain the precious gems.
It is new territory for De Beers, whose African model for mining and operating is sometimes at odds with the way things are done in Canada's near Arctic.
De Beers, whose parent is Anglo American Plc and is based in Johannesburg and London, has faced a quagmire of environmental and social scrutiny that has delayed the opening of Snap Lake by two years to 2006.
Once the symbol of colonial prestige and dominance -- founder Cecil Rhodes raised a private army to protect his African interests -- De Beers has tried to shed its image as a cartel in recent years by redefining its role.
That change brought it to the rocky shores of Snap Lake, its first mine outside Africa, in the desolate Northwest Territories below the Arctic Circle.
SHORT CANADIAN SUMMERS
In recent weeks a thin sheet of crusty ice reflecting off Snap Lake is the last reminder of the long winter that just ended.
The sun shines almost 24 hours day in the summer, barely dipping beyond the horizon, and tiny colored flowers grow with mosses and lichen on the rocky ground.
Winter will see just a few hours of daylight, and Snap Lake will be covered in snow and ice as far as the eye can see. Temperatures can drop to minus 76 degrees Fahrenheit (minus 60 degrees Celsius). Summer access is by plane, winter depends on ice roads that run across frozen lakes.
It is forbidding territory where De Beers searched unsuccessfully for nearly 40 years for the kimberlite rock, which contains diamonds one time in a hundred.
In 1989 two Canadian geologists found diamonds under the surface of Lac de Gras, the site today of Canada's first diamond mine, Ekati, operated by BHP Billiton Plc.
The discovery launched one of the biggest diamond rushes in North American history. British group Rio Tinto and Canada's Aber Diamond Corporation started producing diamonds southeast of Etaki this year.
Fearing it was being left out of the world's fastest-growing diamond-producing area, De Beers wrested a small Canadian company, Winspear Resources, from its founders in 2001, breaking with a tradition of finding its own mines.
It faced a tough Canadian review process, including questions on social issues and how Snap Lake and the two other mines in the region would affect wildlife, including a herd of 350,000 migratory Bathurst caribou.
The review means De Beers has to consult with the Dene Indians, who are also negotiating land claims with Ottawa. Such deals generally provide a guaranteed percentage of jobs to locals, as well as training programs and other benefits in exchange for the right to develop the land.
John Goyman, De Beers operations manager, flew into communities in a light aircraft, with a translator and fresh fruit, which is scarce, to discuss plans.
"We decided to develop a working relationship off the front because of a lot of history of mistrust of mining companies in this region," Goyman said.
Darrell Beaulieu, a leader of the Yellowknives Dene, says diamonds have been both a curse and a gift to aboriginal groups, providing economic opportunity that has also reshaped traditional society by taking men out of communities to work in mines.
SHARING THE ROUGH
De Beers is also dogged by the question of supplying a percentage of rough gems from Snap Lake to a local polishing industry -- something at odds with its normal practice of mixing diamonds from many mines and selling them in London.
Martin Irving, director for diamond projects for the Northwest Territories government, says De Beers is expected to follow the example of the two other mines and send 10 percent of its rough diamonds, by value, to the local industry.
"We will not support De Beers' mining here if allocation of rough (gems) is not made available," Irving said.
Richard Molyneux, De Beers chief executive in Canada, said rough diamonds from the two current producers are enough to sustain the few polishing factories in Yellowknife.
"Our position has been to cut diamonds where it makes economic sense to cut diamonds, which is the message we have repeatedly given to the government of the Northwest Territories. However, we are one of the stakeholders and we're currently in negotiations," he said. |
