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Business West
Canada's diamonds in the rough
Thursday, March 12, 1998
By Mathew Ingram
CALGARY
CALGARY -- ABOUT six years ago, anyone who said that Canada might contain enough
diamond-bearing rock to develop a commercial diamond mine risked being laughed out of the
room. Chuck Fipke certainly was.
The founder of Dia Met Minerals , who is now worth several hundred million dollars, was
routinely dismissed as just another crank prospector who had gone batty from too many months spent in the wilderness of the Northwest Territories.
That was before he released results from his exploration in 1991 that electrified the Canadian
mining industry. Dia Met soared in value, and it eventually became clear that the company would
establish Canada's first diamond mine, one that should produce enough high-quality stones to rank
alongside some of world's most valuable diamond properties.
It now seems equally clear that Aber Resources of Vancouver will become the second company
to establish a commercial diamond play, and one that is expected to be, at least, as valuable as Dia
Met's. So much for the so-called "Fipke curse," in which the Dia Met founder reportedly declared
that no other properties would prove to be as valuable as his.
Aber said last week that it had filed a project description with the federal government for its
proposed $875-million Diavik mine in the Lac de Gras region of the Northwest Territories, about
300 kilometres northeast of Yellowknife and 35 kilometres from the proposed Dia Met mine. The
project filing marks the start of the official process of environmental assessment required before the
mine can get federal approval to proceed.
Dia Met and its partner, Australia's Broken Hill Pty. Co. Ltd. , went through a long and gruelling
process, one marked by a considerable amount of tension with aboriginal groups living in the
vicinity of the $1-billion mine. Dia Met had originally said in 1995 that it expected to begin
construction in 1996 and would be producing diamonds by mid-1997, but the project was tied up
for the better part of 1996 awaiting government approval.
After the companies agreed to seek a variety of settlements with local aboriginal groups, the
proposal was approved by Ottawa and construction soon began. The Lac de Gras -- or Ekati
(Lake of Fat) in the Dene language -- mine is now expected to start turning out diamonds toward
the end of this year. By the time it is at full production in the year 2000, Dia Met and Broken Hill
expect it will be producing about three million carats of diamonds a year.
The engineering required before Aber and partner Rio Tinto PLC can begin producing diamonds
is even more complex than what the Ekati project requires. The Dia Met mine will produce
diamonds from several kimberlite pipes currently covered by small lakes, which will have to be
drained and their lakebeds blown up to get at the kimberlite.
Aber's kimberlite pipes, however, are underneath Lac de Gras itself, which will have to be
dammed or diked at considerable expense. Still, most analysts believe Aber has a better chance of
going through the federal approval process quickly because Dia Met has paved the way. Aber and
Rio Tinto have already signed agreements with several aboriginal groups.
Surprisingly enough, Yorkton Securities analyst John Hainey, who has been following Canada's
diamond companies from the beginning, says Dia Met, Aber and the other NWT diamond plays
are still not well known in the United States. "I was down there two or three months ago talking to
people, and they said, 'Diamonds in Canada?' " he recalls.
Perhaps it's just a modern variation on an age-old skepticism about diamonds in Canada, since
companies have been exploring here without success since the 1960s. Going back even further,
the explorer Jacques Cartier was embarrassed when he returned to France from Canada in 1541
bringing with him what he believed to be diamonds. They turned out to be quartz, spawning a
French insult: "As fake as diamonds from Canada."
Mr. Hainey says investors in the United States and elsewhere ignore the fact that when both the
Dia Met and Aber mines are in full production in the year 2002 or so, they will be among the most
productive diamond properties in the world, and will give Canada an even larger share of global
production than South Africa, where the modern diamond business first evolved.
At full production, Mr. Hainey said, Aber's mine will produce more than twice as many carats a
year than Dia Met's, or about eight million. They will be of somewhat lower quality, however,
making the total market value of the two mines roughly similar at about $8.5-billion each. This
would make each mine almost twice as valuable as any other existing diamond mine, with the
exception of the massive Jwaneng mine in Botswana.
Mr. Hainey says the value of Dia Met's and Aber's mines would be equivalent to a gold mine with
reserves of 19 million ounces, producing a million ounces a year at a cost of about $85 an ounce.
When both mines are producing at full capacity, they are expected to have combined annual
revenue of about $1.3-billion. That would put Canada fourth in the world in terms of diamond
value, behind Botswana, Russia and South Africa.
Business West readers can reach Mathew Ingram by fax at (403) 244-9809 or by E-mail at
mingram@globeandmail.ca
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bringing with him what he believed to be diamonds. They turned out to be quartz, spawning a
French insult: "As fake as diamonds from Canada."
Mr. Hainey says investors in the United States and elsewhere ignore the fact that when both the Dia Met and Aber mines are in full production in the year 2002 or so, they will be among the most productive diamond properties in the world, and will give Canada an even larger share of global production than South Africa, where the modern diamond business first evolved. At full production, Mr. Hainey said, Aber's mine will produce more than twice as many carats a year than Dia Met's, or about eight million. They will be of somewhat lower quality, however, making the total market value of the two mines roughly similar at about $8.5-billion each. This would make each mine almost twice as valuable as any other existing diamond mine, with the exception of the massive Jwaneng mine in Botswana. Mr. Hainey says the value of Dia Met's and Aber's mines would be equivalent to a gold mine with reserves of 19 million ounces, producing a million ounces a year at a cost of about $85 an ounce.When both mines are producing at full capacity, they are expected to have combined annual revenue of about $1.3-billion. That would put Canada fourth in the world in terms of diamond value, behind Botswana, Russia and South Africa. Business West readers can reach Mathew Ingram by fax at (403) 244-9809 or by E-mail at mingram@globeandmail.ca
[ News ] [ Sports ] [ The Arts ] [ Commentary ] [ Report on Business ]
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Copyright c 1998, The Globe and Mail Company
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