Diamonds remain territory's best friend

Thanks to recent progress in development of several major projects in 2014, the outlook for diamond mining in Northwest Territories is suddenly a lot brighter.

This is especially good news for the territory's mining industry, which is largely dependent on the production of diamonds now and in the foreseeable future.

This point was driven home most forcefully in "Measuring Success 2014: NWT Diamond Mines Continue to Create Benefits," a report recently released by the NWT & Nunavut Chamber of Mines.

An update of a January 2013 report that incorporates data from 2013 in its findings, Measuring Success 2014 describes the combined benefit of more than two decades of diamond exploration and mining in Northwest Territories and also projects what benefits the sector could provide in the future.

"The history of the diamond industry in the Northwest Territories has been a positive one," the chamber wrote in concluding the report. "It has come through direct actions by the mining companies, by investments from government and Aboriginal groups, and by partnerships between all three.

"In less than a generation, diamond mining has seen thousands of NWT residents trained, with skills that will carry them through long and productive careers in mining or other industries. We have seen billions of dollars spent with northern companies, enabling them to build a strong foundation to compete anywhere on the globe."

The amount of diamonds produced by the NWT's three diamond mines - Ekati, Diavik and Snap Lake, has been relatively constant over the past three years at just under 10 million carats per year, though output dropped slightly in 2013. Natural Resources Canada data (chart below) projects the value of 2013 diamond production at C$1.56 billion from sales of 9.9 million carats, down slightly from C$1.63 billion from sales of slightly less output (9.8 million carats) in 2012, and substantially from C$2.1 billion received from sales of about the same weight of carats (9.95 million carats) sold in 2011.

But local benefits from the NWT diamond mines continue to be strong, in all areas including people, business, government, and knowledge, according to the chamber.

Northern business spending by the mines is robust. The mines spent C$943 million in 2013, of which C$621 million was with northern businesses, including C$248 million was spent through Aboriginal firms.

Combined spending to date to construct and operate the three diamond mines totaled nearly C$15 billion. Of this, more than C$10.6 billion (73 percent) was spent with northern companies and joint ventures, including C$4.8 billion (33 percent) with Aboriginal companies.

In 2013, the three mines employed 1,430 northern workers, including 752 (52 percent) who were Aboriginal. The northern work force represented 46 percent of the mines' total work force of 3,109.

The presence of the diamond mines also resulted in the Government of Northwest Territories encouraging the growth of a secondary diamond cutting and polishing industry in Yellowknife with training and certification programs.

"As diamond mining operations flourished, there was clearly an opportunity to establish and nourish a secondary cutting and polishing industry in the NWT. As well, locally sorting rough stones coming from the mines could keep them separate from diamonds from the rest of the world," NWT officials said.

As a result, two sorting facilities, and several innovative manufacturing facilities were built in Yellowknife. Crossworks Manufacturing Ltd. has operated a diamond cutting and polishing facility in Yellowknife since 2008. In May, Crossworks also opened the NWT Diamond Centre in downtown Yellowknife. The center features several exhibits, and visitors are able to purchase locally mined diamonds. The company employs about 10 people in Northwest Territories.

Deepak International Ltd. is another company that recently purchased two factories and intends to open a diamond cutting and polishing factory in 2015 in Yellowknife. As a result, it is anticipated that more people will be employed by the secondary diamond industry in the coming years.

The factories have attracted some of the world's most experienced and skilled diamond-cutting and polishing craftsmen to Yellowknife to oversee employees as they turn NWT rough stones into high-quality polished diamonds.

The key to developing diamond manufacturing opportunities, according to the GNWT, is reliable access to quality rough diamonds. In broad terms, this means the three operating mines provide for access to 10 percent of their production (on a five-week cycle basis) to Approved NWT Diamond Manufacturers.

To date, C$39 million of diamond royalties have been shared with three NWT Aboriginal groups - the Gwich'in and Sahtu received more than C$12 million each and the Tlicho more than C$14 million.

Royalty sharing with Aboriginal groups is expected to increase going forward because the Government of Northwest Territories has committed to share 25 percent of royalties collected with Aboriginal signatories to the devolution agreement signed with the federal government last spring.

In addition to payroll and royalties, the mines also spent significant sums in NWT communities on cultural and health programs and events and on training and scholarships.

All three mines have invested in environmental and technology research programs aimed at extending knowledge of the surrounding areas. This work has led to caribou, grizzly bear, wolverine and wolf studies as well as construction of a wind farm at the Diavik Diamond Mine. (Diavik's four-9.2-Megawatt-turbine wind farm delivered 8.5 percent of the mine's power needs in 2013.)

Growth in the near term

In the near term, opportunities arising from the diamond mines are significant. A number of initiatives at the three diamond mines and at the advancing Gahcho Kué project are expected to sustain and even increase opportunities in the near future.

At the Ekati mine, development is underway on a number of diamond deposits aimed at keeping mining robust until the projected mine closure in 2019, when the ore bodies are depleted. These include:

• The 'pushback' to prepare the open pit for mining of the Misery Main pipe.

• Pre-stripping of the Pigeon deposit to prepare for open pit mining.

• The Lynx open pit project which will take advantage of the nearby Misery infrastructure.

• The Jay Deposit Project, which represents the long-term sustainability of the Ekati Diamond Mine beyond the current mine life of 2019. At the Jay deposit, drilling has established more than 78 million carats of indicated resource and 13 million carats of inferred resource.

Dominion Diamond, Ekati's owner, filed a Developer's Assessment Report for the Jay kimberlite pipe with the Mackenzie Valley Environmental Impact Review Board in early November.

The Jay Project, currently the largest diamondiferous resource in North America, has the potential to extend the Ekati mine's life to about 2030, more than 10 years beyond its current closure date of 2019. The facilities required to support the development of the Jay Project and to process the kimberlite already exist at the Ekati Diamond Mine.

The project proposes the building of a water retention dike following a horse-shoe shaped alignment from the shoreline out into Lac du Savage to isolate the portion of the lake overlying the Jay pipe. The dike will be five kilometers long with an average water depth of five meters. The approach is similar in concept, geographic environment and water depth to that implemented by Agnico Eagle Mines Ltd. between 2008 and 2010 at the Meadowbank Gold Mine in Nunavut.

The project timeline currently envisions that dike construction would commence in the summer of 2016 and would continue through to 2019. De-watering and pre-stripping would then commence followed by conventional open-pit mining, with production currently expected to begin in 2020.

The Jay kimberlite pipe is located in the southeastern portion of the Ekati mine property, about 25 kilometers southeast of the Ekati main facilities and roughly seven kilometers to the northeast of the Misery pit, in the Lac de Gras watershed. The Jay project is part of the Buffer Zone Joint Venture, in which Dominion has a 65.3 percent interest.

The analytical and hearing phases, the next steps in the environmental assessment process, are anticipated to deliver a ministerial decision on the project in late 2015. Once the decision is issued, the water license and land-use permitting process will take another six months or so.

In 2013, the Diavik mine operated for its first full year as an all-underground mine. Ore production exceeded targets, demonstrating that Diavik is now a proven underground mine.

Diavik also continued in 2013 to examine the feasibility of open-pit mining of the A21 diamond deposit, located just south of the existing mining operations. Three sampling programs were completed on the A21 kimberlite pipe, which included the initial drill sample, an on-ice drill sampling program, and construction of a 1.2 kilometer decline tunnel. A total of 9,635 carats of rough diamonds were recovered, allowing for accurate pricing predictions. A21 contains a resource of 4.7 million metric tons at a grade of 2.8 carats per metric ton.

The mine's 60/40 percent owners, Rio Tinto plc and Dominion Diamond Corp. reported approval in late November of the development of the A-21 pipe. The mine's operator, Diavik Diamond Mine (Diavik Diamond Mines (2012) Ltd.), has estimated the total capital cost for the development of the A-21 pipe to be about US$350 million and a plan for A-21 diamond production to commence in late 2018.

The A-21 ore body is located under a lake requiring construction of a dike to isolate the open pit operations.

The bulk of the requisite infrastructure for the A-21 pipe is already in place from previous dike construction to mine three other ore bodies and pit operations at Diavik, and the necessary operating licenses and agreements are in place for project implementation.

The A-21 ramp up was anticipated to begin immediately, with the first equipment and supplies scheduled to be transported in early 2015 to the Diavik mine site on the seasonal winter ice road.

Four years of dike construction and pre-stripping (2015-2018) are anticipated to be followed by roughly five years of open-pit mining.

Mining of A21 is not expected to add mine life, but would help the mine to maintain its current diamond production.

The Diavik Joint Venture has approved the 2015 program of work. Expenditure on the development of the A-21 pipe in 2015 will relate to crushing costs, pipeline construction and initial dike foundation and abutment work in preparation for expected dike construction during the 2016 and 2017 summer seasons. Pre-stripping of the open pit is expected to begin in 2018 following dewatering of the pool within the dike.

DDMI has estimated that the A-21 pipe contains (on a 100 percent basis) 3.6 million metric tons of measured resources, at a grade of 2.8 carats per metric ton, and 400,000 metric tons of indicated resources at a grade of 2.6 cpt. These estimates were calculated as of Dec. 31, 2013.

At the Snap Lake Mine, owner and operator De Beers Canada Inc. is planning significant capital investment in 2015 to support increased production to improve the sustainability of the mine. This will require the purchase of additional mining equipment, expansion of power generation and fuel storage capacity, and enhancing water management systems.

In September, the Gahcho Kué diamond mine project, owned by a 51/49 joint venture between De Beers Canada and Mountain Province Diamonds Inc., received the final licenses required for construction.

Construction of the Gahcho Kué mine is expected to require roughly 700 jobs at the peak of two years of construction.

This will be followed by 12 years of mining with an operations work force of about 400 jobs.

In 2013, De Beers signed a Socio-Economic Agreement with the Government of the Northwest Territories, which sets NWT employment targets of 25 percent, or about 175 northern jobs during construction and 55 percent, or about 220 jobs during operations.

Gahcho Kué will provide for at least 16 trades training positions, 10 apprenticeships and four education sponsorship positions during the life of mine.

Uncertain future

Longer term opportunities for diamond mining in Northwest Territories are less well understood at this time, according to the chamber report.

Current mine lives for Ekati, Diavik and Snap Lake paint a mixed picture for the future. Ekati is projected to run out of ore in 2019; Diavik by 2024, and Snap Lake in 2028.

The addition of Gahcho Kué will add 12 years of production but will not offset the lost benefits from Ekati's projected closure in 2019. The work force at Ekati is about 1,400 workers, while the Gahcho Kué Mine work force is only 400.

Moreover, projected employment by one diamond and three hardrock mines anticipated to begin production within the next 10 years will fall short of providing enough jobs to offset the loss at Ekati.

In addition to Gahcho Kué, Avalon Rare Metals Inc.'s Nechalacho Rare Earth Elements project will require 286 mine workers; Canadian Zinc. Corp.'s Prairie Creek silver-zinc-lead-copper project will need 220 workers; and Fortune Minerals Ltd.'s Nico gold-copper-cobalt-bismuth project will hire 150 workers. Together, the future mines will employ a work force number 1,056, about 350 jobs shy of the positions lost with the closure of the Ekati mine.

Dominion Diamond, however, is continuing to advance the Jay Project, which contains more carats of diamonds than have been mined to date at Ekati. The Jay deposit has the potential to extend Ekati's mine life by more than 10 years and represents the future of the Ekati Diamond Mine beyond its current projected mine life of 2019.

The chamber said the timeline to have this project approved is critical as start of production needs to be timed with the completion of mining of the known ore reserves in 2019.

Since purchasing the Ekati Mine, Dominion Diamond has worked with its stakeholders through public meetings and workshops to obtain important public input into the company's plan to extend the life of the mine.

An important part of the execution for this project continues to be Ekati's engagement with community, government and regulatory stakeholders.

This has helped the company create a revised plan to mine the Jay kimberlite pipe with simplified construction and a significant reduction in the overall environmental disturbance of the project, the chamber added.