Diamonds are about to add even more sparkle to the Canadian economy.

Canada is emerging as a major player in the world market, analysts say, with three new mines that are scheduled to come online over the next few years, two world-class operations already in production and exploration continuing across much of the country.

Diamond production, which has soared from zero to almost five million carats a year between 1998 and 2003, according to Statistics Canada, has more than doubled in the past two years alone.

Preliminary figures for Canadian diamond mine production in 2005 reveal a total of 12.3 million carats produced, estimated to be worth $1.7 billion, says Louis Perron, a senior policy adviser on diamonds for Natural Resources Canada (NRC).

Photo courtesy of the Diamond Information Centre
Open pit diamond mines are helping extract one of Canada's most precious mineral resources.

Though that number is lower than the 2004 figure of 12.7 million carats valued at $2.1 billion, and represents a drop of three per cent in quantity and a decline of 19.7 per cent in value, Perron points out that diamond production is down due to lower grades of ore processed at the country's only two mines, Diavik and Ekati, both located in the Northwest Territories.

But that still places Canada as third in production, behind world leader Botswana and the No. 2 producer, Russia.

Even though some industry reports say Canada is poised to become the world's No. 1 producer, Canadian diamond expert Pierre Leblanc says that while it could happen, he doesn't expect things to change overnight.

"Canadian production averages about 12 million carats, Botswana and Russia both produce around 30 million carats. That's a huge gap to fill and I don't think it will be filled in the immediate future," says Leblanc, principal of Ottawa-based Canadian Diamonds Consultants Inc.

However, he adds that it's an exciting time to be in the diamond sector, with exploration going on in Alberta, Saskatchewan, Manitoba, Ontario, Quebec, the N.W.T. and Nunavut.

"We should be able to achieve a significantly larger portion of the market for a couple of reasons. With more and more mines coming online and, despite the fact that they are smaller, that is still going to increase the rough diamond market that Canada captures," Leblanc says.

He points to older diamond mines in areas such as Australia and South Africa that are either reducing production or shutting down due to depletion.

Canada's geology is also a factor - the country's Precambrian Shield is said to be the largest and most prospective terrain for diamonds in the world - and there is huge potential for additional finds, notes Leblanc.

According to Perron, preliminary exploration and deposit appraisal expenditures for 2005 show $290 million was spent by 123 companies.

One of those companies, British Columbia-based Diamonds North Resources Ltd., has 15 projects at varying stages of development.

"We've got one of the largest land positions in Canada and we're one of the most aggressive and we've got a very strong project portfolio," says company president and CEO Mark Kolebaba.

"Why are we looking for diamonds, as opposed to gold or other commodities? Each stone is valued individually. What we do know is the value of rough diamonds has increased 13 per cent to 15 per cent annually. The United States consumes about 50 per cent of the world's diamonds and that's been increasing.

"What you've got is a growing demand, diminishing supply, the shutting down of some mines, and it's a great opportunity," Kolebaba adds.

But as Diamonds North and others explore, Canada's third, and newest diamond mine - and Nunavut's first - is now a reality.

Toronto-based Tahera Diamond Corp.'s Jericho mine has produced its first diamonds and predicts it will attain commercial production by the end of the first quarter of this year.

The Jericho project has a life span of nine years, ending in 2014, and will employ 60 to 116 people for open-pit mining and 40 people over eight years for processing. Production is expected to be at 500,000-plus carats per year.

"Certainly for this company it is a major, major event. It is a principal asset," says Tahera chairman and CEO Peter Gillin. "We are in the phase-in and test period and expect to be in full commercial production by the first of April.

"It's (Jericho) a significant new development. It's not as large, of course, as Ekati and Diavik, but Tahera is the only fully Canadian-owned diamond mine operator, developer and explorer," says Gillin, adding that he believes the diamond sector is poised for a continued period of growth.

Tahera has a marketing alliance with Tiffany & Co. and an exploration alliance with De Beers.

Other diamond mines expected to open in the near future include De Beers' first project outside of Africa at Snap Lake in the N.W.T.

About 220 kilometres northeast of Yellowknife, Snap Lake is slated to begin production in 2007 and is estimated to have a 20-year lifespan. It will produce 1.5 million carats annually and employ 250 people.

"This is going to be significant," says Leblanc. "It's not as big as Diavik or Ekati, which are also in the N.W.T., but it will bring in additional economic and social benefits."

Brendan Bell, the minister of industry, tourism and investment for the N.W.T., says if it were not for diamonds, the territory's economic picture "would be pretty bleak today."

"In the mid-1990s we were really seeing low gold prices and tapped out reserves in our two gold mines, which have now closed, so we were faced with the loss of one of our more important economic sectors," says Bell.

De Beers expects to begin construction on its Victor project this year in the James Bay lowlands of northern Ontario. The open-pit mine should reach full production in 2009, but start producing in 2008. This mine has an expected life of 12 years and its production rate is projected to be 600,000 carats per year, employing 400 people.

De Beers also has two other operations, both joint projects, on the go.

Gahcho Kue, about 80 kilometres southeast of Snap Lake and approximately 300 kilometres northeast of Yellowknife, is a joint venture between De Beers Canada Exploration Inc. (51 per cent), Mountain Province Diamonds Inc. (44 per cent) and Camphor Ventures (4.9 per cent). If shown to be economical, Gahcho Kue could be put into production by 2011. Production is estimated at three million carats per year.

De Beers' other project, the Fort à la Corne Diamond Project, is located 50 kilometres northeast of Prince Albert, Sask. Home to one of the world's largest diamondiferous kimberlite clusters (rock formations in which diamonds can be found), it is a joint venture between De Beers Canada Exploration Inc. (42.25 per cent), Kensington Resources Ltd. (42.25 per cent), Cameco Corp. (5.5 per cent) and UEM Inc. (10 per cent).

The Saskatchewan government reports more than 30 companies are carrying on diamond exploration in the province, including Shore Gold Inc. and its Star project in the Fort à la Corne region.

Growth is also on the agenda at Ekati and Diavik. A $227-million Panda underground project at the Ekati mine started production in April 2005, notes the NRC's Perron.

"The project is expected to deliver approximately 4.7 million carats of high-value Panda diamonds over a six-year production life," he says.

They're also moving into a new phase at the Diavik mine, preparing for the transition to underground mining. "There is no underground mining now, it's being studied," says company spokesman Tom Hoefer. "The plan is to produce a feasibility study on underground mining and present it to the investors in January 2007."

Diamond Facts

The word 'diamond' comes from the ancient Greek word 'adamas,' meaning unconquerable. The ancient Greeks thought diamonds were tears of the gods. The ancient Romans thought diamonds were splinters of stars fallen to earth. Here are some facts on the Canadian retail diamond market:

* The diamond jewelry market in Canada is celebrating its seventh year of significant, consecutive growth.

* 78 per cent of all women in Canada own at least one piece of diamond jewelry.

* The average number of diamond jewelry pieces owned by a woman in Canada is 4.8. More than 30 per cent of Canadian women own five pieces or more.

* Married women account for 63 per cent of all diamond jewelry pieces owned in Canada; single women own 37 per cent.

* 20 per cent of all women claim they will purchase a piece of non-bridal diamond jewelry within the next three years.

* The average retail price paid for a piece of non-bridal diamond jewelry is $800. That said, diamond jewelry pieces that cost $1,000 - $3,000 represent 27 per cent of the pieces purchased and 50 per cent of the value.

Source: Diamond Information Centre

(Laura Severs can be reached at laura@businessedge.ca)