Canada can play a leading role in preventing the sale and distribution of so-called "blood" diamonds, jewellers say.
The gems produced in war-torn countries in Africa and other Third World regions are largely to blame for a worldwide erosion in consumer confidence, according to participants at the World Jewellers Confederation's 80th annual congress held recently in Vancouver.
But Canadian businesses that mine, manufacture and sell gems say Canada's sustainable industry can serve as a model for the rest of the world.
"It's an issue for the diamond industry as a whole, and Canada's got a big one, so it's (about) support for anybody that has an economic stake in diamonds - and anybody who really cares about the industry, too," said Ian Smillie, research co-ordinator for the Ottawa-based Partnership Africa Canada (PAC).
Also known as conflict or war diamonds, the stones are usually sold secretly to finance a rebel or invading army's war efforts.
But the one million diggers who discover them - including many children - are paid as little as $1 per day and their communities are subjected to HIV/AIDS, prostitution and violence while exporters, processors and retailers reap healthy profits.
"If you want to prevent a return to (military conflict), you've really got to do something," said Smillie. "You've got to have economic solutions - 38,000 UN peace-keeping troops, it's just not sustainable.
"You can't spend that kind of money forever to keep this thing under wraps ... That means getting people out of poverty so that they really do earn something from diamonds instead of this casino economy they currently have."
The Canadian industry has sparkled since diamonds were discovered in the Northwest Territories in 1991. Despite having only three diamond mines in operation, Canada ranks third among global producers, behind Botswana and Russia.
Two mines, Diavik and Ekati, operate in the Northwest Territories while the third, Jericho-3, is in Nunavut. A fourth mine, Snap Lake-4, is slated to open in Northern Ontario next year, and another two more could open in Saskatchewan, home to some of the world's largest diamond-bearing minerals, by 2011.
Several other diamond mines are in early-stage development in northeastern B.C., Alberta, Ontario and Quebec as firms try to capitalize on strong global commodity prices that have also sparked renewed interest in metals mining within Canada.
PAC, a non-government organization that received startup funding from the federal Department of Foreign Affairs, has launched the Diamond Development Initiative (DDI), which attempts to gather non-government organizations, governments, academics, and industry and labour groups into a process that will address diggers' political, social and economic challenges and optimize comprehensive development benefits.
Several large industry players are supporting the DDI program, which is seeking financial support. But it won't work if it's guided by the industry alone, because "people will be suspicious of it," said Smillie.
Once present in Sierra Leone, Angola, Liberia, the Democratic Republic of the Congo, Brazil and elsewhere, Smillie says blood diamonds now account for less than one per cent of total world supply, down from an estimated four to 15 per cent in the 1990s, because civil wars have since ended.
The international diamond industry is now trying to boost buyers' confidence through a voluntary authentication system, known as the Kimberley process (in reference to an accord reached in Kimberley, South Africa in 2000), which discloses the history of every diamond from mine to display case. All diamonds produced in Canada display distinct brands and identification marks that can be tracked.
But the jewellers confederation, better known by its French acronym CIBJO, fears an upcoming Warner Bros. movie, starring Leonardo DiCaprio and set during the civil war in Sierra Leone in 1999, will set back the progress Kimberley has made. Blood Diamond will likely make reference to PAC, because Warner Bros. called and asked for permission to use its name on a sign, Smillie said.
To prevent a major sales decline during the peak winter season, CIBJO has launched a marketing campaign that stresses blood diamonds have almost disappeared from the marketplace. But Keith Johnson, CEO of U.K.-based Rio Tinto Diamonds, which operates the Diavik mine in the Northwest Territories, said the industry must do more than just talk about treating people fairly.
"This is not just about managing the message," said Johnson. "This is about directing real change."
Conference participants cited surveys that show customers prefer to know a diamond's history before making a purchase.
"Consumers want to look not just into the heart of a diamond, but deep into the heart of an industry," said David Lamb, worldwide marketing director for U.K.-based Diamond Trading Company.
A brand without philosophical values will have no financial value, he added.
Graham Nicholls, president of Vancouver-based Point Lake Marketing Inc., agreed a made-in-Canada brand is very important. Canadians are very large consumers of diamonds, he added, and the Canadian label is very popular in the U.S., the world's largest market.
"It's not just the domestic market that responds to the Canadian diamond," said Nicholls. "We sell more in the U.S. than in Canada."
Point Lake Marketing is a subsidiary of Australia-based BHP Billiton Diamonds Inc., which operates the Ekati mine at Point Lake in the N.W.T. BHP Billiton fosters consumer confidence by stressing sustainable development in its company charter, sustainability policy and everything it does, said Nicholls.
CIBJO president Gaetano Cavalieri noted Canada is already playing a fundamental role in maintaining consumer confidence internationally.
"The brains of Canadian mining companies are very bright and they took immediately to the possibility to develop the industry in a certain way," said Cavalieri.
International jewellers have already learned two important lessons from Canada, he said. Companies have the capability to operate ethically and still make a profit, and they can act in an environmentally responsible way.
He predicted Canada may become the world's top diamond producer, but some Canadian conference participants disagree with that assessment.
Mo Charania, president of the Toronto-based Canadian Jewellers Association (CJA), which represents 1,500 of Canada's 6,000 jewelry store operators, said he hopes Canada can improve its world market share, but domestic players have to be realistic about diamond-processing costs.
Charania said he wishes there were more downstream activity in Canada, but he's confident it will occur over time. It's unlikely more cutting and polishing firms will emerge, he predicted, but increased mining activity may lead to more jewelry manufacturers, including some in First Nations communities.
"Being in the spotlight may give us the ability to sell (to) other countries in the world that didn't consider Canada as a serious player in the jewelry industry," said Charania, owner of Jubilee Fine Jewellers in Ottawa.
Charania predicted more groups seeking to help diamond industry-affected Third World communities are also likely to start up in Canada. Rather than being controversial and attacking the industry, they will work with it, he added.
RBC Financial Group chief economist Craig Wright said Canada's diamond-mining industry probably won't improve its global third-place ranking. However, there is a "huge upside, potentially" for more new mines, he said.
"It's unfortunately a well-kept secret, but we have seen significant progress from an industry that was, at least from my perspective, virtually non-existent a decade ago," said Wright.
Around 2010, diamond mining will boost Saskatchewan's GDP alone by about one per cent - "a fairly significant lift," Wright added, given the province's size.
There will also be more opportunities for smaller service companies, as has already occurred with diamond mining in the N.W.T., and governments will benefit from increased tax dollars.
Uri Ariel, CEO of Vancouver-based jewelry manufacturer HRA Investment Ltd., said Canada is a world leader in keeping consumer confidence at a high level.
"I believe, here in Canada, we don't have to face the problem of blood diamonds, because we don't have any blood diamonds in Canada," said Ariel, who was a founder of the Canadian jewelry industry's code of conduct. "We know we are an example of environmentally clean companies. I don't think that any other place in the world has the same standards that we have."
(Monte Stewart can be reached at monte@businessedge.ca)
