Ontario will soon join the elite multibillion-dollar club of world diamond producers.

De Beers Canada expects to begin construction early next year on its Victor diamond mine in northern Ontario's James Bay lowlands. The federal government approved the company's environmental study last month.

The company expects to receive environmental approval from the Ontario government this fall. The Victor mine is about 90 kilometres west of the Aboriginal community of Attawapiskat, which is about 500 kilometres north of Timmins. The mine will be Ontario's first diamond mine.

De Beers Canada, a unit of the South African diamond company De Beers Group - the world's largest diamond producer - will start producing diamonds from the Victor mine in 2008, says Linda Dorrington, De Beers Canada spokeswoman. The cost of the mine is $982 million.

Photo courtesy of De Beers Canada
Aerial view of the $982-million Victor mine about 500 km north of Timmins, which is the first Ontario venture for diamond-mining giant De Beers Canada.

The open-pit mine should reach full production in 2009 and produce six million carats. The mine has an expected life of 12 years and a total project life of 17 years, the company says. It will create 400 permanent and 600 construction jobs. The minesite will include an onsite processing plant, quarries, sand and gravel pits, and an all-weather airstrip. Annual revenue from the mine is expected to be $115 million.

In August, De Beers awarded a $65-million contract for engineering, procurement and construction to British project-management company AMEC.

Victor is one of 18 kimberlitic pipes on the De Beers property, 16 of which are diamondiferous. The company is continuing core- and bulk-sampling programs at three nearby kimberlites, which may extend the life of the mine. Kimberlite pipes are the primary source of diamonds.

The South African mining giant also has a mine under development at Snap Lake in the Northwest Territories, about 220 kilometres northeast of Yellowknife. The $635-million mine, which is expected to begin production in 2007, will produce 1.5 million carats of diamonds annually and employ 250 people. The mine's lifespan is estimated at 20 years.

In addition, De Beers is participating in a joint development venture at Gahcho Kue about 80 kilometres southeast of Snap Lake.

Canada joined the elite of world diamond producers when the Ekati diamond mine in the Northwest Territories went into production in 1998. Ekati is 80-per-cent owned by Belgian-based BHP Billiton.

When the Northwest Territories' Diavik mine opened in 2003, Canada became the world's third-largest producer of diamonds, behind Botswana and Russia, according to the Northwest Territories Department of Industry, Tourism and Investment. The Diavik mine is 60-per-cent owned by the Rio Tinto Group.

Ekati and Diavik produce 11.2 million carats of diamonds with a total value of $1.24 billion US, according to the N.W.T. government department.

Botswana produces 30.4 million carats valued at $2.4 billion and Russian diamond production is 19 million carats with a total value of $1.6 billion.

World diamond production in 2004 was valued at $11.2 billion, De Beers Canada says.

Photo courtesy of De Beers Canada
Preliminary work is under way at De Beers' Victor minesite, slated to start production in 2008.

Steven Butler, mining analyst with Canaccord Capital, is cautious about the potential for more major diamond mines in Ontario. "Apart from the De Beers Victor mine, all the others are still in very early stages. There have been some glimpses of hope in Ontario. Some juniors (mining companies) have found pipes (kimberlites) in New Liskeard and Wawa."

In 2004, there were about 340 diamond exploration properties in Canada, 56 of them in Ontario and 98 in the Northwest Territories, according to Natural Resources Canada. Total exploration and deposit appraisal spending in 2004 was $275 million, of which $43.5 million was spent in Ontario and $95.5 million in the N.W.T. In 2000, total spending on exploration and deposit appraisal was $91.9 million of which $19.3 million was spent in Ontario and $41.7 million in the N.W.T.

"But the odds are stacked against you. You can make a kimberlite discovery, but you have to have an adequate bulk sample to prove its viability. De Beers has had Victor for some time. Ontario is not on the same scale as Botswana or Russia, although James Bay looks like a stable area," Butler says.

The Contact Diamond Corp. of Toronto announced recently that it is undertaking an advanced diamond-exploration program in Ontario's Temiskaming region, which includes New Liskeard.

Other companies looking for diamonds in Ontario include Pele Mountain Resources and Diadem Resources Ltd., both of Toronto.

De Beers' Dorrington says the company has been looking for diamonds in Canada for more than 40 years. She adds it will continue to explore in Canada because there is "further potential."

De Beers also is looking for kimberlites on its holdings in Baffin Island, Manitoba, Saskatchewan and northern Quebec as well as its other holdings in Ontario.

Canada's geological makeup is conducive to kimberlites. About half of the more than 685 kimberlitic pipes found in Canada have been diamondiferous. De Beers has found more than 220 kimberlitic pipes in Canada, Dorrington says.

Although it's unlikely there will be a world-scale mine such as Ekati in the next 10 years, smaller diamond sites will be found, she says.

"Victor is a marginal mine for De Beers. It is not on the scale of Ekati, Diavik or Botswana, which are much larger and cheaper to mine," Dorrington says.

The De Beers mines in Botswana, South Africa, Namibia and Tanzania produced $3.9 billion in 2003 - 41 per cent of world production - in 2003.

Prospectors have been looking for diamonds in Canada since the 1960s when kimberlites were first found, although major kimberlitic discoveries were not made until the 1980s.

Kimberlite is found in areas where the geology is old and stable.

These are characteristics of the Canadian Shield in Ontario ranging from Cobalt to Lake Timiskaming, Wawa to Kapuskasing, Marathon to Geraldton, the lowlands of James Bay and northwestern Ontario near the Manitoba border.

Much of the current diamond exploration in Ontario centres on the James Bay lowlands and the area from Cobalt to Lake Timiskaming, according to the Ontario Ministry of Northern Development and Mines.

In the first six months of 2005, more than 5,000 claim units were staked in the Attawapiskat region of northern Ontario. The claims cover more than 81,000 hectares and represent 18 per cent of the total area staked in Ontario.

(Charles Wyatt can be reached at wyatt@businessedge.ca)