Diamond miners sign agreement with Northwest Territories Metis

The Northwest Territories Métis Nation will benefit from the Gahcho Kue diamond mine at Kennady Lake.

by Peter Caulfield
Garry Bailey and Glen Koropchuk

Garry Bailey, president of the NWT Métis Nation, left, explains the significance of the colours in the NWT Métis Nation sash to Glen Koropchuk, chief operating officer for De Beers in Canada. De Beers and the NWT Métis Nation have signed an impact benefit agreement for the Gahcho Kué project. (CNW Group/De Beers Canada Corporation) — Photo courtesy Mountain Province Diamonds, Inc

De Beers Canada Inc. and Mountain Province Diamonds Inc. recently signed an Impact Benefit Agreement (IBA) with the Northwest Territories Métis Nation (NWTMN) for the proposed Gahcho Kué diamond mine.

The IBA puts in place a method for the diamond miners and the Métis to work together to develop economic, environmental and cultural programs with NWTMN members.

"De Beers is committed to sustainable development,” said De Beers Canada chief operating officer Glen Koropchuk in an announcement. “Through this agreement, the NWT Métis Nation can access new employment, training and business opportunities, while ensuring strong environmental and cultural programs."

Lutsel K’e impact benefit bgreement signing ceremony.

Lutsel K’e impact benefit bgreement signing ceremony. Members of the negotiating teams pose for a group photo with a painted paddle. From left: Larry Innes, LKDFN negotiator; Addie Jonasson, sub chief; Steven Nitah, LKDFN negotiator; LKDFN chief Felix Lockhart; De Beers Canada COO Glen Koropchuk; and Rudolph Swanepoel, De Beers negotiator. — Photo courtesy Mountain Province Diamonds, Inc

NWTMN president Garry Bailey was also effusive in his praise of the IBA.

"De Beers Canada has earned the respect of the Northwest Territory Métis Nation and enhanced its social license,” Bailey said in the same announcement. 

Gahcho Kué is located 280 kilometres northeast of Yellowknife on a 10,353-acre site at Kennady Lake.

Mountain Province spokesman Matthew Evans said Gahcho Kué is the largest diamond mine under development in the world, and has the potential to become one of Canada's major high-grade and long-lived diamond mines.

Construction at Gahcho Kue, February 2014

Construction at Gahcho Kue, February 2014 — Photo courtesy Mountain Province Diamonds, Inc

“We are 12 months into a 24-month build,” said Evans. “At the end of December 2014, the mine was 54 per cent complete.”

There are currently about 240 employees on site, with the number growing to around 700 in the summer. The mine is expected to start producing in the third quarter of 2016, at which time it will have 370 full-time employees.

Gahcho Kué  is a joint venture (JV) between De Beers (51 per cent) and Mountain Province (49 per cent).

“All material decisions require consensus, making it effectively a 50/50 joint venture,” Evans said. “De Beers is the operator of the mine. It is also responsible for construction and 51 per cent of funding. We fund the other 49 per cent.”

Each partner markets its own share of the diamonds (51 per cent De Beers/49 per cent Mountain Province).

An aerial view of Gahcho Kue taken in October 2014.

An aerial view of Gahcho Kue taken in October 2014. — Photo courtesy Mountain Province Diamonds, Inc

Evans said the mine has a solid business case.

“Gahcho Kué has an internal rate of return of 32 per cent and has the highest return of any De Beers major capital project, with a margin of well over 50 per cent,” he said. “This translates to a cash flow of approximately $630 million per year.”

Gahcho Kué has a probable 43-101-compliant reserve of 35.4 million tonnes, 55.5 million carats, with a grade of 1.57 carats per tonne. The mine has an expected life span of 17 to 20 years.

Evans said there are four producing diamond mines in Canada (Ekati, Diavik, Snap Lake and Victor) and two more mines (Gahcho Kué and Renard) are under construction.

Patrick Evans and Jonathan Comerford, Director of Mountain Province Diamonds, on Gahcho Kue site visit, August 2014.

Patrick Evans and Jonathan Comerford, director of Mountain Province Diamonds, on Gahcho Kue site visit, August 2014. — Photo courtesy Mountain Province Diamonds, Inc

“There are a number of exploration companies, such as Kennady Diamonds Inc., Peregrine Diamonds Ltd (see sidebar) and North Arrow Minerals Inc., with most of the exploration taking place in the Northwest Territories,” he said.

At the moment there are 17 producing diamond mines in operation around the world. According to Mountain Province, that number will be reduced to 12 in 2017, when Gahcho Kué is expected to achieve full production.

Also according to Mountain Province, a worldwide shortage of diamonds is expected in the future, because supply is not keeping up with demand.

Another photo taken at the time of the site visit by Evans and Comerford in August 2014.

Another photo taken at the time of the site visit by Evans and Comerford in August 2014. — Photo courtesy Mountain Province Diamonds, Inc

Despite investments of hundreds of millions of dollars in exploration, the diamond industry has failed to discover enough commercial diamond deposits to replace existing diamond mines. The United States accounts for one-half of all diamond sales. But demand is increasing in China and India, which have growing middle classes, and in the Middle East.

By 2017, global demand for diamonds is expected to rise to US$20 billion, outstripping supply by approximately US$5 billion annually. As a result, diamond prices are projected to double within the next 10 years.

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