Locals get a cut of Canada's growing diamond trade

Perhaps only in Yellowknife, perhaps only here at Sirius Diamonds, is the term "polar bear" a verb.

Jeannetta Hynes is "polar bearing" one of the stones cut and polished in the firm's shop. Using computerized controls, she laser-etches a microscopic rendition of the company's polar bear logo onto the diamond, along with a serial number and the name "Sirius."

The stones come from the three-year-old Ekati mine, an hour north of here by plane, and the first of three diamond mines being built in Canada.

As Canada develops into a world-class diamond producer, leaders here want to ensure that some benefits are passed on to the community. Sirius and two other diamond-cutting businesses owe their existence to an unusual arrangement between the Northwest Territories government and the mine's owners, whereby the owners must sell at least 10 percent of the raw stones to local cutting shops.

Not every small town has a world-class diamond mine in its backyard. But the concerns of Yellowknife, a town of 18,000, are those of every resource-based community seeking ways to keep its natural wealth - and its young people - from gravitating toward the big cities.

The mine was discovered in 1991 by a pair of Canadian geologists, Charles Fipke and Stewart Blusson, who each own 10 percent of it. The mining company, BHP Diamonds, an arm of the Australian mining giant, owns 51 percent; the former Mrs. Fipke owns 5 percent; and shareholders own the rest. But the estimated 300 diamond-cutting workers in Yellowknife have their own stake in the business: a decent paycheck and the chance to eventually expand from cutting and polishing into valuation and maybe even jewelry manufacturing.

"At the end of the day, when all the diamonds are gone, we don't want five holes in the ground and nothing for our people, with the profits all gone to Australia and the royalties to the federal government," says Robert McLeod, deputy minister for resources, wildlife, and economic development in the territorial government. "Our government would not have approved the diamond mine without the value added."

But Canada's success in this business is not a foregone conclusion. This is a high-cost environment. It is remote and heavily dependent on long supply lines from the south.

"Labor costs are as high as in Antwerp," says Peter Finnemore, a South African with 35 years' experience in diamonds who manages Sirius for its owners, the Ben-Oliel family of Vancouver. His staff of two dozen are still in training, but when fully qualified, they should be able to pull down up to US$20 an hour. "That's competitive with anywhere in the world."

Yellowknife leaders estimate the 300-person diamond-cutting workforce could expand to 2,000 in the forseeable future. And then there are the 640 mine workers, most of whom are flown to Ekati from Yellowknife, who make an average salary of $45,000 annually. That workforce will grow as other mines come online.

In this mostly frozen territory of 45,000 inhabitants, some of them only half a century past their first contact with white people, a diamond-cutting industry of that size would loom as large as Boeing in Seattle. In the next few years, the federal and territorial governments expect to earn about $100 million annually in royalties and taxes from Ekati alone.

The modest Sirius lobby is full of employees' framed diplomas from the Diamond High Council in Antwerp and other training and accrediting organizations. The transfer of knowledge and skills into the local community will help Yellowknife, the self-proclaimed "diamond capital of North America," move "up the pipeline" of the diamond industry, to get beyond cutting and polishing to the valuation of diamonds, and then perhaps even jewelry manufacturing, says Mr. McLeod, the deputy resource minister.

The effort to give a cut of the diamond business to the community is due in large part to Stephen Kakfwi, the onetime native activist turned resources minister who is now territorial premier. It's part of a broader strategy intended to help the Northwest Territories slip the bonds of dependency on federal transfer payments.

The Ekati mine is in its third year of production. It is expected to yield $7 billion worth of stones over the next 25 years. A second mine, the Diavik mine, is under construction, with production expected the first half of 2003. A third mine, De Beers's first project outside Africa, is in the permit-application phase, with production there expected to start in 2004.

All this activity could make Canada the world's No. 1 producer of rough cut diamonds within the next two decades, said Larry Heaman, a geologist at the University of Toronto.

These are exceptionally high-quality stones. They have the further cachet of being "conflict-free" diamonds that socially conscious buyers can purchase without fear that their jewelry budget is supporting a war in Africa.

More than anything, growth in the diamond cutting business will be constrained by a shortage of suitable workers, Finnemore predicts. Although official unemployment rates in this town of 18,000 here are high, so are rates of drug abuse and other social problems.

(c) Copyright 2001. The Christian Science Monitor