The global economic slowdown has dulled the gleam of one of Canada's most luxurious exports, as northern diamond mines enact cost, production and job cuts in reaction to falling gem prices.
"The diamond industry was doing well until about September, then all of a sudden the wheels came off the wagon," said Pierre Leblanc, an Ottawa-based diamond industry consultant. "The impact was rather sudden."
Diamond prices are down about one-third since their high last August, Leblanc said. Retail sales in Canada are fairly stable, but they have dropped between 20 and 30 per cent in the United States.
That fall has rippled through world diamond markets to the Canadian tundra, where Canada's three producing mines are grappling with the change.
The effect has been most drastic at the Snap Lake mine, owned by De Beers Canada and located about 220 kilometres northeast of Yellowknife.
Last December, De Beers announced the mine would shut down for a total of 10 weeks in 2009, once in the summer and once in December. About 430 workers at the mine will be laid off during the shutdowns.
"The shutdowns will save the company expenses such as meals, air transportation, accommodations and power," said a De Beers press release. "The company is taking steps to weather the crisis so that the mine will be ready for production once the economy revives."
The economic slowdown is also being felt at the nearby Diavik mine, owned by Rio Tinto and Harry Winston Diamonds.
In a bid to reduce capital costs, the mine is delaying its move to underground production by about six months to the fall of 2009. The delay will cost jobs among contractors hired to do work, said spokesman Doug Ashbury.
With the situation still in flux, the company hasn't laid off any of its own employees, Ashbury said.
"Things can change. We have to make sure that our business is set for the future."
A two-year-old cost reduction at BHP Billiton's Ekati mine, Canada's first diamond mine and considered by some to be the most profitable mine in the country, has saved that facility from the worst impacts of the slowdown, said spokeswoman Deana Twissell.
"We've been able to weather the storm a little bit more manageable than others."
Production costs of $85 per tonne of kimberlite ore have now been squeezed down to $70, she said. Further measures are planned to reduce costs to $50 per tonne.
The mine remains in full production, said Twissell.
So far, Yellowknife's cutting and polishing industry remains stable, said Jim Myres of the Northwest Territories' Industry, Tourism and Investment Department.
Employment in the territorial capital's four factories remains at about 100, he said.
The long-term future of the mines is probably safe, Leblanc said.
Ekati and Diavik are among the more profitable mines in the world. They produce diamonds with average values of between $90 and $95 per carat, well above the worldwide average of $72 per carat.
However, the drop in prices and the economic turmoil will make life difficult for junior miners trying to develop new properties, said Leblanc. Issuing shares is how expensive exploration programs are financed, and depressed share prices mean the companies must issue more of them, making them less attractive to investors.
"It's now exceedingly difficult to get money, and if you do get money you get it at pennies per share," Leblanc said.
"You're looking at huge dilution."
However, any major fall-offs in exploration aren't likely to take place until 2010.
"(Miners) still have some reserves and have a program in place for 2009."
