Diamond strategy unveiled

A group consisting of the Northwest Territories and Nunavut Chamber of Mines, the Prospectors & Developers Association of Canada, and the Mining Association of Canada (MAC), has released a document designed to influence public policy on the Canadian diamond industry.

Pierre Gratton, vice-president of public affairs and communications with MAC, says federal policy on diamond mining is flawed and that he does not want to see the same mistakes repeated when the next set of diamond mines goes into production in the next decade.

The document, National Diamond Strategy, proposes several changes, including a study of the competitiveness and cost structure of the polishing and cutting industry. The proposed study is part of a strategy aimed at capitalizing on potential “downstream” opportunities, such as jewelry manufacturing. The MAC believes numerous aboriginals could find work as jewelry makers if provided with apprenticeship programs. The reports suggests such a strategy could work if the federal government were to eliminate the excise tax on jewelry or the tax on jewelry made and sold here.

The report also suggets improving the investment climate for exploration and mining by simplifying regulations, and investing in northern geoscience and infrastructure programs.

As well, the report calls for an end to short-term, unsustainable policies designed to stimulate the development of cutting and polishing in Canada, as these policies ultimately penalize primary producers. For example, the government of the Northwest Territories requires that Canada’s two diamond mines, Ekati and Diavik, each sell 10% of their highest-quality diamonds to local polishing and cutting facilities. Diamonds are traditionally sold as parcels of gems and rough, with higher-grade diamonds bringing up the overall price of the stones. If a mine sells 10% of its best diamonds, then it cannot get as much for lower-quality stones in subsequent deals.

Ekati and Diavik employ some 2,200 people in total — mostly northerners who directly contribute to the economy of the Northwest Territories and Nunavut. And mining at De Beers’ Snap Lake deposit is slated to begin in 2008. It is estimated that, over the life of all three mines, revenue from federal royalties, federal and territorial corporate income tax, municipal taxes and other sources will exceed US$7.5 billion. The mines are also expected to generate between $25.7 billion to $29.7 billion in combined gross domestic product over their lifespans.

“In less than a decade, Canada has emerged as a diamond powerhouse,” says Gordon Peeling, chief executive of the MAC. “We are already producing fifteen per cent of the world’s supply of rough diamonds by value. By providing the right mix of fiscal and regulatory policies, governments have the opportunity to maximize the contribution of Canada’s diamond industry.”