Greater than three many years after diamonds remodeled Canada’s Northwest Territories (NWT) into a world mining powerhouse, the business that when outlined the area’s trendy financial system is dealing with a painful reckoning.
Whereas governments and buyers have spent the previous a number of years centered on vital minerals and battery metals, the NWT’s diamond mines are grappling with falling costs, lab-grown competitors, tariff disruptions and mounting monetary pressure.
With one main mine set to shut inside weeks and others beneath stress, leaders throughout the North are asking a seemingly as soon as unthinkable query: what comes after diamonds?
From staking rush to international participant
The trendy diamond period within the NWT started in November 1991, when geologists Chuck Fipke and Stewart Blusson found 81 small diamonds at Lac de Gras. The discover triggered the biggest diamond staking rush in North American historical past and led to the event of the EKATI Diamond Mine, Canada’s first.
By 2004, greater than 28 million hectares throughout the NWT and Nunavut had been staked. Canada rose to grow to be the world’s third-largest diamond producer by worth, behind Botswana and Russia, largely on the power of the NWT’s output.
For many years, the sector generated hundreds of high-paying jobs and helped construct Indigenous-owned companies throughout the territory. At its peak, greater than 3,000 Indigenous staff had been employed on the area’s three diamond mines.
In the present day, that basis is beginning to present cracks.
All stress, no diamonds
Rio Tinto’s (ASX:RIO,NYSE:RIO,LSE:RIO) Diavik mine, one of many pillars of the business, is scheduled to shut subsequent month.
Though the corporate just lately unveiled a uncommon 158.2-carat yellow diamond from the positioning final 12 months, described by COO Matt Breen as a “miracle of nature,” the symbolic discovery can’t reverse the mine’s finite life.
As well as, De Beers ( a subsidiary of Anglo American (LSE:AAL,OTCQX:NGLOY)) and Mountain Province Diamonds’ (TSX: MPVD,OTC:MPVD) Gahcho Kué mine has paused a challenge that will have prolonged operations from 2027 to 2030, elevating issues about its longevity.
In the meantime, EKATI, owned by Australia’s Burgundy Diamond Mines (ASX:BDM), is battling monetary misery after diamond costs fell at the least 20 % following its acquisition of the asset.
Within the legislature this week, Monfwi MLA Jane Weyallon Armstrong warned of the implications.
“The closure of Diavik and Gahcho Kué may have a major influence on Tłı̨chǫ communities and at the moment, the GNWT has no significant different,” she stated.
Premier R.J. Simpson acknowledged the problem. “We’re at some extent now the place we all know the diamond mines are winding down, and the query has been: ‘OK, effectively, what’s subsequent?’” he stated in a current interview.
Market headwinds multiply
The business’s struggles usually are not merely a matter of geology. Pure diamond costs have been beneath sustained stress, battered by a number of macroeconomic forces converging directly.
For example, lab-grown diamonds—chemically an identical to pure stones and obtainable at a fraction of the value—have quickly gained acceptance amongst shoppers. What was as soon as a distinct segment product is now mainstream, significantly amongst youthful consumers drawn to decrease prices.
Canadian diamonds lengthy marketed themselves as moral options to so-called “blood diamonds.” However artificial stones could make related claims, weakening one of many pure business’s key promoting factors.
Luxurious spending has additionally softened, and new commerce obstacles have added additional pressure. A 50 % US tariff on Indian imports has disrupted the worldwide sprucing pipeline, since most tough diamonds are minimize and completed in India earlier than being bought into the US market.
The proprietor of EKATI has linked its monetary difficulties partially to these tariffs, in addition to to the broader collapse in pure diamond costs. The corporate just lately acquired a C$115 million federal mortgage beneath a facility designed to help companies affected by US commerce disruptions.
Even so, EKATI suspended elements of its operations final 12 months and has confronted criticism from staff over layoffs and severance funds. Burgundy has publicly acknowledged critical monetary issues and indicated it might want extra funding if costs fail to recuperate.
At Gahcho Kué, Mountain Province Diamonds is navigating its personal funding challenges. Appearing president and CEO Jonathan Comerford stated the corporate’s difficulties mirror “the extended weak spot within the diamond sector.”
“On this setting, our focus stays on fastidiously managing prices, defending liquidity, and making measured choices to assist the long-term sustainability of our operations,” Comerford stated.
The corporate has acquired in-kind funding notices from joint-venture associate De Beers totalling roughly C$49.2 million associated to unpaid money calls.
Political stress builds
Territorial leaders are additionally beneath rising stress to reply.
Minister of Trade Caitlin Cleveland described the Gahcho Kué announcement as “critical information for the Northwest Territories.”
“Costs are weak, prices are excessive, and firms are having to make troublesome calls,” Cleveland stated in a current assertion. She emphasised that whereas the GNWT can’t management international markets, it’ll work to make sure employee helps are accessible and employers meet labour requirements if job impacts happen.
However some structural points are more durable to deal with. Yellowknife North MLA Shauna Morgan questioned how the federal government can implement socio-economic commitments made by mining firms once they established operations.
Simpson conceded that these agreements lack enforcement clauses corresponding to fines.
“That is about constructing relationships and making certain that we’re staying on high of this,” he stated.
In the meantime, requires diversification are rising louder. “This announcement additionally reinforces a broader actuality for our territory: our financial base stays too depending on a single commodity,” Cleveland stated.
Trying to find the subsequent chapter
There are hopes that vital minerals may assist fill the hole. Exploration for uncommon earths and different strategic metals is rising, reflecting international demand tied to electrification and protection applied sciences.
Weyallon Armstrong has argued that infrastructure, together with expanded street connections from the Tłı̨chǫ area, may unlock new improvement corridors.
“We might not have a Ring of Fireplace, however we may have a frosty circle,” she stated, referencing Ontario’s mineral-rich area.
But even optimistic observers acknowledge that no single challenge is prone to replicate the size and stability diamonds as soon as offered. For neighborhood leaders, the uncertainty is deeply private.
“It’s form of a scary scenario,” Chief Fred Sangris of the Yellowknife Ndilo neighborhood of the Dene First Nation informed the New York Occasions final 12 months. “The place will we go from right here? What’s the subsequent challenge?”
Diamonds have lengthy symbolized permanence. Within the Northwest Territories, particularly this Valentine’s season the place icons of eternal love dominate the market, that symbolism now feels extra strained than ever.
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Securities Disclosure: I, Giann Liguid, maintain no direct funding curiosity in any firm talked about on this article.
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