Ekati Mine Opens
BHP Diamonds and Dia Met Minerals open Canada's first major commercial
As mid-October's Arctic winds signaled the return of winter, 125 dignitaries
and guests gathered in Canada's Northwest Territories to celebrate the opening
of Canada's first diamond mine. The Ekati mine lies about 100 miles south
of the Arctic Circle.
Since the discovery of significant diamond-bearing kimberlite ore in
the region in 1991, the diamond world had waited for this moment. Canada
represents virgin territory for diamond miners to explore the most
promising new find of higher-quality diamonds in years.
Ekati is a joint venture. Dia Met Minerals of Canada owns 29%; BHP Diamonds,
a unit of Broken Hill Proprietary Co., Australia's largest industrial and
natural resources company, owns 51%; Chuck Fipke, the geologist/founder
of Dia Met, owns 10%, as does his long-time prospecting partner, Stewart
Fipke's lonely and largely underestimated work throughout the 1980s led
to the discovery of diamonds in the Northwest Territories. BHP joined with
Fipke and Dia Met in 1990 to provide needed financing through an exploration
BHP, which operates the Ekati Diamond Mine, built a high-tech operation
that digs up the kimberlite and removes the diamonds against climatic odds
that would have stopped many miners in their tracks (see related story on
The Ekati partners appointed BHP as the marketing arm for the mine's
production over the next five years. BHP also is building a sorting and
valuation center in Yellowknife, a city just south of the mine.
Ekati is expected to produce about $7 billion worth of gem-quality diamonds
for use in jewelry in the next 20-25 years, with yearly output of rough
industrial and gem-quality diamonds pegged at 3.5 million to 4.5 million
carats. BHP and Dia Met estimate the Ekati mine alone can meet 4% of world
diamond demand by weight and 6% by value each year.
De Beers or Not De Beers
The significance of the mine makes for a difficult choice through
which sales channel should the diamonds be distributed? Several analysts
say it's inevitable De Beers will play some role. But BHP Diamonds won't
rush into a decision.
"Let me assure you that appropriate marketing arrangements are being
put in place," James R. Rothwell, president of BHP Diamonds, said at
the opening ceremonies. "It is our intention that diamonds produced
during the initial months as we gradually build toward our capacity production
rate will all be sold through the BHP Diamonds office in Antwerp. Discussions
are continuing with a number of major diamond companies eager to purchase
a significant portion of the production. Our market entry strategy using
the Antwerp office will enable us to gain knowledge of our product and market
experience and will provide time to establish representative samples of
our diamonds that are necessary prior to finalizing any major sales commitments."
In the Ekati Diamond Mine brochure, Bill Zimmerman, head of marketing
for BHP Diamonds, states that in addition to smaller sales to dealers and
manufacturers, "channels we may use include sales to [De Beers'] Central
Selling Organisation ... direct sales of larger quantities of run-of-mine
product to larger dealers or manufacturers, or joint ventures."
Promotions & the Future
Whether BHP Diamonds or Dia Met Minerals will promote the Ekati diamonds
as Canadian remains to be seen. De Beers hints it may someday broadly promote
its own diamond brand, so BHP and Dia Met may need to consider a separate
consumer marketing campaign, especially if they decide not to do business
with De Beers. But such worries remain far down the road for a mining company
concentrating on getting its first diamonds to market.
Interestingly, De Beers also is exploring in the Northwest Territories.
So too is British-based Rio Tinto Mining Co. Rio Tinto's mine, the Diavik,
is expected to open in 2002.
The timing of the opening of Ekati worries some diamond experts. There's
been a drop in diamond demand due to the economic crisis in Southeast Asia,
which caused De Beers' to severely restrict the number of diamonds it sold
in 1998. Though BHP acknowledged the drop in demand at the Ekati opening,
it stressed this doesn't undermine the mine's viability.
by Robert Weldon, G.G.
The Five Pipes of Ekati
The Ekati mine initially will plumb the riches of five kimberlite pipes
known as Panda, Misery, Koala, Fox and Sable. BHP plans open pit mining
at all five. When this mining method is exhausted, Ekati miners will go
underground at Panda and Koala. Underground mining is more expensive, so
it's planned only for the two pipes expected to yield ore richer in diamond
Gem-quality diamonds recovered from the pipes that make
up the Ekati Mine (from left): Panda, Misery, Koala, Fox and Sable.
Kimberlite pipes, the volcanic cones that contain many of the world's
diamonds, are most often found in geological areas known as cratons, where
the earth's crust is thick, ancient and stable. Well-known cratons are found
in Africa and Siberia, home to the most sustained diamond kimberlite mining
operations in the world. The Ekati mine sits on the Slave craton.
What's an Ekati?
Ekati means "fat lake." The native people of the Northwest
Territories have always called the Lac de Gras area where the mine is situated
by this name. Ancient people thought the veins streaking the white quartz
rock in the area looked like caribou fat, a valued commodity there. The
name is a symbol of the commitment BHP and Dia Met have made through agreements
with local Indian tribes, principally the Inuit, to provide job training,
scholarships and jobs.
Copyright © 1999 by Bond Communications.