Ekati Mine Opens

January 1999


Ekati Mine Opens

BHP Diamonds and Dia Met Minerals open Canada's first major commercial diamond mine

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 Blusson.

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 agreement.

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 page 27).

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 value.

Gem-quality diamonds recovered from the pipes that make up the Ekati Mine (from left): Panda, Misery, Koala, Fox and Sable.

 Canadian Craton

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.


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