Diavik Officials Hope Agreement Is Near

February 25, 2000

Diavik Officials Hope Agreement Is Near

Diavik diamond project officials said a deal may be reached with the Canadian government by next week to resolve an environmental dispute that has halted construction of Diavik's billion-dollar mine in Canada's Northwest Territories.

Diavik and Canada's Department of Indian and Northern Affairs have been locked in a month-long battle over the value of environmental reclamation bonds and various land use issues. Diavik is a joint venture of Britain's Rio Tinto PLC and Aber Resources Ltd.

"I would be raising my eyebrows a little bit if by this time next week there wasn't something done," Robert Gannicott, president and CEO of Toronto-based Aber, told Reuters.

Aber announced in mid-February that most issues had been resolved, but a final agreement has not been reached. Optimism grew this week after the talks moved from frigid Yellowknife to Ottawa, the nation's capital, said Gannicott.

The fight, which pitted Diavik against the government and local native groups, threatens the construction schedule of the $1.3-billion (Canadian) diamond mining operation located in Canada's far north. Construction of the mine, which is expected to produce 8 million carats, or 6% of world output annually, was put on hold in mid-January after the Canadian government refused to grant a key land permit.

The impasse came after the government refused to issue an interim land-use permit until an environmental management deal was reached. DINA insists the company post a bond of more than $200 million before any work is allowed. The permit would have allowed Diavik to prepare the location to receive supplies needed to begin construction. Development must begin soon to allow construction to begin in the second quarter. Otherwise, opening of the mine could be delayed by a year.

- by Mark E. Dixon