Canada Could Capitalize on Conflict

June 22, 2000

Canada Could Capitalize on Conflict

As conflict diamonds make headlines and retailers and mining companies become more nervous about trading in African goods, Canada is poised to become one of the hottest diamond sites in the world.

"Canada is in an ideal position to capitalize on the perception of its diamonds being conflict-free and verifiable in terms of their authenticity," David Duval, a technical mining adviser to the U.N., told Reuters. Much of Canada has yet to be explored for resources and is thought to be potentially rich in diamonds. Mining in Canada is appealing also because of the proximity to the U.S., the world's largest diamond market and Canada's biggest trading partner.

Many mining companies, including De Beers, are said to be exploring Canada. Reuters reports De Beers is scouting locations in the Northwest Territories and Ontario, but they have no mines in production at this time. "We recognize that Canada is certainly going to be a very important player in global diamond production in years to come," Richard Molyneux, De Beers' chief executive in Canada, told Reuters. "In our observations of the discoveries that have been made here to date, in the context of the enormous size of the country and the exploration difficulties that are encountered, my gut feeling is there will be a lot of additional significant discoveries made in the years to come."

Even retailers are interested in Canada. Tiffany & Co. has formed a supply agreement with Canada's Diavik mine, owned by Britian's Rio Tinto Plc. and Canada's Aber Resources Ltd. The mine is Canada's second largest, located 300 kilometers northeast of Yellowknife. It is expected to supply $50 million in stones per year to Tiffany & Co. once production starts in 2003.

In other news, diamond officials in Angola have announced they expect its diamond production to rise to $800 million by the end of the year.

This news comes amid the growing attention toward the rebel group UNITA illegally trading diamonds from Angola. According to Reuters, Arye Barboy, a partner in Angola Selling Corp., which markets the country's diamonds, said the government appears to be winning its battle against illegal traders who have long sapped its diamond revenues. "The situation seems to be improving with very few incidents. The government seems to have more control," Barboy said.

Since partnering with Ascorp a year ago, the government has been receiving more taxes and revenue from diamond sales. The partnership is also working to control the flow of conflict diamonds, worth about $150 million annually, Reuters reports.

- by Julia M. Duncan