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BHP to mine Ekati diamonds a year longer Add to ...

The life of Canada's oldest diamond mine will be extended by a year as owner BHP Billiton Ltd. pushes ahead with a $400-million (U.S.) open-pit project at the Ekati site in the Northwest Territories.

The investment at Ekati, which opened in 1998, comes as production at the facility begins to rapidly decline. Production from Ekati has been slowly falling in recent years but BHP's most recent quarter saw output plunge almost 30 per cent from a year earlier.

BHP owns 80 per cent of Ekati. The company plans to strip mine an older area of the site called Misery, which had previously been an open-pit mine from 2001 to 2005.

The Ekati investment is the latest move in Canada by the Australian mining company after last year's failed $38.6-billion hostile takeover bid for Potash Corp. of Saskatchewan Inc. Earlier this year, BHP said it was taking the next step toward building the Jansen potash mine with a feasibility study. A decision on whether or not to build Jansen is set for next year.



Diamond prices, which plunged during the recession, have been steadily climbing amid healthier demand. This spring, the most valuable rough stones from Diavik, Canada's largest mine, popped 14 per cent higher to $205 a carat in April from $180 in March.

Mining at Misery will begin in late 2015 and last less than two years, ending in mid-2017.

A BHP spokesman said Misery will help Ekati stay in business until 2018, one year longer than originally planned.

Production at Ekati in the January-March period was 689,000 carats of diamonds, of which BHP's 80-per-cent share was 551,000 carats. The decline of 28 per cent compared with the same period in 2010 was due to the aging mine and lower-quality deposits, BHP said April 20 when it issued its quarterly results.

"Production continues to be influenced by the variability of ore sources due to the mix of open pit and underground mining," BHP said.

The quality and quantity of diamonds is on the decline because the best parts of the site have already been mined. Bob Gannicott, chief executive officer of competitor Harry Winston Diamond Corp., has likened it to cuts of beef. "We've already had the T-bone," Mr. Gannicott told The Globe last year. "We now have to move on to the hamburger."

Ekati accounts for about 3 per cent of the world's rough diamond supply measured by weight, and about 9 per cent of the total when tallied by value, according to BHP's 2010 annual report. The mine is a significant contributor to the northern economy; the company said it spends the bulk of its Ekati budget with Northern suppliers.

BHP said the trend of lower ore grades and weaker production, which had been expected, will continue in fiscal 2012.

Before this year, production had been relatively steady. It fell 4 per cent in fiscal 2009 to 4.03 million carats and slid a further 5 per cent in fiscal 2010 to 3.81 million carats.

In the first three quarters of fiscal 2011, diamond production is down 16 per cent - which leaves BHP on pace to produce 2.41 million carats for the full fiscal year.

Harry Winston owns 40 per cent of Diavik, located near Ekati. Production at Diavik, which opened in 2003, is still increasing, with output of 6.9 million carats predicted for 2011. That would be a 6-per-cent gain from 6.5 million carats produced in 2010. In April, the company said it was updating its mine plan, which it plans to release later this year.

At Ekati, BHP's share of the expansion is $323-million. Of that figure, $29-million has already been spent, to bring in some equipment over the past winter to the remote site.

The minority 20-per-cent stake in Ekati is owned by Chuck Fipke and Stewart Blusson, the pair of geologists who discovered the kimberlite pipes that house the diamonds.

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