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Now that that pit has reached its bottom, miners are digging a network of tunnels to extract what remains of the carrot-shaped deposit of kimberlite that they have been pulling from the ground for nearly a decade. (JOHN LEHMANN/JOHN LEHMANN/GLOBE AND MAIL)
Now that that pit has reached its bottom, miners are digging a network of tunnels to extract what remains of the carrot-shaped deposit of kimberlite that they have been pulling from the ground for nearly a decade. (JOHN LEHMANN/JOHN LEHMANN/GLOBE AND MAIL)

Mining

The North scrapes bottom Add to ...

Mr. Gannicott, however, doesn't see anything on the horizon that could replace the diamond mines that are, he says, "the linchpins of the economy up here. So what happens after that?

"When they close, all those people that have now got training, are used to being in that wage economy and are doing very well in it - they're frankly going to have to move out of the NWT to be able to carry on doing what they're currently doing for a living."

Some have already begun doing exactly that. Last year, the NWT population declined, and employment fell by 5 per cent.

The economic crisis, of course, played a major role, forcing suspensions of diamond production and causing a huge cutback in spending among junior exploration companies whose sources of capital dried up. Exploration spending in the territory, which once led the country, fell to $29-million last year from $148-million in 2008.

Diavik's transition to underground mining will mean fewer jobs - paralleling the experience at Ekati, where underground mining started in 2002 - and also fewer profits.

At Diavik, it costs about $80 per tonne to process ore from open pits. Underground mining will raise the cost 50 per cent to $120. Most of the underground mining will come from a location that produces on average two carats per tonne - well below the 3.5 and five carats per tonne at the pits. Production volume will substantially decrease.

Worse, the chance of finding more diamonds to sustain further operations has largely faded.

"Both BHP and ourselves have had exploration programs for a number of years and not found anything else that's economical," Mr. Gannicott says.

But for a place that, by the numbers, looks like it's in dire straits, it's tough to see much sign of worry in Yellowknife these days. The NWT has seen a 23-per-cent contraction in its economy in the past two years - a far greater plunge than any other jurisdiction in Canada - but real estate in the northern capital continues a seemingly inexorable rise and the most expensive restaurants still fill up even on weeknights.

Long-time residents are confident it will continue this way. Government, which by some estimates supports 40 per cent of the economy, is not going anywhere, meaning Yellowknife will always have a strong base. Ideas for new infrastructure hold the promise of extending the territory's economic lifelines - including that of the diamond mines.

Pipeline hopes die

The decline in diamond mining has thrown the NWT's other great hope into stark relief. The Mackenzie Valley pipeline, intended to bring natural gas to hungry southern markets from offshore drilling in the Arctic, has long been a divisive symbol of northern development.

The project was first bruited in 1970. When a federal inquiry headed by Justice Thomas Berger recommended a go-slow approach to the pipeline in 1977, it was a milestone victory for the environmental and native rights movements.

But over time, resistance by some of the native bands along the pipeline route changed to an embrace of the project - so long as native people themselves had a say and a stake, which came to pass via the Aboriginal Pipeline Group. The settlement of land claims by most of the aboriginal groups along the pipeline route was part and parcel of the new attitude.

But the revival of the pipeline idea has stalled as the massive cost of the project, as well as the relative contributions of the federal government and participating energy companies, has been weighed against changes in the natural gas market. Moreover, one native group - the Deh Cho, who have not settled their land claim - has opposed proceeding.

The delay is a source of frustration to Joe Handley, the former NWT premier who pushed for the $16.2-billion megaproject, because it would pour billions into the territory and open its frontiers to petroleum exploration like it's never seen.

But Mr. Handley has largely lost hope. The proliferation of shale gas supplies in southern Canada and the U.S. has reduced the need for Arctic gas - and slashed the prices the project would depend on.

"You look at the cost of the Mackenzie Valley pipeline's $4 or $5 gas and it just doesn't add up," he says. "You're not going to make much money on it, if any. You might lose money on the thing."

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