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The Globe and Mail

De Beers set to restart Gahcho Kue diamond mine project

A new diamond mine in Canada's North is again in front of regulators after a recovery in international markets for the sparkly objects of desire.

Diamond miner De Beers recently filed a mammoth environmental assessment for its long-awaited $600-million Gahcho Kue project and says it could begin production from the mine in 2014.

"It's been a project that's been in the works for quite some time," said De Beers spokeswoman Cathie Bolstad.

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De Beers, the majority partner in the project with Canada's Mountain Province Diamonds, originally brought Gahcho Kue before the Mackenzie Valley Environmental Impact Review Board six years ago.

But after the board ruled the project, located about 280 kilometres northeast of Yellowknife, would be the first diamond mine to be subject to a full environmental impact review, the company appealed the decision in court. De Beers lost the case in 2007, and shortly after found itself facing a drop in diamond demand that saw U.S. prices fall between 20 and 30 per cent.

With production cuts at De Beers' Snap Lake mine and other mines cutting back production, Gahcho Kue was pushed to the back burner.

But now, with a 19-volume environmental impact assessment freshly delivered to the regulator, the project is back.

"De Beers has always believed in Gahcho Kue," said Ms. Bolstad.

Northern officials say the project's revival is well timed.

The Northwest Territory's two biggest mines - BHP's Ekati and Rio Tinto's Diavik - have many productive years left and continue to explore for new ore bodies. But they are starting to enter their sunset years, said Tom Hoefer of the NWT and Nunavut Chamber of Mines.

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"They're going to start seeing a reduction in production," Mr. Hoefer said.

"I think there is a feeling of maturity here and of being on the other side of the curve."

Diamond mining has become the linchpin of the NWT economy. Deb Archibald of the NWT industry ministry said the territory's three operating diamond mines are responsible for nearly half of its GDP.

"The boom and bust factor is a significant issue for mining communities," she said. "To have Gahcho Kue come onstream would potentially mitigate some of that bust."

De Beers estimates that Gahcho Kue would create some 360 full-time equivalent jobs during the 11-year life of the mine and up to 700 full-time jobs during construction. The company says it will spend nearly $1-billion on goods and services over the life of the mine, much of that in the North.

Gahcho Kue may not be as rich as Ekati or Diavik. Those mines produce diamonds with average values of between $90 and $95 per carat, well above the world average of $72 per carat, and are considered among the most profitable in the world.

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But at least one of the project's ore bodies is expected to yield above-average values, at $74 per carat.

The mine's main environmental hurdle is its expected impact on caribou habitat. The mine is located within the range of several major herds, all of which have suffered serious declines in recent years.

The mine plan also involves draining the 870-hectare Kennady Lake.

It would De Beers' third Canadian mine, after the Snap Lake mine in the NWT and the Victor mine in Ontario.

The review board is currently examining Gahcho Kue's environmental impact statement. Ms. Bolstad said the company hopes the regulatory process will be finished in under two years.

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