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Matt Manson, President and CEO of Stornoway Diamond Corporation is pictured the the mining company's Toronto offices on Tuesday May 7, 2013.Chris Young/The Globe and Mail

Something sparkly has caught Quebec's eye.

Nearly a decade after the most precious form of carbon was found in the northern mountains of Quebec, the first diamond mine in Quebec is opening in July. Stornoway Diamond Corp.'s Renard mine, nestled near the Otish Mountains, is projected to produce 1.5 to 2 million carats of diamonds a year.

The opening of Renard comes at a convenient time: Globally, demand for diamonds greatly exceeds supply, largely because few new mines have been discovered recently.

"There's Renard in Quebec, DeBeers in the Northwest Territories and one pipe in Russia, that's about it," said Edward Sterck, diamond analyst at BMO Capital Markets. "And these are not of the same world-class scale as DeBeers in Botswana and Russia, which are now very old and in decline, so… Supply is incredibly limited."

Diamond prices have crept higher over the past few years as demand flourishes, particularly in emerging markets such as India and China, where the growing middle class seeks luxury goods.

Canada's unlikely affair with diamonds began more than two decades ago, when geologists found the gem they'd been searching for for more than 10 years in Canada's pristine Lac de Gras tundra, 193 kilometres 120 miles south of the Arctic Circle. It sparked a wild staking rush to the Northwest Territories and Nunavut, which swiftly became the hub for Canada's booming diamond industry in the early 2000s. In 2006, construction began on the Victor Mine in Ontario, widening the search beyond the territories. Canada eventually became the world's third largest producer of diamonds, after Botswana and Russia.

Canadian production peaked in 2007, when more than 16 million carats of diamonds were mined, mostly from the original two mines, Ekati and Diavik, in the NWT. Since then production has tailed off, dwindling to 11 million carats last year as these aging mines are now running out of steam.

"There's been a line drawn in the sand," said Mr. Sterck. "Everyone really wants to find the next deposits."

So is Quebec the next bright spot in an otherwise scarce diamond market? There are certainly geological prospects, said Mr. Sterck, particularly in the Renard area. But it's no panacea, and the heyday of Canadian diamond production is probably over.

"I suspect there are a few people doing exploration but on a quieter basis, without the gusto seen before," said Mr. Sterck. "Diamond exploration is really tough, and I doubt [Renard] will spur a huge new rush."

Investors must still believe there are some legs left in diamond exploration, because Stornoway raised $944-million in financing up front for its Renard diamond project. The lump sum is a "suitable" amount for a project of its scale, says Mr. Sterck, although it's gigantic compared to the size of Montreal-based Stornoway, which has a market capitalization of about $150-million. It's also the biggest-ever project financing deal for a public diamond mining company, according to Matt Manson, CEO of Stornoway.

So how did a junior mining firm raise nearly a billion dollars? The strong backing from the Quebec government gave the project legitimacy when seeking investors, said Mr. Manson. Quebec holds about a 25-per-cent stake in the project, and the provincial government has been involved from the start: Quebec has held an ownership in the diamonds since they were were discovered through a Quebec-funded exploration in 2001.

The Renard site could be a boon to the economy in Northern Quebec, where gold mines have dried up and employment prospects are sparse, making it a priority for the Quebec government. Renard is expected to begin commercial production in 2017, and should have a long mining life of at least twenty years, so the employment boost could sustain itself for decades.

The other appeal of the project? The diamonds themselves. "It's lucrative, there's a very modest impact on the environment," said Mr. Manson. "It's a very easy project to get behind."

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