BUSINESS

NORTHERN GEMS

Natives battle a proposed $12-billion diamond mine

TOM FENNELL March 4 1996
BUSINESS

NORTHERN GEMS

Natives battle a proposed $12-billion diamond mine

TOM FENNELL March 4 1996

NORTHERN GEMS

BUSINESS

Natives battle a proposed $12-billion diamond mine

It might seem improbable that a lone voice from a tropical nation could block development of a massive diamond mine in Canada’s frozen North. But Alex Maun, a soft-spoken businessman from Papua New Guinea, was trying to do just that in Yellowknife last week. The occasion was a federal environmental review hearing on a proposal by Australia’s largest corporation, Broken HiU Proprietary Co. Ltd. (BHP), to mine more than $12 billion worth of diamonds at Lac de Gras, 310 km northeast of Yellowknife. Unfortunately for BHP, the proposed mine site is located on the traditional lands of the Dene, and as part of their strategy to wring concessions from the Australians, they invited Maun to explain how waste from a BHP copper mine has poisoned a river in Papua New Guinea. When Maun spoke, natives at the hearing listened intently—even those who support the project because of its potential to create jobs. “We can’t drink the water,” Maun said. “The river is dead.”

BHP officials disputed every allegation Maun made, but their lawyers’ attempts to

delay Maun’s testimony only underscored what is at stake in Yellowknife. The proposed mine contains an estimated 90 million carats, one of the largest and richest diamond finds in history. After factoring in the cost of building the isolated mine and extracting the gems, analysts say it will still generate a profit of more than $7 billion over the mine’s 25-year lifespan. Moreover, the federal review will also influence the fate of several other proposed mines in the area, which together contain another $30 billion in diamonds. London-based RTZ Corp., the

world’s largest mining company, is expected to start building a mine near Lac de Gras in 1999, and other, smaller finds close to both properties are also laden with diamonds. Said John Hainey, an analyst with Eagle & Partners Inc., a Toronto-based research firm: “The diamonds they have found rank right up there in value with the very best in South Africa and Russia.”

The sparkling find in the windswept tundra was the product of one man’s determined search. For nearly 10 years Kelowna, B.C., geologist Chuck Fipke braved hostile weather and voracious mosquitoes to prove his long-held theory: that diamonds would be found in rock formations near Lac de Gras. Fipke finally discovered his diamonds by accident as he was flying over the area in April, 1990. Just hours before he was set to abandon his search, he spotted an outcropping of soft volcanic rock, known as kimberlite, near the lake. That evening, he chipped away at the rock and revealed its treasure. Hundreds of prospectors soon swarmed over the Barrens. Drill crews worked

around the clock, and a lucky few produced core samples that contained the gems. Four months later, Fipke sold 29 per cent of his find to BHP. Fipke urged the panel last week to approve the mine. “If we have a delay,” he warned, “it could cause BHP to postpone the project.”

Before diamonds from the Northwest Territories go on sale in jewelry shops around the world, BHP faces a daunting task. The company must convince the environmental panel in Yellowknife that it can mine the diamonds without causing major damage to the land or wildlife in the area. Native leaders are split on whether the mine can be developed safely, but on one point they agree: all want a share of the treasure as part of a comprehensive land claims agreement. And so the Australians are caught up in a complex political tussle involving the Yellowknives Dene, the Dogrib Dene and the Canadian government. Bill Erasmus, Grand Chief of the Dene nation, from which the Dogrib have withdrawn, told BHP officials at the hearing that they were simply pawns in the land-claims dispute. “I know you want the diamonds, and we are the people that can stop you,” Erasmus warned. “We are not here for window dressing.”

The panel’s finding is due in June, although either side could then ask for a judicial review. A lawyer for BHP has already argued that it was “unfair” to allow Maun to address the hearing because events in New Guinea have no bearing on the company’s intentions in Canada. Erasmus countered by reminding panel chairman Letha MacLachlan that Canadian courts recognize the Dene’s rights to the land. He promised to take legal action to stop the project from proceeding before the land claim is settled.

That leaves BHP in an awkward position. Project manager Jim Excell told Maclean’s that while the company does not dispute the Dene’s claim, the issue is between aboriginal peoples and the government. BHP, meanwhile, is determined to bring the mine into production on schedule in 1998, creating 650 jobs. “The greatest impact of the Northwest Territories diamonds project is expected to be socioeconomic,” said Karen Azinger, BHP’s manager of external affairs. “It is expected to reduce the overall unemployment rate in the Northwest Territories by three per cent.”

Of the two nations, the Dogrib, who live

closest to the mine site, are most supportive of BHP’s plan. Dogrib Grand Chief Joe Rabesca has already tried to negotiate a separate agreement with BHP that would create jobs for his people and give them a say in how the mine is developed. But the slow pace of talks prompted Rabesca to withdraw his support for the mine on the first day of public hearings. “I did everything in my power so we could get a benefits agreement,” Rabesca told a recent gathering at the Dene village Wha Ti. “I’m open to business, but without this agreement, there is no sense talking.”

Erasmus is taking a tougher stand, partially backed by the World Wildlife Fund, the Canadian Arctic Resources Committee and several other environmental groups. Their representatives are pushing the government to involve natives at every stage of the development. The Dene also hired a Toronto-based public relations firm, Crosbie Communications, to distribute an Australian Broadcasting Corp. documentary on the BHP’s Papua New Guinea operations. Titled Broken Hearts and Promises, it is a compelling portrait of the damage caused by the company’s massive copper mine on the Ok Tedi River. Hundreds of people who live downstream from the site are now suing BHP in Australia for more than a billion dollars. “BHP cannot be trusted,” Maun told Maclean’s. “They have a bad record in Papua New Guinea. They’re going to be the same here.”

To defend their record, BHP executives in Yellowknife flew in Kipling Uiari, the company’s corporate general manager for Papua New Guinea. He said that construction of a tailings dam at the Ok Tedi was halted in

Discovered: 1990, by Vancouver geologist Chuck Fipke

SH Planned start of production: 1998

¡QNumber of employees: 650

¡JQlVIine lifespan: 25 years

■Estimated value of diamonds: $12 billion

BHP’s diamond mine

early 1984 following two major landslides. Since then, with the government’s approval, BHP has continued to dump 88,000 tons of mine tailings a day into the river. BHP has offered downstream landowners $110 million in compensation, and Uiari said he believes most of them are now willing to settle. He also insisted that the river has not been badly damaged by the mine waste. “There’s a lot of fish in the river,” said Uiari. “The levels of copper are not toxic.”

BHP’s track record in Canada is far less controversial. In fact, the company has picked up two environmental awards for its Island Copper Mine near Port Hardy on Vancouver Island. And in Yellowknife, BHP has laid out a far-reaching plan that Excell said would protect the land surrounding the Lac de Gras operation. Still, like any giant mining operation it would not be benign. The firm plans to drain five small lakes and then mine the diamonds beneath the lakebeds in open pits. The ore would be crushed and the gems removed, after which the tailings would be contained in a sixth lake. Some independent analysts who have studied BHP’s plans say it would be one of the most environmentally safe mines ever built in Canada. Said David James, a mining analyst at Canaccord Capital Corp. in Winnipeg: “I’ve never seen such well-done environmental and engineering studies.”

Critics, however, say BHP’s environmental submissions are not sufficiently detailed. Peter McCart, a biologist representing the Northern Environmental Coalition, also told the hearing that the impact on fish in the area could be far worse than the mining company suggests. Complained McCart ‘The BHP impact assessment is seriously deficient” Environmentalists are also concerned about the fate of the area’s 350,000-strong caribou herd—still an important source of food for the Dene. The animals migrate over a 100,000-square-mile region, which includes Lac de Gras. Anne Gunn, a biologist with the territorial government, told the panel that BHP has done little scientific work to assess the risk to caribou. François Messier, a biologist and consultant to BHP, however, said that while he agrees with the need for studies, he supported the company’s conclusions because the mine would cover only a fraction of the caribou’s territory.

One of the few organizations in the North which fully supports BHP is the city government of Yellowknife, whose crest features a mine, a shovel and a pick—recalling the community’s historic gold-mining past that dates back to 1934. With federal cutbacks now pinching the city, Mayor Dave Lovell predicts “increased prosperity” if the mine project goes ahead. To the mayor’s frustration, his dream of a sparkling boom on the Barrens has hit a wall of opposition—and an unassuming man from the sunny Pacific is leading the way.

TOM FENNELL

LEE SELLECK