Business

DIAMONDS in the Rough

Adventur and greed marked the search for preciouems in Canada's North

JENNIFER HUNTER December 29 1997
Business

DIAMONDS in the Rough

Adventur and greed marked the search for preciouems in Canada's North

JENNIFER HUNTER December 29 1997

DIAMONDS in the Rough

Business

Adventur and greed marked the search for preciouems in Canada's North

JENNIFER HUNTER

hen Europeans first explored the tundra of the Northwest Territories, 200 km south of the Arctic Circle, they called it the Barren Lands—a plain of Ice Age detritus, granite rock, boulders and thousands of tiny blue lakes filled with glacial runoff. Too far north to support even the hardiest of conifers, the ground bears only tufts of sedge and grass and, in the spring, the neon profusion of wild arctic flowers. When winter comes, the land takes on a haunting aspect, as though the sky and rocks have merged into one flat sweep of grey. It is like being on the edge of the Earth.

One of the largest lakes in the area, 310 km northeast of Yellowknife, is Lac de Gras. The Dogrib Dene

people call it Ekati, the Fat Lake, because the bits of quartz found on its shores resemble glistening caribou fat. Surrounding it are the traditional hunting grounds of the Dene and the Inuit, the area where 350,000 caribou pass through each spring and fall. It is home, too, to grizzly bears, wolverines and wolves.

There are no paved roads to Lac de Gras, but six years ago the ice-crusted land of the Northwest Territories began to swarm with prospectors and geologists in search of diamonds. Not run-of-the-mill industrial diamonds, but exquisite, eye-popping white diamonds. They found them, and continue to find them, Canadian gems under the ice where the caribou have run for thousands of years. Lac de Gras is fat with them. “This is very much a modern Klondike,” says Yellowknife prospector Mike Byrne, one of the first fortune-seekers to join the diamond rush in 1991. “We knew the moment we heard the

word ‘diamonds’ that it meant big money.”

Not just big money—billions. Starting next October, when Canada's first diamond mine is due to go into production, $500 million worth of gems will be culled from the ground annually, and that is just from one company. When the next mining company gets permission to cut the ancient granite and permafrost, more than $1 billion worth of rough diamonds will be dug up and sold yearly. It is an extraordinary find, these diamonds in the tundra, and they will make Canada one of the world’s largest diamond producers, right up there with South Africa and Russia.

Getting those diamonds out of the ground is a story of greed, adventure and political wrangling. Not only do the permafrost and -40° C winter temperature forbid easy access to the area, but the companies planning to mine the diamonds have been forced to buy the goodwill of aboriginal groups with millions of dollars’ worth of educational funding and community investment. They have also made promises to the federal and territorial governments about hiring native people, and attempted to satisfy the demands of environmentalists with elaborate plans to restore the land and preserve wildlife. It took three years of negotiations before construction of the first mine could even start. But the companies are doing it all gladly. There is that much money to be made.

The Hawker Siddeley 748 jet noses up over Yellowknife Airport on a freezing fall morning, headed for the Ekati diamond site at Lac de Gras. On board is 37-year-old Clarence Rufus, who calls himself an Eskimo, a surprising identification these days among some Inuit and many whites. But Rufus is an ingenuous man who does not have the luxury of being politically correct. His home is in Inuvik, 1,200 km north of Yellowknife in the Mackenzie Delta, and he is flying to the Ekati camp to join the mine’s construction crew. It will be the first real job for Rufus, who is already a grandfather. In Inuvik he lived on welfare and spent—by his own admission—too much time playing bingo, doing his best to avoid the fate of his brother who had a drinking problem and died in a car accident. A 3¿day program offered by the local community college taught Rufus the basics of mining. “I was tired of living on welfare,” explains Rufus, who has an infectious smile and a gentle manner. “They asked too many questions.”

The Ekati mine will product 500 million woth of diamonds every year

When the plane arrives an hour later, Rufus is given an orientation session, then booked into a room at the camp, which can house 750 people. His employment is in keeping with the mine’s commitment to Ottawa and the territorial government to hire mostly aboriginal people—Dene, Inuit and Métis—and other northerners. Until a deal had been negotiated, the federal government refused to approve the Ekati mine— jointly owned by The Broken Hill Proprietary Co. Ltd. (BHP) of Australia, Chuck

Fipke, who first discovered diamonds in the Northwest Territories, his partner Stu Blusson, and the company Fipke started, Dia Met Minerals Ltd. of Kelowna, B.C.

At first, native groups opposed the mine, but money talks. BHP courted the Dene, even taking some of them on a visit to a mine in New Mexico, and promised millions for cultural and social projects. “BHP came here and thought they could deal the way they’ve dealt everywhere else in the world,” says Ted Blondin, a land-claims negotiator for the Dogrib Dene and a cousin of Liberal cabinet minister Ethel BlondinAndrew. The agreements the mining company was forced to sign, he adds, “ended the whole idea that mining companies can just come in here and obey mining regulations without dealing with the people who are affected.”

When the Ekati mine comes onstream, it is expected to produce four million carats of diamonds a year. In the late fall, construction crews were still at the site. Five of the 8,000 glacial lakes in the Lac de Gras region are being drained to allow access to the diamonds underneath. BHP built a diversion channel between two of the lakes so fish could move through. When the diamonds are gone and the mining stops, some time in the 21st century, the company will be required to do what it can to restore the area to its previous condition.

CARATS BY THE KILO

• Total world production of diamonds in 1996 was 110 million carats, worth $9.7 billion. • Only 15 per cent of those diamonds were gem quality. • There are 5,000 carats in one kilogram of diamonds, which could easily fit inside a one-litre milk carton. • A kilogram of diamonds from the new Ekati mine will have an average value of $710,000, almost 50 times the value of the equivalent weight in gold. • Ekati is expected to produce at least two kilograms of diamonds a day for 17 years.

Environmentalists still fear the mine’s impact on the migratory habits of the caribou and the grizzly bears which hibernate in glacial mounds called eskers. Under pressure from the federal government, BHP had to fund an independent environmental monitoring agency. Last June, the department of Indian affairs and northern development issued a “deficiency” report critical of BHP and called on the company to devise a more detailed plan to deal with the mine’s environmental impact. In September, staff from the department of fisheries and oceans arrived at the site to investigate the appearance of sediment in the diversion channel. “We’re not sure what they were looking for, but they seized files,” says Denise Burlinghame, BHP’s senior public affairs officer.

Not that it is easy to obey all the rules in a remote area where winter lasts eight months. In the summer, all supplies must be airlifted in, including fuel. In the winter, trucks can use an ice road from Yellowknife that passes near Ekati en route to a gold mine further north. BHP and Dia Met will spend about $700 million to build Ekati, including airstrips and roads, sorting facilities to cull the diamonds from the crushed rock, and a corridor allowing workers to

move from camp to workplace without stepping outside. Construction workers have removed nine million tonnes of rock so far to create the open pits for mining.

By late October, 700 other men and women had joined Rufus at the isolated camp. Housed in what seems like an institutional resort, with a squash court, a gym and two TV rooms, the construction workers—who earn an average of $20 an hour—are on the job 10 or more hours a day for three weeks straight, then fly to Yellowknife for a week of rest. The other employees, including caterers, geologists, mechanics, engineers and environmental experts, work for two weeks straight, then get two weeks off.

In spite of the diversions and the plentiful grub—the workers devour 1,800 sandwiches and 280 litres of milk a day—it is a hard life. Alcohol is banned. Parties are verboten. Smoking in the bedrooms is taboo because of the fire hazard—the maids who make up the beds are under orders to report even a whiff of smoke—and repeated infractions can mean a pink slip. In the dark, seemingly endless night of winter, when icy winds whip across the tundra, it’s

impossible to go for an outside stroll. The tension of living such a circumscribed life is noted in an anonymous, handwritten poem pinned to a bulletin board in the main recreation hall:

In the dark arctic tundra, sweat froze to my head six weeks from the next flight that will take me back home to my bed. Work like slaves on the job site 10 to 12 hours a day. Wouldn’t choose to live out here if it wasn’t for the good pay.

Blasting and digging out the hard granite rock in sub-zero temperatures requires stoicism and a sense of humor. Eric Almquist, one of the BHP foremen, says: “In the summer, you wish it were cold because the bugs are all eating you. In the winter, you wish it was summer ’cause you’re freezing.” As Almquist is speaking, a young

caribou ambles down the road past his giant Caterpillar loader. Most of the caribou have already migrated, but for some reason this one is lingering. “Dinner for the wolves,” Almquist mutters.

Humans, too, have been circling the camp ever since Fipke and his BHP partners told the world they had found diamonds. It was Fipke’s discovery that brought Eira Thomas and her father, Grenville, to Lac de Gras in the early 1990s and led them to their own diamond find. The Thomases’ public company, Aber Resources Ltd., is working with British mining giant Rio Tinto PLC to open a diamond mine by 2001.

The same week Rufus started work, Eira Thomas, 29, was travelling up to Lac de Gras to visit her company’s site, 30 km southeast of the Ekati mine. Her story is unique, both because she is a young woman in a business filled with cowboys and codgers and because her find seems to be even richer than Fipke’s.

Thomas’s morning flight on a 12-seat Air Tindi plane took her on a route so well-travelled that the map on the airline office wall of the Lac de Gras area is smudged with fingerprints. Prepped for the harsh cold, Thomas boarded the plane wearing a heavy, furtrimmed grey parka and tiny diamond-stud earrings. The jewelry was a gift from her father, but Thomas earned those diamonds the hard way. After graduating with a geology degree from the University of Toronto in 1990, she went backpacking in Africa when she was unable to find steady employment. She was in Johannesburg when her father, a mining engineer, called to say he was looking for diamonds in the Northwest Territories. “I said, What? Diamonds in the Canadian North?’ ” Until the winter of 1991, he had found beryllium and other metals, but never diamonds.

Thomas returned to Vancouver and over the next two years flew regularly to Lac de Gras, eventually taking over Aber’s exploration team. The search for diamonds led her to a tiny island in Lac de Gras, where she found herself following a mineral trail of garnets, diopside, ilumite and chromite leading right into the lake.

At 29, mining executiveira Thomas has become a multimillionaire

By early 1994, Thomas and another Aber geologist, Robin Hopkins, had found some diamonds under the lake, but nothing really worth mining. The two geologists and their drill crew were fast running out of time, money and patience. The ice over the lake was beginning to break up, and the expenses were mounting. It was time to make a decision: leave or risk one last try. They took the risk. “Robin and I were taking turns checking the drill,” Thomas recalls. “One morning, it was his turn and I was sitting in the kitchen trailer having a cup of tea. He came into the kitchen and threw some rocks on the table. He was beaming.”

There sat a fabulous array of diamonds, four to five carats per tonne of ore, one of the richest diamond finds anywhere in the world. A two-carat triangular diamond was lodged right in the drill core. Thomas slept with that diamond under her pillow for two nights, then flew to Vancouver and presented it to her father. “We couldn’t stop laughing. We were like a group of kids, very giddy. We knew we’d struck it big time.”

Now, three years later, Thomas’s find is on the verge of becoming a mine. Part of her company’s plan calls for water in the lake to be held back by a dike so Diavik Diamond Mines Inc., a subsidiary of Rio Tinto, can scoop out the diamond-laden rock. This concerns aboriginal people who fish for trout in Lac de Gras, as well as envi-

ronmentalists. But the company has hired environmental consultants and, pending government approval, that rich hole could start coughing up diamonds in 2001.

I It is the fall of 1997 and by 11:30 0 a.m., Thomas’s Air Tindi plane had 1 arrived at the tiny Aber camp. She ^ skipped over the granite rocks of § the tundra and picked up a hunk of □ greyish green stone. “This is kim? berlite,” she said. “Now it’s frozen, “ but when it thaws it will begin to I crumble.” Kimberlite is volcanic I rock that carries diamonds from i deep within the Earth to the surface. The gems themselves are not formed in the kimberlite, but are swept along as volcanic eruptions

spew kimberlite pipes—which can be up to a kilometre in length and 200 m wide—to the Earth’s crust, much like a speeding subway train carries passengers. When the glaciers retreated across the tundra after the last Ice Age 10,000 years ago, they scooped away the top of the soft kimberlite and left behind water. As a result, pieces of kimberlite containing indicator minerals—ruby-colored pyrobe garnets, emerald-green chromium diopside, charcoal-hued ilumite and chromite— were scattered over the surface of the Earth. Because the kimberlites are often covered by water, they are difficult to find. The behemoth of diamond mining companies, South Africa’s De Beers Consolidated Mines Ltd., has been looking for diamonds in Canada for 30 years, but until recently had found nothing worth mining.

Back in Yellowknife, Thomas recommends a visit to Nettie’s diner, where the local prospectors hang out. The chicanery involved in the hunt for diamonds still feeds the conversations of the men who meet at Nettie’s for coffee every day. Mike Byrne is sitting under the “No smoking” sign at the back of the diner, puffing an Export A. Byrne is the paradigm of the prospector, thickly bearded, wearing a checked shirt and baseball cap that says: ‘The great diamond rush of ’92 N.W.T.” Brian Weir is sitting beside Byrne, and both are recounting the staking hysteria that followed Fipke’s find. “When the news broke, within five days I was staking land for De Beers,” Weir recounts. Exploration companies chartered every helicopter in Yellowknife and more were flown in from as far away as Ontario. Prospectors bought up every can of fluorescent paint and spool of fibre tape in town. The demand for wooden stakes was so great that Johnson’s Building Supply had to start an overnight shift to cut them. Byrne and his rivals would fly in by chopper to the areas around Fipke’s find and drop the wooden stakes onto the tundra, claiming the land. A co-worker would then jump out and hammer in the stakes. “Hanging out the side of a helicopter in 40-degree-below weather and flying 100 miles per hour, 25 feet off the ground, was scary and dangerous work,” Byrne says.

Sometimes, the prospectors found they had staked the same piece of property. When that happened to Weir, he invited his competitor over to his house, placed a bottle of overproof rum on the kitchen table and began the negotiations. Men were lining up at 1 a.m. outside the federal government building in Yellowknife to get permits to stake. By the end of 1993, 186,000 square kilometres— about five per cent of the total area of the Northwest Territories— had been staked for 150 companies. Weir made enough money from prospecting and buying shares in the new diamond companies to purchase a summer home in British Columbia’s Okanagan Valley and a $30,000 four-carat diamond for his wife.

The money involved in the diamond play has caused the mayor of Yellowknife, Dave Lovell, to agitate for a diamond valuation and sorting facility in his town of 18,000. The community badly needs the obs. The gold mines in the area are struggling; some are closing. The planned division of the Northwest Territories in 1999 into two jurisdictions will mean the disappearance of government jobs. Lovell’s bid for a diamond-sorting facility is backed by the territoriil government, which wants BHP to reconsider its plan to have the

diamonds valuated in Antwerp. “Boris Yeltsin doesn’t sort his Russian diamonds in Antwerp,” says N.W.T. Finance Minister John Todd. “Nelson Mandela doesn’t sort his diamonds in Antwerp. Why should we?” In early December, the federal government agreed to appoint a committee to study the issue.

There is also the matter of royalties. The federal government controls the mineral resources of the Northwest Territories and will garner most of the tax revenue and royalties: an estimated $2.4 billion over 17 years from the Ekati mine alone. The Northwest Territories will receive only $200 million during the same period. ‘We are still a colony of Ottawa,” laments Stephen Kakfwi, the minister of resources, wildlife and economic development. “People 3,000 miles away are deciding what will go on on our land, how it will be used, how the mine can open. That’s as colonial as you can get.” (The federal government, on the other hand, made transfer payments of $834-million to the territorial government last year.)

Rhetoric over royalties aside, the diamond rush is, in many minds, the most exciting thing ever to happen in the Northwest Territories. The potential profits are huge, the scope of the environmental and aboriginal agreements unique. And people’s lives have been changed. The Dogrib Dene are demonstrating their business acumen and are now dreaming up other initiatives, such as forming construction companies and catering services. Eira Thomas, at 29, has become a multimillionaire and made a significant contribution to Canadian mining history. Clarence Rufus has made his first real trip away from home and earned his first weekly paycheque. The diamonds mined in the Northwest Territories may end up on the ring fingers of new brides, but the adventure of seeking them has made the Barren Lands a realm of bounty and mythic fascination. □