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					Diamonds:
Certification in a New
Canadian Industry




A Presentation to:
Canadian Aboriginal Minerals Association

November 3, 2003
A Phenomenal 10-year Impact


     •   New centres of economic activity
     •   Major employers for Aboriginal and northern communities
     •   Aboriginal entrepreneurship
     •   Potential for hundreds of millions in tax and annual royalty
         revenue within 10 years
          – GNWT will collect an estimated $828 M in corporate taxes
            over the life of Ekati and Diavik mines alone -- just under
            total GNWT budget for 2002
          – Subject to devolution, Federal government will collect
            $2.8 billion
     •   Total government tax revenues including direct and
         secondary taxes are estimated in excess of $5 billion
Canadian Diamond Industry

     • Exploration
         - In five provinces and two territories
         - Many promising discoveries have been
           made

     • Mining
         - Canada hosts Western hemisphere’s
           only 2 diamond mines in NWT
           ? Ekati Mine (1998) - $720 M in annual sales
           ? Diavik Mine (2003) - $540 M (est.) in
             annual sales

     • Canada’s Place
        - Today, 6% of world production by value – 7th largest
        - By end of decade, 16 % of world production by value – 3rd
          largest
Diamond Exploration in Canada

  Legend                                                                                                       • 30 % of global budgeted
                                                                                                                 exploration
  exploration areas                                                                                              expenditures for
  producing properties                                                                                           diamonds are directed
                                                                                                                 at Canada
                                                                       Jackson Inlet                           • 74 % of diamond
                                                                                                                 exploration by Canadian
                                                                                                                 companies ($49.7 M)
                              Coronation Gulf                               Melville Peninsula
                                                                                                                 budgeted for Canada
              Yukon       Northwest
                          Territories        Jericho        Nunavut
              Territory
                                               Ekati Mine
                             Diavik Mine
                           Snap Lake             Kennady Lake                                       Ungava Peninsula



                                                                                                                       Newfoundland &
                                                                                                                              Labrador
              British       Buffalo Hills               Manitoba                        Quebec
              Columbia                      Fort a la
                           Alberta           Corne
                                                        Oxford Lake/                             Otish Mountains
                                     Saskatchewan         Gillam
                                                                                  Attawapiskat
                                                                       Ontario



                                                                        Wawa

 Source: Dimensions of Canada’s Diamond Mining Industry, Minerals and Metals
 Sector, Natural Resources at the The Economic National Roundtable on Canada’s
 Diamond Industry, Edmonton, AB, May 20, 2003
                    Total Mining Employment
                     in Yukon, NWT and Nunavut, 1989-2003

                                        Diamond Mining Employment
                             3 000
 Total number of employees




                                        Non-Diamond Mining Employment
                                        Linear (Non-Diamond Mining Employment)
                             2 500

                             2 000

                             1 500

                             1 000

                              500

                                0
                                         93

                                         94

                                         95

                                         96
                                         89

                                         90

                                         91

                                         92




                                          f
                                         97

                                         98

                                         99

                                         00

                                         01

                                          e
                                        03
                                       02
                                      19

                                      19

                                      19

                                      19
                                      19

                                      19

                                      19

                                      19




                                      19

                                      19

                                      19

                                      20

                                      20



                                     20
                                     20
                                        Year
Source: Natural Resources Canada
Notes: e = estimate; f = forecast.
Aboriginal Business Development

     •   The New Mining -- takes patience, but
         pays dividends
          – Builds entrepreneurial,
            professional and trade skills
          – Creates local labour supply and
            expertise
          – Stimulates direct and indirect
            northern employment
          – Enhances company’s
            acceptability (social license to
            operate)
          – Reduces costs (over time)

     •   Aboriginal business relationships
         with diamond mines: unprecedented
         in the history of northern mining
Purchasing


    • Snapshot from Ekati
     Category        1999       2000       2001
     Aboriginal
                     $51 M      $67 M      $106 M
     Business
     All Northern
                     $280 M     $260 M     $328 M
     Businesses
     Other           $76 M      $56 M      $58 M

     Total           $356 M     $316 M     $386 M

    • Exploration stage companies also make a
      significant contribution to northern businesses
Aboriginal Business Partnerships:
    Joint Ventures with Ekati

     •   Tli Cho Domco: Dogribs providing janitorial services - $2.0 million per
         year

     •   Sodexho Marriot: North Slave Metis providing kitchen/food catering
         services –$5.4 million per year

     •   Ke Te Whii: Dogribs and Akaitcho to haul kimberlite from Misery pit to
         the Process Plant - $32 million

     •   Nuna logistics: Inuit (50% owned) to mine Ekati Misery pit, employing
         110 people - $60 million per year

     •   Polar Explosives: Lutsel K‘e Dene Band to provide explosives and
         blasting supplies - $14.5 million per year
Aboriginal Business Partnerships:
    Some Examples from Diavik
      Outsourcing Contracts
      Light Vehicle Maintenance
      Tire Management                       •     Construction of Diavik completed
      Land Survey                                 by 44% northern and Aboriginal
      Mine Manpower                               employees and contractors
      Security Services                     •     $600 million to Aboriginal
      Geochem Laboratory                          companies
      Site Services                         •     Currently, majority of contracts
      Camp & Catering Services                    with northern & Aboriginal firms
      Medical Services
                                            •     ~ 250 workers
      Control & Instrumentation Tech's
                                            •     Value ~ $30 million


          Northern
          Aboriginal
            86%

                                       Southern
                            Northern
                                           6%
                              8%
Kimberley Process:
   Fighting Conflict Diamonds
    •   Canadian leadership

    •   Jan 1, 2003 – Kimberley
        Process Certification Scheme
        implemented

    •   Diamonds exported from
        Canada must be
        accompanied by a valid
        Canadian Kimberley Process
        Certificate



    •   The challenge - the new process has increased the time
        involved in applying and receiving the certificate
Why a Kimberley Process?


     •   African conflict problem

     •   Global Witness, Partnership Africa
         Canada, Amnesty International, World
         Vision

     •   Kimberley Process Certification
         Scheme agreed at Interlaken,
         November 2002

     •   Promoting Prosperity Diamonds
Canadian Requirements


     •   Export and Import of Rough Diamonds Act effective
         January 1, 2003

     •   Applies only to rough diamonds

     •   No conflict diamonds will be allowed to cross Canadian
         borders

     •   Natural Resources Canada issues certificate

     •   Right of inspection

     •   48 certificates issued (by September 2, 2003)
Regulatory Regime -- Growing Pains

     • Complex, expensive and uncertain regulatory environment
       discourages exploration, especially by juniors
     • Inconsistent application of environmental
       standards (need to apply lessons and
       results from previous EA’s to upcoming
       projects)
     • Unresolved land claims in the N.W.T.
     • Incomplete regulatory framework in Nunavut
       (1997 deadline not met)
     • Need for additional resources and expertise
       for northern boards (progress being made)
Infrastructure:

     •   Basic infrastructure investment required
          – roads, bridges, ports
     •   Investments in geoscience and geomatics
          – economic and environmental benefits (climate change,
             pollutants)
          – skills training
          – investment in science and
              technology
          – critical to future development
             in northern Canada

     •   Rapid growth could put
         pressure on social services
Valuing Diamonds:
    More Expertise Needed
     •   Expertise required to establish value not readily available even
         within diamond industry

     •   A Role for Government:
          – To provide technical input to calculate value of diamond
            production for royalty purposes:
              • Value production on
                list/market or combination
              • Market intelligence
              • Statistical support
          – Each jurisdiction will require its
            own Government Diamond
            Valuator
Cutting and Polishing -- A Difficult Issue

      Natural Canadian desire to create “secondary” industry, but:
      • Cutting and polishing operations in India and Asia are
        extremely high-tech, very competitive, producing high quality
        diamonds
      • India and China have skilled, cheap labour
      • Access to Yellowknife can be difficult
      • Jobs are low-paying
      • Skills must be imported
      • Ekati, Diavik, and the Dogrib Dene have concluded that
        opportunities in value added are too risky and of insufficient
        value for them to invest in
      • No publicly available cost/benefit analysis of industry
Cutting and Polishing -- A Difficult Issue



     “Primary” industry benefits
         widespread:
      • High-paying, high tech jobs in
        the north for northerners
      • Consulting, engineering,
        design, financing and
        services industries whose
        products and services are
        exportable (e.g. SNC Lavalin,
        Hatch, Major Drilling Group)
Conclusion



     • Certification is functioning
     • Diamond Strategy Discussions
        – DIAND paper
        – GNWT/Quebec paper
     • Dialogue will continue

				
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