Burgundy Diamond halts Sable expansion plans at Ekati in Northwest Territories

Burgundy Diamond Mines (ASX: BDM), owner of the Ekati diamond mine in the Northwest Territories, says it has pulled plans for underground mining at the Sable open pit following feedback from local communities.

This week, the miner withdrew its application with the Wek’èezhìı Land and Water Board. It had deemed the Sable underground development to be a major mining project that required approval from the Tłı̨chǫ people, a Dene First Nations group.

“Burgundy has made this difficult decision after taking to heart all the comments and feedback provided during the application process,” the company said in a letter to the water board. “The information provided by the intervenors and the Tłı̨chǫ government has been the subject of careful deliberation by Burgundy, and has led Burgundy to conclude that more time is needed to improve the application for the proposed project.”

The company said it could revisit the project in the future after incorporating feedback from the Tłı̨cho government. A public hearing due Wednesday on the expansion was cancelled after the company pulled its application. 

The CBC first reported the water board letter on Tuesday. The broadcaster also said Burgundy called for changes in “inflexible” regulations in a letter the same day to Premier R.J. Simpson. Revisions could help Ekati operate until at least 2040, the company argued. 

Shares in Burgundy see-sawed from Tuesday at A14¢ apiece before closing at the same level on Thursday. The company’s market capitalization is A$199 million ($184.5 million). They’ve traded in a 52-week range of A12¢ to A24¢.   

Mine closures 

Withdrawing Sable’s proposed extension comes as the territory’s three diamond mines face closures in the coming years. Rio Tinto’s (NYSE: RIO; LSE: RIO; ASX: RIO) Diavik mine is due to close in 2026, and Anglo American (LSE AAL) unit De Beers’ Gahcho Kué mine is slated to run until 2028. While Ekati’s Sable open pit is expected to wind down this year, its Point Lake open pit could produce until 2029, according to company projections.

Burgundy has also said recent drilling at the main Misery orebody could extend Ekati’s mine life. The crew found a fancy yellow diamond about 25 metres below the last planned mine level and the company contends there’s a larger ore body at depth.

In the three months to June 30, Ekati produced 1.22 million carats and sold 1.03 million carats at an average of US$103 per carat to earn US$106 million, the company said in July. The Fox underground updated prefeasibility study was 30% complete and the Point Lake open-pit preparation was progressing towards production early next year, it said. 

Burgundy acquired Ekati when it purchased its former owner, Arctic Canadian Diamond, in March 2023 for US$136 million. But since then, it has faced financial pressure due to headwinds in the global diamond market.

These include slowing demand for luxury items after inflation limited consumer spending and caused some oversupplies. Cheaper and more accessible lab-grown diamonds are hurting the natural stone market by appealing to younger, sustainability-conscious consumers. So-called conflict diamonds also remain a concern from countries such as Russia, Central African Republic and the Democratic Republic of Congo.