EDITORIAL — Diamonds are everyone’s friend — From one to sixty, in six

Six or seven years ago, there was no Canadian diamond sector. Today, brokers and analysts are following the activities of numerous companies exploring for and developing diamond deposits across the land. The same is true of the United States, where diamond exploration and development was almost unheard of until a few adventurous juniors began reviving old prospects and looking for new ones.

The story began in Canada in April 1990 when Charles Fipke flew over Point Lake in the Lac de Gras region of the Northwest Territories and noticed a crater-like feature ringing an ice-capped lake. He stopped and, with his son Mark, dug through the frozen glacial till. A large, greenish piece of chrome diopside was found, which Fipke knew was part of a mineral assemblage that indicated the nearby presence of kimberlites.

As it turned out, Point Lake was one of many kimberlites found at Lac de Gras, and not the best by a long shot. Today, five richer kimberlites are being readied for production by Fipke’s Dia Met Minerals and the senior operating partner, BHP Diamonds. Numerous others are still in the exploration stage.

Not far away, another world mining giant, Rio Tinto, is exploring and developing several diamondiferous kimberlites discovered by Aber Resources.

Diamond giant De Beers also is active in Canada’s North, which promises to be the world’s next diamond-producing region.

David James of Canaccord Capital has been following all this, probably more closely than any other mining analyst. Six years ago, only one diamond company existed: Dia Met Minerals. Its market capitalization at the time was a mere $2.4 million.

Today, James follows about 60 Canadian-listed diamond stocks with an aggregate market cap of about $3.7 billion. Diamonds have arrived, he says, and are now “an important, informal sub-group” of Canadian equity markets.

But that is only one side of the diamond industry story. Sometime next year, Canada will have its first large diamond mining operation. Others will soon follow. That means good-paying jobs and a steady stream of revenue for local suppliers and services. In other words, what began as stock market speculation will soon provide tangible benefits for all Canadians. The local economy will get a major boost, and government will have more tax revenues.

The big question now is, How will Canadian diamonds be processed and marketed? Rio Tinto is already plugged into an existing diamond pipeline through its 60% interest in the Argyle joint venture in Australia. This mine is a high-volume producer, but the stones are not highly valued. Analysts speculate that Rio Tinto will likely use the Central Selling Organization, managed by De Beers, to market its production from the Northwest Territories.

But that decision will not be made for some time.

Even more intense speculation is revolving around how BHP will market its production, which is scheduled to start late next year. The company has no experience in diamond mining or marketing. It is, however, a huge organization and therefore well-equipped to take on such challenges.

Junior companies operating small diamond mines in the western U.S. (Kelsey Lake on the Colorado-Wyoming border) market their production independently. A selling feature is the “home-grown in America” label.

Canadian producers might consider a similar marketing strategy, at least for a portion of their production. After all, the Canadian Maple Leaf gold coin is a product known throughout the world for its fine quality.

Canadian diamonds are reputed to be of excellent quality. And who wouldn’t love to own a beautiful piece of Canadian ice?