Brent Reaney
Northern News Services

Yellowknife (June 03/05) - When the dust settles the Sirius Diamonds deal will cost the NWT government $4 million.

Since the government pulled its support from the troubled cutting and polishing plant in June 2004, it has bled $10.7 million from public coffers.

Over the next 10 years the government will earn $2.2 million in commissions on the sale of diamonds from the cutting house bearing the polar bear logo. - photo courtesy of Sirius diamonds

Tuesday, Finance Minister Floyd Roland said losses represent costs involved in selling the troubled venture and re-paying a loan to the Royal Bank.

Basal Diamonds bought Sirius for $4.5 million, Roland said. That deal lowered the government's net loss to about $6.2 million.

The GNWT will also receive a one per cent commission over the next 10 years on sales of diamonds bearing the polar bear logo. That amounts to an estimated $2.2 million in revenue for the government. But it cost the government $479,808.75 in lawyer's fees over three years of legal wrangling to wrest control of the logo from Sirius

The sale to Basal only came about after a deal with global diamond tycoon Lev Leviev fell apart in February.

Basal is also the majority shareholder Arslanian Cutting Works after closing a $9.1 million deal a year ago.

Last spring, the GNWT pulled out of $16 million in loan guarantees for both Sirius and Arslanian.

While a deal was arranged quickly for Arslanian, Roland said dealing with Sirius took longer than expected.

"Once we entered into the legal realm of courts and receiverships, that took on almost a life of its own," said Roland.

Nearly $2 million went to lawyers and consulting firm Deloitte and Touche, which acted as Sirius' interim receiver, Roland said.

Shortly after the B.C. Supreme Court appeal period expires on June 20, the Sirius plant will re-open under a new name: the Polar Bear Diamond Factory. Arslanian will handle the administration of both cutting houses.

"The polar brand is incredibly successful, let's build on that," said Arslanian's Hilary Jones of the advantage of having the two operations.

Currently, 10 per cent of Ekati and Diavik's rough diamonds are delivered to Arslanian, Sirius and Deton Cho. The new deal gives Arslanian the rights to Sirius' share.

Jones said Arslanian is having trouble keeping up with demand.

To boost production, the company plans to introduce more automated cutting and polishing for smaller stones in both operations.

"It's not going to affect employment," she said. "What it will do is increase production."

Instead of cutting jobs, Jones anticipates workers will be able to supervise up to 16 machines. The shift to automation could happen within the next six months.