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De Beers Canada has announced that 105 contract employees of Kete Whii/Procon, which is currently mining underground at De Beers' Snap Lake mine, will no longer be needed by the end of the year. Nine of those employees live in the Yellowknife area. - Guy Quenneville/NNSL photo

SOMBA K'E/YELLOWKNIFE - Nine Yellowknife-area workers have been notified by De Beers Canada that their work as underground miners will no longer be required by the end of the year.

Faced with shrinking demand for rough diamonds from traders and retailers and an expected reduction of its revenue stream this holiday season, De Beers Canada gave notice early this month to Procon Mining and Tunnelling - the B.C. parent company of Kete Whii which employs the workers - that its contract for underground work at Snap Lake would be terminated early, according to Cathie Bolstad, spokesperson for De Beers Canada. The contract was originally slated to end in November 2009.

Procon provides 105 contract workers to Snap Lake: nine from the Yellowknife area, one from Hay River. Procon's staff constitute about a third of De Beers' underground mining workforce at Snap Lake, which totals approximately 300. Total operations staff at Snap Lake numbers 673.

Seventy five Procon employees will punch out for the last time December 3, while the remaining 30 workers will remain on site, preparing equipment for demobilization, until December 31.

"We were certainly disappointed, as De Beers was, that the decision had to be made," said Jim Dales, vice-president of operations at Procon.

Dales added that while "we're doing everything we can to employ them on other projects that we have," not everybody will be so lucky. He estimated only 10 to 20 of Snap Lake contract workers will be assigned elsewhere.

"We're in the middle of the same downturn as everyone else. Work is not improving; it's getting less," said Dales.

Sad as the news is, the layoffs provide a sober reminder that the Northern diamond industry is not insulated from the current worldwide economic downturn, said Bolstad.

"The diamond industry is not immune to this economic crisis and De Beers, as a player in that industry, isn't either."

The company that purchases rough diamonds from De Beers has advised the mining company that demand is shrinking during the holiday season and is expected to shrink into the new year, especially in the United States.

According to Bolstad, 50 per cent of worldwide diamond jewelry, by value, is purchased by clients in the United States, where the economic downturn has hit hardest. Of that number, 40 per cent of sales take place between November and February - U.S. Thanksgiving and Valentines Day.

"While we operate all year long, the biggest revenue stream for our operation is during this time ... If we're having less of a revenue stream, we need to tighten up what we're doing during that time period," she said.

De Beers will also be scaling back production at Snap Lake, as it is at all of its mining operations throughout the world, added Bolstad. Some of De Beers' own underground mining employees will take over the work carried out by Procon.

Capital investments planned for the new year, like new underground mining equipment, will be delayed, said Bolstad.

Tom Hoefer, spokesperson for the Diavik Diamond Mine, said that despite the volatility in world markets, the company is moving ahead with its major capital investment plan to begin underground mining next year, which will cost $700 million.

"That money has been committed to that project and we expect that project will continue to completion next year," he said.

Mike Vaydik, executive director of the NWT Chamber of Mines, was caught by surprise when he heard about the cutbacks but said they contain an important lesson for the mining industry and for the NWT as a whole.

"I think the people have been used to, for ten years now, relying on the diamond business to provide a great deal of our economic activity," said Vaydik. "Maybe we've forgotten that a diamond mine is like anything else. It's a business, it has to make money and the diamond industry in particular works in an international marketplace and is very sensitive to (market) pressures."

The territory is in a tough position, said Vaydik. While it needs to support further exploration by junior exploration companies looking for commodities other than diamonds, how much those companies participate is greatly dictated by the current economic climate.