Feds can't force
companies to sort diamonds

by Doug Ashbury
Northern News Services

NNSL (Nov 28/97) - The federal government will treat diamond mines much the same as any other resource company when it comes to royalties, John Lazarovitch said yesterday at the GeoScience Forum at the Explorer Hotel.

"A diamond mine will pay royalties (to Ottawa) on the same basis as any other mine," said Lazarovitch, with the federal government's mineral resources directorate.

Proposed Canadian Mining Regulation changes could be in force by fall 1998, he said. They would:

* Raise the maximum royalty rate to 14 per cent. Resource companies currently pay royalties to the federal government of one per cent of profit for every $5 million to a maximum of 12 per cent. The percentage is based on yearly profits minus various deductions.

* Eliminate the three-year royalty-free grace period.

* Increase the depreciation rate from 15 per cent to 100 per cent. This would permit companies to recover capital costs before paying royalties.

New rules would also mean the appointment of a diamond evaluator for determining royalties prior to export, Lazarovitch said.

Some GNWT officials have been pushing for a diamond sorting facility in the North to add value to the industry.

But under Canadian mining regulations, the federal government can only require companies to perform limited sorting for royalty evaluation.

BHP Diamonds, scheduled to open Canada's first diamond mine in the fall of 1998, has said any sorting facility in the North would be for initial sorting and only employ a handful of people.

"Sorting of diamonds for government and sorting of diamonds for sale are two different things," Lazarovitch said.

Federal and NWT governments have agreed to a committee to look at diamonds.

The committee's terms of reference are to be finalized Tuesday. Membership of the committee, to be co-chaired by Resources and Economic Development deputy minister Joe Handley and assistant deputy minister of Northern Affairs Jim Moore, is to be finalized next week.