by Richard Gleeson
Northern News Services

NNSL (Dec 24/97) - By this time next year, BHP expects to be selling diamonds from its Ekati mine near Lac de Gras, 300 kilometres northeast of Yellowknife.

Spinoffs to the Yellowknife economy have attracted much political attention, but appear little more than a pipe dream at this point.

Limited sorting of those diamonds -- to determine how much the company must pay the federal and territorial government in royalties -- will be done in the North, but that's it, likely nothing more sophisticated than a small operation that will employ no more than 10 people.

For the past year, the territorial government has been lobbying to have further stages of diamond sorting done in the North or at least Canada.

But Graham Nicholls, local manager of external affairs for Australia-based BHP, said many arguments lobbyists have advanced make little sense.

One argument is that other diamond producing-countries do all the sorting internally.

"If they want to make comparisons with other countries with very different types of levels of production, very different sales arrangements and say that can apply here ... it doesn't reflect the situation we have here," said Nicholls.

Apart from the political differences between Canada and diamond producers such as Russia, Botswana, Namibia, Zaire and Angola, there is the simple fact that the Canadian government has no equity interest in the BHP mine. Most of the countries named above do, said Nicholls.

The majority of production from those mines is channelled through the Central Selling Organization (CSO), which requires a highly advanced degree of sorting, he added.

"We are looking at a different type of sales arrangement than you would typically find in those other countries," said Nicholls.

Yellowknife South MLA Seamus Henry is one of a group of politicians that travelled to Ottawa two weeks ago to raise awareness among federal officials of the diamond-sorting situation.

"Anything done with diamonds before they are offered for sale must be done in the NWT, and the company should not have any extra expense," Henry said last week.

The secondary industries of advanced diamond sorting, and the spinoff benefits, are "the greatest hope (of economic prosperity) any of us have ever seen," said Henry.

"It's very unfortunate that the company seems to be caught between the fumbling of the federal government and what the people of the North want."

But Nicholls said the company's position on sorting and marketing was made clear in the environmental agreement it signed with the federal government.

That agreement states BHP intends "to do cleaning and final sorting of rough diamonds at a site readily accessible to potential customers. While such a site remains to be selected, it is likely to be Antwerp or Belgium."

Like any business, BHP sees being located close to its customers as critical to its marketing success, said Nicholls.

"That's also where the skills are. We don't have any resident skills in this area. We would have to import them," said Nicholls.

BHP is establishing an office in Antwerp, he added.

"That doesn't mean the entire sorting function will be conducted in Antwerp," he added. "We've also got the capability at site, and no decisions other than that have been made."

Nicholls reiterated that control over those decisions rests solely with BHP. "It's not a regulatory matter, it's a business decision," he said.