Yellowknife (Feb 16/05) - Finance Minister Floyd Roland says the government may have to close the Sirius diamond polishing plant if a buyer isn't found by the end of March.

Under questioning from Kam Lake MLA Dave Ramsay in the legislative assembly Friday, Roland conceded that if the government doesn't find a buyer soon, it may no longer be "in the best interest for us to try to make something like this happen."

On Monday, Roland said the deadline will likely be March 31.

"We'll probably have to make a decision as we enter the new fiscal year," said Roland, adding he remains hopeful a buyer can be found.

"We're trying to keep it going as an operational unit, and have a viable operation."

A deal with Israeli billionaire Lev Leviev to buy Sirius fell through last month when Ekati and Diavik diamond mines refused to supply Sirius with more rough diamonds.

While it's unclear what Leviev sought, an e-mail from Denise Burlingame, a spokesperson for BHP Billiton which owns Ekati, called the request "excessive."

"There wouldn't have been enough diamonds remaining to supply the other three factories."

The government and diamond producers have been at odds about the amount of rough diamonds being supplied ever since Yellowknifer broke the news two weeks ago that Leviev had pulled out of talks to buy Sirius.

Roland said the mines are only delivering 2.5 to three per cent of their rough diamonds to the three Yellowknife factories: Sirius, Arslanian and Deton'Cho.

"They're returning some of the rough because they're too small for the Northwest Territories operations," said Roland.

Burlingame insists, however, that BHP is supplying between nine and 11 per cent of its total production every year, but the polishing plants can't keep up production.

"The factories over the last several years have in total taken less than 50 per cent of what we offered to sell to them," Burlingame wrote in response.

"The diamonds not purchased were high quality, larger stones - definitely not inferior diamonds."

Diavik spokesperson Tom Hoefer said the mine supplied about seven per cent of its total production to the polishing plants last year.

"The goods we're supplying are of the very best colours and clarities, and the largest sizes," said Hoefer.

The Sirius plant has been on government life-support ever since it went into receivership last August, after previous owner Stephen Ben-Oliel defaulted on a $8 million loan from the GNWT.

The government estimates it has spent $3 million since then to keep the plant running. Twenty-two people work at the Sirius plant.

Ramsay has been pressuring the government about why the deal with Leviev fell through ever since the legislative assembly reconvened last Wednesday.

On Monday, he went after Resources, Wildlife, and Economic Development Minister Brendan Bell.

Ramsay questioned the department's logic for keeping two "diamond experts" on the payroll while problems with the NWT's secondary diamond industry continues.

"If we are not receiving a benefit from having this consultant in place, then why do we retain this consultant?" asked Ramsay.

The two consultants, hired on by the GNWT to provide intelligence on the global diamond industry, cost the government about $200,000 U.S. a year, according to Bell. One is stationed in Antwerp, Belgium; the other in Israel.

Bell, much like Roland the week before, said the government is currently re-evaluating its options.

"In the coming weeks and months, we'll be taking stock of our resources, and make a determination at that point as to what type of resources we need to employ," said Bell.

Ramsay also told Bell he had heard the NWT's two diamond producers mark up their prices for rough diamonds an additional six per cent compared to what they're sold for in Antwerp.

Bell said "we really have no way to know" one way or another because commercial deals in Antwerp are confidential.

Both BHP's Burlingame and Diavik's Hoefer denied that there was a mark-up of any kind.

"We're certainly not going to charge the local manufacturer more," said Burlingame yesterday.

"My understanding is that it's market value."

Ramsay said he doesn't think Sirius will close, but the government will be forced to sell the plant for a bargain.

"They'll find a buyer for it," said Ramsay. "It's like a fire sale. At this stage of the game it's a real bargain."

Ramsay said he is planning on calling for an inquiry into government handling of the NWT's secondary diamond industry.