Yellowknife (Feb 23/05) - A Yellowknife polishing plant is disputing the territorial government's claim that gems received from the NWT's two diamond-producing mines are inadequate and of poor quality.

Hilary Jones, manager for Arslanian Cutting Works, said the diamonds her plant receives from Diavik and BHP Billiton are some of the very best on the market.

"It's what they call the bread-and-butter stones, three to four carat-ers," Jones said yesterday.

"I'd like to double-set the amount or triple it because they're so nice."

Her plant employs about 50 people.

Finance Minister Floyd Roland said earlier this month that the diamonds being sent to polishers in Yellowknife are "too small" to be economically viable in the NWT.

He also said the mines are only shipping 2.5 to 3 per cent of its rough diamonds to Yellowknife, contrary to the 10 per cent the mines agreed to send under memorandums signed with the polishers.

Jones said, however, the arrangement with her plant is based on value not volume - meaning that 9 to 10 per cent of the value of diamonds produced at the mines are being sent to Yellowknife polishers.

She said while her plant would be happy to obtain even more diamonds for polishing, the producers have been fair with her company.

Jones isn't sure where the government got the idea that mines are only shipping 2.5 to 3 per cent of their rough diamonds to Yellowknife polishers.

"We've worked very hard on our relationship with the producers," said Jones.

"We all have different agendas, I guess. I just want to polish diamonds. We're doing that and making money."

Stephen Ben-Oliel, the former owner of the Sirius Diamonds polishing plant, which is currently operating under receivership, tells a very different story.

He disputed BHP's claims in Yellowknifer last week that high quality stones were going back to the mine unpurchased because polishing plants couldn't handle the load.

He said 55 per cent of the diamonds sold by BHP to his plant finished under less than one-third of a carat.

"What they say is that they're being generous, but in fact over half of what they've left, nobody would take because they're not economical to cut anywhere in the First World," said Ben-Oliel.

"The reason there's not going to be an industry up there is because BHP doesn't want an industry up there."

He didn't indicate that his plant had any troubles with Diavik.

Sirius was forced into receivership last August after defaulting on an $8 million government loan. The government is desperately seeking a buyer for the plant now that a deal with Israeli billionaire Lev Leviev has fallen through.

In a sworn affidavit filed in NWT Supreme Court last June, Terry Pierce - the GNWT's director of budgeting and evaluation for the Financial Management Board Secretariat - reported that Sirius failed for four reasons: a rising Canadian dollar, an increase in the cost of rough diamonds, the range of goods being supplied cannot be "economically processed" in the NWT, and that BHP is charging more to Northern manufacturers than to their "core customers" in Antwerp, Belgium.

Finance Minister Roland said Arslanian has obviously made some big changes after facing a loan recall of their own last year. The GNWT came looking for the $9 million it had loaned to the company, but unlike Sirius, Arslanian was able to pay all of their's back.

When asked if he thought BHP was playing favourites with Arslanian, Roland said he couldn't say.

"I'm not sure if the allotments that different companies are receiving are better from one company to another," said Roland.