Yellowknife (Feb 25/05) - The company hired to find a buyer for a Yellowknife diamond polishing plant questioned the industry's viability even before it began searching for a new owner.

Montreal-based financial advisory firm, Deloitte and Touche, has been running the Sirius diamond polishing plant on the government's behalf ever since the previous owner was forced into receivership last June.

The territorial government was forced to recall its $8 million loan guarantee to previous owner, Stephen Ben-Oliel, after the Royal Bank demanded payment.

Deloitte was originally hired by the GNWT to conduct an operations review of the plant after it became clear the company was in financial trouble. They submitted a report on the plant and its Vancouver-based parent company May 27.

While the report remains under court-ordered seal, the company's doubts were outlined in an affidavit filed by Terry Pierce, director of budgeting and evaluation for the Financial Management Board Secretariat. "The Deloitte report indicates the viability of the Canadian diamond cutting industry, as a whole, is questionable," wrote Pierce.

Pierce recommended that the Deloitte report remain sealed because disclosure of financial information "may further damage (Sirius') financial viability and the ability of an interim receiver to operate the businesses as a going concern."

When asked why the government trusted the company to run, and hopefully, sell the plant, considering their reservations about it, Finance Minister Roland said Deloitte is considered one of the best in the business. "The area of receivership was what they were hired for."

He said he still believes the industry has a future in the NWT. "We still have three operating cutting and polishing facilities," said Roland.

"There's been some troubles initially. Through our hurdles, hopefully we can strengthen our position."

Earlier this week, the manager of Arslanian Cutting Works, Hilary Jones, said her company was doing fine despite claims made by Roland that diamond producers Diavik and BHP Billiton were short-changing Yellowknife polishing plants.

Mike Ballantyne, who until December was a vice-president with Yellowknife's other polishing plant, Laurelton Diamonds, said "things are going very well there," too.

"What we originally envisioned is happening. We got over 50 people working there. It's sort of a very quiet success story."

Kam Lake MLA Dave Ramsay, who has been pressuring the government in recent weeks over its handling of Sirius, has since called for an inquiry.

Before end of year

The government wants to find a buyer for the plant before the end of this fiscal year, March 31. Otherwise, they may simply close it down and write off the loss.

"We have to try and pin down what it is we spent," said Ramsay.

"If you can appreciate and understand what your investment is, then it's a lot harder to walk away from it."