Yellowknife (Apr 19/06) - A cutting and polishing company has been unable to solve its problems with BHP Billiton and has been forced to continue buying rough diamonds on the world market.

"We haven't been buying directly from BHP's mine," said Bob Bies, Arslanian Cutting Works director of operations. Instead the company has been shopping on the open market in Antwerp, Belgium, and getting a better supply of gems.

The pace at Arslanian Cutting Works hasn't slowed despite the strike at Ekati because the company has been forced to continue purchasing rough diamonds on the world market instead of directly from NWT mines. - NNSL file photo

Members of the Legislative Assembly were shocked when they heard in February Bies had once been forced to turn to overseas suppliers to get the stones he needed to keep the Yellowknife factory operating.

At the time, all involved said the problem was being solved though negotiations, but now more than two months later it appears no progress has been made on securing an economical supply of rough stones for Yk diamond cutters and polishers.

In February, Bies said it is sometimes cheaper for him to buy from Antwerp rather than making use of the NWT stones flowing through the socio-economic agreement with Ekati's owner BHP.

A better agreement between Northern diamond mines and the secondary industry is clearly needed, said Great Slave MLA Bill Braden, who lead the charge in the Assembly when the supply problems first surfaced.

The socio-economic agreement signed between BHP Billiton and GNWT in 1996 did not have "the teeth" required to keep mines in check while allowing cutting and polishing companies to flourish, he said.

If the right combination of size-, quality- and quantity-requirements are spelled out in the deal with the territorial government - along with some means of enforcing the agreement - Yellowknife's secondary diamond industry can grow far beyond where it is today, he said.

"We are competing against the world," said Braden. "It's a high cost area, but not a reason to abandon the secondary industry."

The ball is in BHP's court and it needs to take a look at what is happening and fix the problem, said Braden.

BHP Billiton does have agreements with cutting and polishing companies, said Deana Twissell, external affairs officer for BHP in Yellowknife.

"We support the secondary diamond industry through the supply of rough diamonds to local cutting and polishing companies," she said.

She refused to discuss the terms of those deals calling them "confidential."

Two months ago, Bies explained that every five weeks separate packages of 2,500 carats worth of Ekati diamonds are made available to Arslanian, the Polar Bear Diamond Factory and Canada Dene Diamonds. But because there are no guarantees of size or quality, his company only accepts about two-thirds of those stones and the other two operations take far less.

"There is no official agreement with BHP, just a loose understanding," Bies said at the time.

Industry, Tourism and Investment Minister Brendan Bell admitted in February not only do problems exist within diamond agreements, but the government isn't sure how to fix them.

The minister was not available for comment prior to presstime.

- with files from John Curran