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SOMBA K'E/YELLOWKNIFE - Underground mining at Diavik Diamond Mine will be delayed until the third quarter of 2009 due to a $5 billion reduction in worldwide capital spending announced by Rio Tinto, Diavik's parent company, on Wednesday.

Arnold Enge, system analyst for the Diavik Diamond Mine, stands in front of the tunnel leading to the underground workings of Diavik. The company will continue with the construction necessary for the underground mine, despite a reduction by $5 billion in capital expenditures next year by Diavik's parent company, Rio Tinto. - Guy Quenneville/NNSL photo

However, no layoffs are currently planned at Diavik, according to Doug Ashbury, the mining company's acting spokesperson.

"The last resort would be to lay people off," he said. "Right now we're not looking at that."

Rio Tinto announced it is cutting capital spending - previously budgeted at $9 billion for 2009 - in an effort to minimize financial risk during the global economic slowdown.

This means underground mining, previously slated for the first quarter of 2009, will wait until later in the year. Diavik is in the midst of a $700 million dollar transformation that will see the mine become completely underground by 2012.

Construction of the underground tunnels and the expansion of surface infrastructure - such as the doubling of the mine's power and water treatment plants - will be completed in time for the beginning of underground production, said Ashbury.

"We'll concentrate more on underground construction and not go into the mining phase as early," Ashbury said.

However, Rio Tinto's budget cuts mean Diavik's aggressive plans for exploration on the Diavik site, as well as exploration on other parts of the large claim block that surrounds the mine, will be reduced next year, he said.

"I can't say if there's going to be a smaller exploration staff," said Ashbury. "I can only say that we're going to be cutting back our exploration activity."

Rio Tinto's rollbacks also mean Diavik's plans for a $50 million dollar project to recover small diamonds, announced earlier this year, will be put on hold. No one has been hired for the project, said Ashbury.

The mine's workforce is expected to peak at around 1,000 people when underground and open pit mining occur simultaneously until open pit mining ceases in 2012. The current workforce is around 800 workers.

Ashbury said Rio Tinto's decision actually has a silver lining to it.

"It will give us some more time to prepare our workforce," he said.

The announcement from Rio Tinto comes weeks after De Beers Canada announced it is eliminating 105 contract positions at its Snap Lake mine by the end of the year to contend with the global economic slowdown and shrinking demand for diamonds this holiday season.