SOMBA K'E/YELLOWKNIFE - Rio Tinto has cancelled the winter production shutdown for the Diavik Diamond Mine.

The company made the decision official in a press release posted on its web site yesterday afternoon.

A haul truck travels down the slop of the A418 open pit at Rio Tinto's Diavik Diamond Mine, where production was shut down from July 21 to August 24. The second shutdown for the mine, which was scheduled for December 1 to January 11, was cancelled yesterday. - photo courtesy of Rio Tinto

"This is a positive development for all of us at Diavik and for our local communities, business partners, and government. There has been sufficient improvement in the market outlook to enable us to make this decision," said Kim Truter, Diavik president and chief operating officer, in the release.

Rio Tinto will keep a close watch on the diamond market and, if markets deteriorate again, may decide to go through with more shutdowns, he added.

The news comes after Robert Gannicott, chairman of Harry Winston Diamond Corp., which owns 40 per cent of Diavik, gave strong hints to media that the second planned shutdown for Diavik, scheduled for December 1 to January 11, might be called off.

Diavik underwent a summer production shutdown from July 21 to August 24.

Truter also indicated Diavik may ramp up next year, resulting in the production of 7.5 million carats worth of diamonds.

Earlier this year, Rio Tinto, which owns the balance of the mine, predicted Diavik would churn out between five and six million carats this year, compared to 9.2 million in 2008.

Doug Ashbury, a spokesperson for Rio Tinto, confirmed the number of produced carats this year will be "slightly more" than Rio Tinto's earlier prediction.

Gannicott's predictions - which he stressed are "all on the table" - came after Harry Winston posted its second quarter earnings last week.

The company reported a net loss of $24.5 million compared to the same period last year, with sales during the quarter dropping to $94.8 million from $186.1 million a year prior.

But beneath that bit of bad news came a silver lining.

"Our July rough diamond sale realized prices a full 50 per cent higher than those seen in March as the diamond pipeline regained its poise after the near-collapse of the previous six months," said Gannicott in a telephone conference with media Friday. "Since the market has improved substantially and consistently since the beginning of the first quarter, there is now a new mine plan under consideration."

Gannicott also confirmed Harry Winston has discussed the possibility of "synergies" with BHP Billiton, the owner of the Ekati Diamond Mine.

By "synergies," Gannicott meant possible ways to combine the resources of the Ekati and Diavik mines as a means of saving money.

Options could include combining transportation of goods, but Gannicott added, "there are also two large power plants, both of which have got to have stand-by generators that are actually physically spinning all the time. Obviously a connection between the two has some charm, to say the least."

Last week, Doug Ashbury, a spokesperson for Rio Tinto, denied rumours of any kind of merger.

He could not be reached for comment on this story.

Mike Vaydik, general manager of the NWT and Nunavut Chamber of Mines, was not too surprised to hear Gannicott's comments regarding the second shutdown, nor about the possibility of infrastructure sharing.

"That's been rumoured for many years, that Ekati and Diavik could be operated as one entity. I think as cost cutting becomes more crucial, those things look a lot better," said Vaydik. He said using one process plant for both mines could also be a possibility.

Talk of no shutdown was expected, given the slow recovery of the diamond market, he added.

"People are buying diamonds again. I think they (Harry Winston) will probably watch and see for a while before they make any firm decisions."