Northwest Territories Premier Bob McLeod prepares to address media in Yellowknife regarding the De Beers Canada announcement that the company will suspend work at the Snap Lake underground diamond mine, affecting 434 workers. He is flanked by deputy minister of Education, Culture and Employment David Stewart, left, and deputy minister of Industry, Tourism and Investment Peter Vician. - Walter Strong/NNSL photo

SOMBA K'E/YELLOWKNIFE
De Beers Canada halted production at its Snap Lake diamond mine last week, a move that will leave 434 people out of work in the coming months.

The decision will negatively impact the territory's economy through lost incomes, taxes and spending by the company and its suppliers, said industry experts and officials with the GNWT. However, it was too soon to say how large or lasting the impact could be.

The future of the mine, which is located about 220 km northeast of Yellowknife, has been a looming question mark for some time as the diamond market has shifted and the mine has struggled to deal with a water issue.

Prior to the announcement, the company hinted changes were coming. On Dec. 3, De Beers Canada CEO Kim Truter flew from Ontario to the mine site to inform staff of the pending layoffs. He said about 500 employees and contractors would be affected, with about 100 full-time employees being from the NWT. Those affected will continue to be paid for 16 weeks, although they will not have work, and will receive severance packages.

The mine is not closing, but has ceased production and shifting into what was described as a care and maintenance mode.

"Placing Snap Lake on care and maintenance is a part of a broader response as we respond to the very rapid downturn in the diamond market over the recent months," Truter said.

Should the market for diamonds change, the company could re-evaluate resumption of mining. During the shutdown, the mine will still be required to meet its environmental and regulatory requirements, the company and GNWT Lands department deputy minister Mark Warren said. About 120 workers are needed in the short term, while care and maintenance work will need about 70. Approximately 120 to 130 people will be transferred to Gahcho Kue mine, which is expected to open by mid-2016. Some will transfer immediately and others are scheduled to transfer in the middle of next year.

The news came as a shock to many, piling on to recent troubling news about the territory's resource sector.

"I guess I'm shocked that we actually have a mine shut down," said NWT and Nunavut Chamber of Mines executive director Tom Hoefer.

"That's going to have a big effect on our communities," Hoefer said. De Beers has what are known as impact benefit agreements that provide funds to Yellowknives Dene First Nation, Tlicho Government, North Slave Metis Alliance, Lutsel K'e and Kache Dene First Nation. The details of the agreements aren't public.

De Beers plans to continue sponsorships, donations and the consideration of targeted programs as methods of support in those communities, its CEO said.

Edward Sangris, the Dettah chief of the Yellowknives Dene First Nation, said the shutdown will undoubtedly affect members of his community.

"It's really unfortunate at this time of year being so

close to the holiday season," Sangris said.

Yellowknife Mayor Mark Heyck said it's too soon to speculate on any impact to the city.

"As a community we've been through tough times before and we've persevered," Heyck said.

Speaking to reporters at the legislative assembly, Premier Bob McLeod expressed a similar sentiment.

"As a territory we have been through this before - and we have survived it," said McLeod, who remains premier through the transition to the new government.

Education, Culture and Employment deputy minister David Stewart said plans are in the works to hold information sessions about various GNWT programs and services that are available for employees affected, Stewart said.

The company informed the government of the move in a phone call early last week followed by a written notice Dec. 3.

The company has committed to the GNWT there would not be any impact on Gahcho Kue other than the transfer of employees, McLeod said.

A 2014 socio-economic impact report stated the mine spent about $126 million that year with Northern businesses.

"The dollars (De Beers and other companies) would have otherwise have spent won't be in the economy," Bradshaw said.

Peter Vician, deputy minister of Industry, Tourism and Investment, said the GNWT is still calculating an actual financial impact.

Outgoing GNWT finance minister Michael Miltenberger predicted the closure would have a "significant" impact across the North.

"That small group of mines, we've been living off them for well over a decade," he said. "They contribute about $1.5 billion to our (gross domestic product) and you take one of those mines off the table, it leaves a big hole in terms of the revenue side."

Over the past year, Miltenberger has said the territory is on the edge of a "fiscal cliff" and needs to focus on controlling spending.

On Dec. 4, Hoefer doubled down on Miltenberger's metaphor, saying he believes the announcement could "take us over the edge.

Snap Lake, which hasn't been profitable since opening in 2008, was expected to operate until 2028. There were 1.8 million carats of diamonds recovered from the mine in 2014, a De Beers report states.

News/North reported in March that De Beers had spent $2.4 billion to build and operate the mine, $1.5 billion of which was spent with NWT companies, including $865 million with aboriginal firms and joint ventures. Truter called the mine a "troubled operation" since the day it started.

"It's been a borderline, marginal asset for many, many years. We've tried a variety of solutions, technical, operational, leadership, all kinds of solutions," Truter said.

As for whether Snap Lake will ever re-open, Truter said the company has a commitment to go back to the board of directors in a year's time.

- with files from Karen K. Ho

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