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For sale: One diamond mine (with water problems)
De Beers placing Snap Lake on the market ahead of flooding underground

Shane Magee
Northern News Services
Wednesday, July 27, 2016

SOMBA K'E/YELLOWKNIFE
De Beers Canada is placing its unprofitable Snap Lake Diamond Mine northeast of Yellowknife on the market less than a year after halting production and laying off staff.

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The Snap Lake Diamond Mine has been put up for sale before De Beers Canada follows through on plans to flood the mine's underground tunnels later this year. - NNSL file photo

The company is continuing with a plan to flood the underground tunnels later this year, likely starting in October or November.

"Before we did that, we thought the right thing to do would be to check the market to see if anyone is interested before it becomes flooded," said De Beers spokesperson Tom Ormsby. "To bring it back once it's been flooded will take a longer period of time to put it back into production."

De Beers has no immediate plans to put the mine back into production.

The underground mine still has an estimated 20 to 30 million carats within the ore remaining that would be potentially recoverable over about 12 years, he said.

"We believe in the asset. We think that the ore body still has a viable life to it," Ormsby said.

BMO Capital Markets has been hired as a third party to evaluate any offers to make sure there is a chance for success.

Ormsby said the company is not disclosing a price.

Should any sale take place, Ormsby said proposals would likely have to deal with social-economic benefit agreements signed with aboriginal governments.

Since opening in 2008, the facility employing about 800 people remained unprofitable and has been plagued with costly water-inflow issues from the lake above the mine tunnels. The water, containing dissolved solids such as mineral salts, was being pumped into the lake from the mine. Last year, the company threatened closure of the mine if a request to increase the amount of total dissolved solids allowed in the lake water wasn't granted. A partial increase was granted and the company had made some progress dealing with the water issue but the market for diamonds was in rough shape.

The company announced Dec. 4 it would suspend production at the mine, resulting in hundreds of layoffs and the transfer of some employees to the Gahcho Kue diamond mine project, which is expected to begin production this year. At the time the company said it would reevaluate in the future whether to reopen the mine.

The company received regulatory approval in June to flood the underground mine, though that has yet to happen. Prior to flooding, various components such as electrical work would have to be removed.

Tom Hoefer, executive director of the NWT and Nunavut Chamber of Mines, wrote in an e-mail it's logical and not surprising the company would explore various options.

"If they decide to sell it, a flooded mine will have added costs to reopen," Hoefer wrote. "This could include not only pumping the mine out and treating the water, but re-installation of electrical components that would be removed and perhaps sold prior to flooding. It makes good sense to see what the market is before flooding then."

Tu Nedhe-Wiilideh MLA Tom Beaulieu, whose district includes the mine as well as Ndilo, Dettah and Lutsel K'e, said the the end of Snap Lake production meant a loss of some jobs in his district.

It's now looking less likely those jobs will return.

"Someone would have to find a more efficient way to access the diamonds," he said. "I think it's less likely it will reopen."

He said as a territory, the government has counted on economic growth from diamond mines.

"I suppose there would be less employment, less revenues flowing to our government . down the road it has impacts on the small communities because of the loss of employment," Beaulieu said.

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