SOMBA K'E/YELLOWKNIFE
Fifty-one people are out of work this week after Diavik Diamond Mine announced layoffs Monday, citing "current market challenges."
The employees who lost their jobs came from all areas of the company, stated Marc Cameron, Diavik's president and chief operating officer.
They will receive compensation in accordance with their contracts and company policy, as well as personal and career counseling.
"Unfortunately, with the current market challenges, we have had to reduce the number of employees in our business," stated Cameron by e-mail.
Wally Schumann, minister of Industry, Tourism and Investment, called the layoffs "disappointing" when reached for comment yesterday.
"Mining is the biggest sector of our economy and provides jobs for many Northerners," he stated in an e-mail to Yellowknifer. "Diavik's announcement shows that industry here continues to face challenges."
The price of diamonds have fallen by about 20 per cent over the last two years. While those prices have rebounded this year by about nine per cent, Tom Hoefer, executive director of the NWT & Nunavut Chamber of Mines, said that's still a tough pill to swallow for the industry.
"That is a long time to continue to operate as normal, and suggests companies might have to find a new normal," he said.
"You can't control the price you get for your diamonds and you can't pass on increasing costs to your customers. So new technology is one way to reduce costs, layoffs are another."
Diavik Diamond Mine, located about 300 kilometres northeast of Yellowknife, is operated by Diavik Diamond Mines Inc., a subsidiary of Rio Tinto, which owns 60 per cent of the mine. The other 40 per cent is owned by Dominion Diamond Corporation. There were 997 employees at the mine in 2013, according to Natural Resources Canada.
The mine began production in 2003 and has an annual production of around six to seven million carats, mostly of large, white, gem quality diamonds. Processing volumes and the number of diamonds recovered at the mine actually rose in the third quarter of this year - both statistics jumping 22 per cent higher over the same quarter the year before. The grade of the diamonds was also higher than the year before. But in its news release Monday Diavik states the increase is still "below plan" for the quarter due to underground dilution as a result of granite sloughing from the walls of the open pit.
This, Hoefer says, is part of the problem with older mines.
"As mines get older, they mine deeper, and so their costs increase. This means that they are constantly striving to find ways to decrease their rising costs. It's a tough pill to swallow but when your success depends on the bottom line, hard decisions unfortunately have to be made," said Hoefer.
"We all know how that works in the North. If it's a cold winter and your fuel bill is high, you might perhaps find a more efficient furnace or you find ways to cut other costs."
The higher costs is not good news for the diamond industry in the NWT.
"I think what's going on is that the commodities complex across the globe is still very challenged," said Richard Morland, president of the NWT Chamber of Commerce.
"The diamond market is challenging at the moment and I'm guessing there are things going on at the site that led them to the point where they decided they didn't need those 51 people."
Dominion's fiscal 2017 third quarter results are scheduled to be released next week but its sales results, released on Nov. 17, reported that between Ekati and Diavik, the company earned $102.7 million from the sale of 1.2 million carats in rough diamonds, a 29 per cent decline from the same period last year when the company sold just 0.8 million carats for $145 million.
Dominion announced in November that its headquarters, and 100 jobs, were moving to Calgary from Yellowknife.
Hoefer said he hopes the layoffs aren't a sign of more to come at Diavik and other mines in the territory.
"That's something we never want to see," he said. "We do know that the diamond markets have been sort of fragile here for the last couple of years. And you know what, perhaps it should come as no surprise if that's the case. I mean, companies can only carry costs for so long before they have to make decisions."
