Video: An insider's look at a diamond's journey

updated 11/28/2006 8:07:07 PM ET 2006-11-29T01:07:07

The billions-of-years-old rocks underneath the Canadian Shield have untold potential for Canada, as they include the kimberlite rock formation where diamonds are found, and could bring a glittering bonanza, the head of De Beers Canada says.

"When you look at Canada, serious exploration of diamonds is only 20 years old," said Jim Gowans, a mining engineer who helped build seven metal mines before taking the helm of De Beers Canada earlier this year.

South African based De Beers, which already produces nearly half the world's diamonds, is spending $1.8 billion to develop two Canadian projects into diamond mines.

Canada only started mining diamonds in 1997, but it is already the world's third-largest producer behind Botswana and Russia.

There are three mines so far, BHP Billiton Ltd.'s Ekati operations, Aber Diamond Corp. and Rio Tinto Plc's Diavik mine and Tahera Diamond Corp.'s Jericho mine. De Beers' two mines will be Nos. 4 and 5.

In 2006, De Beers spent about $11.5 million on early-stage diamond exploration in Canada. For 2007, the company has set aside $15 million, some 15 percent of its global exploration budget of about $100 million.

It has 14 exploration agreements with other companies. Prospecting for diamonds is harder than looking for metals — an ounce of gold is the same as every other ounce of gold, but the value of a diamond carat can range from nearly nil to hundreds of dollars.

De Beers started searching in Canada 40 years ago
"That is why diamond exploration cost so much money and takes much longer to find," Gowans said.

"You are looking for vertical needles in a haystack and when you do find them, you have to find out if they have diamonds in them and if the diamonds have any value."

Figures from Canada's Ministry of Natural Resources show that companies spent about $286 million looking for diamonds in Canada in 2006.

"At the exploration level, we (in Canada) have not hit a lucrative kimberlite pipe. The challenge is to find one as quickly as possible," said Pierre Leblanc, principal with privately owned Canadian Diamond Consultants Inc.

De Beers started searching in Canada about 40 years ago. Its Snap Lake project, just south of the tree line in the Northwest Territories, could start producing by July and will be De Beers' first mine outside Africa. It will come on stream as some of its oldest mines in Africa start winding down.

De Beers is also developing the Victor project in northern Ontario, which is expected to start producing in 2008, and the Gahcho Kue project in the Northwest Territories, a joint venture with Mountain Province Diamonds Inc. and Camphor Ventures Inc.

"Certainly at the rough trading level, the Canadian industry has become very well known, very quickly, because of quality and quantity," said Leblanc. "At the retail level we're less known. There are many people that don't know we have our own diamonds."

But De Beers said it has no intention of branding the Canadian diamonds, even though other firms have capitalized on the mystique of the great white north by etching microscopic symbols of Canadiana into their gems.

When people buy diamonds "it's not to buy a souvenir," said Gowans. "Right now De Beers is the world standard for diamonds, so there is no need for us to move off what has already been the standard."

Copyright 2012 Thomson Reuters. Click for restrictions.

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