De Beers considering closing Canada's Snap Lake diamond mine

Thu Dec 3, 2015 12:04pm EST
 
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By Susan Taylor

TORONTO Dec 3 (Reuters) - De Beers Canada said on Thursday that it may consider closing its Snap Lake diamond mine in the Northwest Territories, alongside other options, as it grapples with falling prices and costly operations at the unprofitable Arctic mine.

De Beers Canada, which employed 747 staff and contractors at Snap Lake last year, has not turned a profit at the underground mine since it began production in 2008. The company had planned for operations to continue until 2028.

Groundwater problems at the mine, which extracts diamonds from beneath Snap Lake, have added to high costs at the site, which is accessible only by air and an ice road that operates for two months of the year. It produced 1.2 million carats last year.

"Any time these scenarios come forward, where the cycle is challenging, everything's on the table and everything's looked at including the option of what would we do if we had to go into any kind of a care and maintenance or closure situation," said De Beers spokesman Tom Ormsby. "Nothing's off the table."

Global diamond miners have cut output and lowered prices in the face of slowing demand growth in China and a glut of supply.

Prices for rough stones are down 18 percent from last year, data from roughprices.com shows, while polished diamond prices are down 20 percent year-to-date, the Rapaport Group said.

De Beers, which is 85 percent owned by Anglo American Plc and 15 percent owned by the government of Botswana, is the world's largest diamond producer. It has cut global production three times this year.

De Beers Canada said in October that its new Chief Executive Kim Truter would relocate the company headquarters to Calgary as part of a restructuring to cut costs.

The company, which also operates the Victor diamond mine in Ontario, continues to build the Gahcho Kue mine in the Northwest Territories, with 49 percent partner Mountain Province Diamonds Inc. Gahcho Kue is expected to start production in late 2016 and operate for 11 years.

The company is also reviewing Victor and Gahcho Kue, Ormsby said, to determine if efficiency or operations could improve. (Reporting by Susan Taylor; Editing by Marguerita Choy)