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Canada as a global diamond center

23 march 2020

The countries ranking high in the global diamond mining, cutting and polishing, and trading are generally considered to be the world diamond centers. The diamond-mining countries, cutting and polishing hubs and diamond sales centers are among them.

Diamond mining in Canada

Diamonds were first discovered in Canada in 1991, in a place where few expected kimberlite inclusions. The diamond production at the Ekati mine that is still in operation began in 1998. Diamond mining helped maintain Yellowknife, the capital of the Northwest Territories. In Canada, almost 90% of the population live and work about 200 km from the border with the United States, so the Northwest Territories where most of the diamond mining in Canada is concentrated has a population of only 50,000 people in an area of ​​1.34 mn sq. km; this makes these territories together with the Yellowknife administrative centre located 2,000 km north of the US border similar to Western Yakutia where diamonds are mined in Russia. Diamond mining is the main source of employment and tax revenues for these territories that effectively utilize their subsoil resources (Fig. 1).

Diamond mining in Canada has provided tremendous opportunities for the areas with limited possibilities, and the tax revenues continue to support the government at various levels. According to the Kimberley Process, in 2018, Canada exported diamonds worth about $2.16 bn; taking into account 10 percent royalties, diamond mining annually brings about $216 mn to the country. Since the onset of diamond mining in Canada, over $10 bn has been invested in the development and operation of four diamond mines. Two new long-life mines have recently been launched, and many more are in the early stages of their development.

Canada is included in the pool of the BRANCS countries - Botswana, Russia, Angola, Namibia, Canada and South Africa, - in which, in addition to the extraction of diamonds worth about one billion dollars or more, the cutting and polishing industry is also being developed.

The BRANСS countries produce about 92% of the total value of the mined diamonds in the world. In the diamond production by volume, Australia and the Democratic Republic of Congo that produce lower quality diamonds can also be classified as the largest diamond-mining countries. These 8 countries account for about 96% of global diamond production (Table 1).

Table 1

Diamond production, imports and exports by major diamond-mining countries, 2017-2018

analyt_16032020_1_eng.png
Notes: * BRANCS countries. The numerator is the data for 2017, the denominator - the data for 2018.
The table is compiled by the author based on the data from the Annual Global Summary: 2017, 2018 Production, Imports, Exports and KPC Counts.

The analysis of the data in Table 1 shows that the major diamond-mining countries mainly export their goods and this is where their participation in the diamond business ends. The exceptions are Botswana and South Africa that buy diamonds from the neighboring poor African countries and sell them in rather large volumes earning additional income from re-exporting diamonds through diamond exchanges in Gaborone and the UAE. In 2018, Canada ranked third in the diamond production, and the same year, it became third in the cost of rough diamonds mined, surpassing South Africa in this indicator. 

analyt_16032020_2_eng.png

Diamond cutting and polishing

Canada's attempts to develop its own cutting and polishing industry gave mixed results. The governments of provinces and territories, having greater autonomy to enact laws within their jurisdiction, used various rules, which sparked the competing interests among the diamond manufacturers in the country. In two of the three diamond mining provinces, the local governments obliged diamond miners to sell up to 10 percent of the mined diamonds by value to the local diamond manufacturers, but in fact, the demand was less than 10 percent, and the local diamond cutting and polishing industry did not develop to the anticipated levels.

Canada, like Russia, imports gem-quality diamonds to use them for further manufacturing polished diamonds. It should also be noted that the volume of diamonds processed at their own cutting enterprises in the beneficiary countries is not as significant as in India or Israel, which are traditional diamond cutting and polishing centers. The cutters in those centers are, as a rule, the craftsmen from other global diamond centers - Belgium, India and Israel.

The cutting industry did not create jobs for Canadian workers, as promised. Referring to the lack of trained local manpower, many firms hired third-party cutters. Preferential conditions for foreign workers in Canada allowed this to continue constantly, and local workers were practically unable to take advantage of this employment opportunity.

Probably, the advantage that outweighs all the shortcomings of the cutting and polishing industry is the branding of the Canadian polished diamonds. Several different brands are on sale in the country, and they are promoted as mined, cut and polished in Canada. At the same time, for marketing purposes, retailers can use the environmental data of the Canadian mines, workers’ salaries, and the ‘flawless’ reputation of the diamond industry in the country. This helps a small number of factories to create a niche for themselves in the market, and the industry still maintains its sustainability.

Conclusions and recommendations

1. It should be recognized that the experience in developing the diamond industry in Canada has been poorly studied by national institutions dealing with the problems of the diamond complex in Russia and Yakutia that still claim that the creation and development of the diamond industry in Yakutia is an unrivalled experience in the world.

2. The beneficiation in Canada should also be interesting to the Yakut diamantaires – as for cutting and polishing firms, the proximity to resources and guaranteed regular supplies are important, but this is not enough for the development. When there is pressure from other costs, the beneficiation should rather develop due to a good business reason or based on a strategy.

3. The branding strategy in Canada definitely worked and created a sales niche to sell the diamonds to the Canadian consumers. The next step is to promote these brands to the rest of the world, primarily to the United States, taking into account the pressure from the lab-grown diamonds.

Yu. G. Danilov, Ph. D. in Economics, independent expert analyst

S. P. Leontyev, Senior Lecturer, the Institute of Informatics and Mathematics at the Ammosov North-Eastern Federal University