Ekati + Diavik = A Revived CanadaMark

Ekati Mine Aerial View
An aerial view of the Ekati diamond mine. Photo courtesy of Dominion Diamond Corp.
Sometime soon a celebrity may be posing for the paparazzi wearing suites of diamond jewelry hallmarked “Mined in Canada.” The merging of the two largest Canadian diamond mines has given the new owner, Dominion Diamond Corporation, the opportunity to relaunch and expand globally the CanadaMark, which was originally a brand commissioned by Rio Tinto for locally polished diamonds from its Diavik mine.
Dominion is no stranger to brands. The company owned a majority interest in Harry Winston, the jeweler synonymous with mega-diamonds, and carried its name for more than six years; it also owned a 40% stake in the Diavik mine. The company sold the Winston luxury stores and watch brand to Swatch Group of Switzerland for $750 million in 2013, changed its name to Dominion Diamond Corporation and acquired the Ekati mine from BHP Billiton later that year. The price was $553 million, leaving the company with nearly $200 million in surplus cash.
“We were always very keen to take over Ekati,” said James Pounds, president of Dominion Diamond. “The acquisition of Ekati provided the opportunity to revive a Canadian hallmark,” he added, noting that the combination of the two mines will produce sufficient quantities of “eligible” goods to sustain such a program.

James Pounds, president of Dominion Diamond Corp.
James Pounds, president of Dominion Diamond Corp said the merger of the two largest Canadian mines offers an excellent opportunity to revive the CanadaMark brand. Photo by Russell Shor.
The CanadaMark will be used on polished diamonds with a cut grade of Very Good or above, L color or higher and I2 clarity or higher. The clarity range is lower because demand for I2 goods is growing, said Pounds. About 20% of both mines’ total production would polish out to such goods.
Dominion is just beginning a test marketing campaign for CanadaMark, but Pounds is confident the demand will be there.
“We’ve done our research. Consumers today have a growing awareness of the origins of their diamonds, so our brand can offer them the assurance of responsibly sourced, fully audited chain of custody,” he said.
The amount of cooperative advertising funds that will be available and which celebrity will carry the CanadaMark is still under consideration, Pounds said.
Previous attempts to establish a Canadian diamond brand were difficult because all of the larger mines were in the hands of different producers. Although there was no specific requirement that the diamonds be polished in the Northwest Territories, BHP did develop CanadaMark in tandem with efforts to start manufacturing there. Most cutting operations closed after a few years, however, because the high costs were not competitive with other diamond centers.
Approved manufacturers of CanadaMark diamonds are based in India, Canada and Belgium and have agreed to maintain the audited chain of custody. These operations, appointed by Dominion, are able to produce CanadaMark diamonds, assuring their provenance and origin at a competitive price, Pounds noted.
Ekati, commissioned in 1998, was Canada’s first diamond mine. Its discovery seven years earlier touched off a diamond rush not seen since the gaudy days of South Africa’s boom of the 1870s. This time, the prospectors flew aircraft with specially equipped sensors to detect potential kimberlites. BHP Billiton, which acquired a majority interest in Ekati, also staked claims to a number of kimberlites in the surrounding area.
At least one of the pipes will secure the future of Ekati for some years to come; mining at the original pipes, Misery and Koala, will likely end in 2019. Mining at the Fox pipe ended earlier this year because the costs of redeveloping it as an underground operation were too high. The large Jay pipe, however, has yet to be developed. Its production consists of mainly smaller stones, but is fairly rich at approximately two carats per ton. Jay, which lies under a shallow lake, could extend the life of the mine for another 10 to 20 years, Pounds said.
Diavik, discovered by Aber Resources during the mid-1990s diamond rush, started production in 2003 with a 40-60 partnership between Aber and Rio Tinto. Aber later acquired Harry Winston and took on the name of the New York–based retailer.
Pounds thinks there are eight to 10 years of production remaining from Diavik’s three main pipes. The mine transitioned to all-underground operation in 2012. One pipe, A-21, has yet to be developed.
BHP shook up the rough diamond market six years ago by becoming the first major producer to sell its production (from Ekati) by auction instead of selling at set prices by the “sight” system of set-price contracts. But as Pounds noted, Dominion has gone back to the sight system to ensure consistency of supply.
“Supply consistency is very important,” he said. “Manufacturers have to know what they are getting.” Accurate pricing is also important, he added, so Dominion will continue to auction a portion of its production every six months to accurately gauge market price levels.
Analysts expect Dominion sales to top $800 million this year, up about 6% from 2013’s total of $751.9 million, due mainly to increased volume, not price increases. 

Russell Shor is GIA's senior industry analyst in Carlsbad, California.

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