November 2009

Taking diamonds from mine to market

Ontario Diamond Sector Unit seeks to bring the province value-added opportunities

By M. Eisner

Polishers at Crossworks Manufacturing in Sudbury

The Ontario Diamond Sector Unit was established to develop key policies as well as a legislative and regulatory framework for the province’s burgeoning diamond industry. The unit operates the valuation process for the province’s rough diamonds, including administrative processes for verifying and collecting royalties. It is also there to pursue any value-added opportunities, new exploration and investment in Ontario.

“We slowly started developing the sector in the summer of 2006,” says Ron Gashinski, director and chief gemmologist at the Diamond Unit Sector. “We knew the De Beers Canada’s Victor diamond mine was opening in 2007-2008 and, as a new commodity for the government, we knew we had to do something similar to what was done in the Northwest Territories [BHP and Rio Tinto mines] and find a framework to value the production of diamonds.”

The Diamond Sector Unit borrowed that framework and used it as a template, enhancing it for Ontario’s needs. That included finding ways to put forward the goals and aspirations of Ontario with regards to capturing a piece of the annual US$73 billion global retail jewelry market using the high-quality rough diamonds coming out of the Victor Mine. “We wanted to see if there were any value-added opportunities that we could realize, such as jobs and investment with local benefits and empowerments,” explains Gashinski. “We also wanted the Ontario diamonds to be on Ontario jewelry.”

With the Victor Mine already producing top-quality diamonds and a process in place to collect royalties, the province then wanted to find a way to take the concept of diamond mining all the way to retail — from mine to market. This included mining (production), sorting, valuation, cutting and polishing, jewelry manufacturing and retail.

The first step was to guarantee a minimum yearly supply of rough diamonds that could be cut and polished in Ontario. To do that, the provincial government negotiated with De Beers Canada and the Diamond Trading Company (DTC) to make available up to 10 per cent by value of the rough diamond production mined from Victor. With the Victor Mine forecasting a yearly average production of approximately $250?million in diamonds, it would provide approved cutters and polishers in Ontario an opportunity to purchase up to $25?million worth of rough diamonds each year.

For De Beers Canada, the request was not unusual. “This model already exists in Canada at our Snap Lake Mine,” says De Beers Canada president Jim Gowans. “When the government of Ontario wanted to have a similar opportunity, we certainly expected it. And we’re happy to sit down and help, providing the burdens are realistic to all involved.” 

Once the agreement was inked, the next step was to find an experienced and committed cutting and polishing company that would set up shop in Ontario. The Diamond Sector Unit put out a request for proposals for a global competition looking for such a company. Interested parties needed to meet specific performance requirements in terms of jobs and investments, as well as a plan for how they would help promote Ontario diamonds. “They also had to pass a requirement that the DTC had for their sightholders,” says Gashinski. “Whomever we selected had to have the financial wherewithal to cut diamonds in Ontario.”

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