|Snap Lake, Canada’s first completely underground diamond mine, was a technically challenging and expensive operation since it opened in 2008 | Courtesy of De Beers
De Beers is giving potential buyers a chance to snap up Snap Lake, its unprofitable diamond mine, before it is flooded in the last quarter of 2016, the company announced in July.
Located about 220 kilometres northeast of Yellowknife, Snap Lake is Canada’s first completely underground diamond mine and has been a technically challenging and expensive operation since it opened in 2008.
De Beers halted production at the mine in December. It will continue into extended care and maintenance if there are no suitable offers to buy it, so the company can still hold it for possible production in the future, De Beers Canada spokesperson Tom Ormsby said. The flooding will cut costs and reduce the environmental risk from continuing to pump out water while the facility is out of commission.
“The mine still has in that ore body approximately 20 to 30 million karats,” or 12 years of mining, Ormsby said. “Unfortunately, the gains we were making were overtaken by the drop of the market late last year.”
Ormsby did not say if any buyers have come forward or how much De Beers expects for the mine, citing confidentiality rules.
Paul Zimnisky, a diamond and mining industry analyst, said he doubts any company will step in to buy the Snap Lake mine under the current market conditions.
“It’s a relatively complex endeavour, there’s a lot of things that can go wrong,” he said, adding Snap Lake has multiple challenges, including costly water issues, complex engineering and a remote and geologically tricky location. By the end of 2014, De Beers had spent $2.2 billion on constructing and operating the mine.
“The reason somebody would buy it is maybe they anticipate that sometime in the future the price of the diamond will exceed the cost of producing,” Zimnisky said. “But I just don’t think at the moment the profit for diamonds is good enough to justify all of those risks.”
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