Ekati owner says things must change or it’ll go ‘elsewhere’

Ekati diamond mine owner Burgundy has warned the NWT government in blunt terms that the sector needs more support or the mine could be sold or shuttered.

In a letter to NWT Premier RJ Simpson on Tuesday, Burgundy boss Kim Truter said the diamond industry was “in a state of turmoil” over decreasing prices and there had been “very little support” from government.

“Environmental requirements are getting unnecessarily more onerous, government agencies are inflexible to change, and the burden placed on the asset is increasing,” Truter wrote.

“Should this trend continue, then Burgundy will need to revisit the viability of the Ekati asset and focus on growth elsewhere.”

The price of mined diamonds has, in general terms, fallen about 20 percent in the past year. Some reports note that those decreasing prices come at the same time as lab-grown diamonds have gained market share.

For two decades, the NWT’s economy has been broadly reliant on diamond mining at Ekati, its Rio Tinto-owned neighbour Diavik, and mines operated by De Beers.

Diavik will close in 2026, leaving Ekati and De Beers’ Gahcho Kué as the lone remaining NWT diamond mines in operation.

Burgundy has said it hopes to keep Ekati running until 2040, an outlook Truter reiterated in his letter to the NWT’s premier, while adding that can only happen with more government support and less regulatory burden.

“There is no technical reason why the Ekati asset could not keep operating until at least 2040 and beyond due to the significant diamond resources that remain undeveloped on the property,” Truter wrote. He said the Jay kimberlite pipe (a source of diamonds) on the Ekati property “represents one of the largest undeveloped kimberlite pipes on the planet.”

To keep Ekati going, Truter said Burgundy wants to see various changes:

• Mines must set aside huge sums of money to pay for the cleanup once mining is over, in part a legacy of the disastrous failure of Yellowknife’s Giant gold mine, which is now a toxic $4-billion remediation project. Burgundy says the current system is too much of a burden, tying up cash it needs elsewhere.
• Government diamond valuers take too long to assess diamonds being held in Yellowknife, Truter said, delaying the sale process and interrupting the flow of cash into the business. (Valuation has to happen so the NWT can determine the royalties that must be paid.)
• Burgundy is worried that new legislation may force it to negotiate new impact benefit agreements with NWT communities. It wants a government assurance that it won’t need to do that.
• The company wants the regulatory process to be reviewed “with urgency,” saying it has become “unduly complicated and unnecessary.” Burgundy also wants federal water management requirements to be eased.
• Lastly, Burgundy calls for a mindset change. Truter says the territory is currently too focused on the mines’ looming closure and not on the opportunity diamonds still present. He says Ekati alone could be worth $500 million to the northern economy over the next 25 years.

The letter was sent to Premier Simpson, various ministers and Indigenous governments on Tuesday.

The territorial government has been approached for comment.

Two versions of Ekati’s health

Truter’s letter to the GNWT strikes a different note to public statements from Burgundy earlier this week.

In a Monday press release, Burgundy said it had paid down debt worth nearly US $25 million in cash, a move that the company said “highlights the strength and belief in our business and our optimism in the diamond market” – a sentiment not voiced in the same terms in the company’s letter to Simpson.

“We are well on our way and very happy with Burgundy’s progress,” Truter was quoted as saying in Monday’s debt payment announcement.

Michael O’Keeffe, Burgundy’s non-executive chairman, was quoted in the same press release as saying that “the Ekati asset continues to outperform expectations, offering significant earnings leverage potential for shareholders as diamond prices turn higher.”

The picture of Ekati’s health presented in the Monday press release did not touch on the concerns Truter subsequently expressed to Simpson on Tuesday.

Meanwhile, Burgundy unexpectedly withdrew its application to begin mining beneath its Sable former open pit.

The company made the decision on Tuesday, less than 24 hours before a public hearing into its plans to mine underground at Sable was due to begin.

In public, Burgundy said it had done so because it needed to engage with the Tłı̨chǫ Government on some concerns that had been expressed. The Tłı̨chǫ Government has been approached for comment.

Burgundy said the likelihood of being able to mine more diamonds elsewhere at Ekati meant Sable is a less pressing matter for the next year or so.

The company did not immediately respond to a Tuesday afternoon interview request regarding its letter to Simpson.