GNWT meets with Burgundy after Ekati ‘go elsewhere’ letter

The NWT government has begun trying to address the complaints raised by a diamond mine owner in a letter inadvertently made public last month.

The letter, briefly displayed on a public registry in an apparent mistake, showed Ekati mine owner Burgundy telling the GNWT things must change or it would “need to revisit the viability of the Ekati asset and focus on growth elsewhere” – even as Burgundy stated publicly that Ekati was outperforming its expectations.

Burgundy made six asks of the GNWT.

Among them were a request that diamond royalty valuation, where GNWT officials assess the cut of diamond revenue it should take, be speeded up so that the product isn’t left sitting around for weeks.

Burgundy also said the amount of money the GNWT demands be set aside to pay for mine closure is too much for it to bear.

The broader context is that it’s been a rough year for diamond mines, a sector that has powered the NWT’s economy for two decades.

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.

Speaking with Cabin Radio this week, NWT industry minister Caitlin Cleveland said four members of cabinet – including Premier RJ Simpson – had met with Burgundy’s management to hear the mine owner’s concerns in person.

“The meeting was fairly collaborative, and they very honestly went through where they’re at right now,” Cleveland said.

“I think what that speaks to is the current state of the commodity market for diamonds. That is putting some serious stress on our diamond mines.”

Cleveland said the GNWT had heard the concern about delays in royalty valuation from other mines and was now looking for a way to speed that up, but she cautioned that the government had to be “responsible to taxpayers” around the issue of mine closure and how that is funded.

“The legacy of mining in the Northwest Territories is not a secret to any of us, and we need to ensure we’re protecting the interests of northerners,” she said.

Departments are now meeting with mine representatives to come up with solutions to some of the issues Burgundy raised, the minister added.

“The solution can’t be at a cost to the GNWT, for obvious reasons,” Cleveland said. “And then we’ve asked that we get creative with solutions that don’t require regulatory changes, because our minerals and land legislation and regulations are co-managed. We want to make sure we can be as responsive as possible.”

Below, read the full interview about Burgundy’s letter and how the GNWT says it is responding.

Burgundy has said that in ideal circumstances, it believes it can keep Ekati open until 2040. The neighbouring Diavik mine will close in 2026 and the NWT’s third operating diamond mine, Gahcho Kué, is expected to last until 2031.

Ekati is 26 years old. Burgundy said this week that the mine had just hit the milestone of 100 million carats produced.

The company declined an interview request for this article. “At this time, we do not have any additional comments to provide,” a spokesperson said by email.

Burgundy isn’t the only mine owner worried about a shift toward lab-grown diamonds.

De Beers just released what it called a “captivating new natural diamond marketing campaign” titled Worth the Wait, which aims to persuade a younger demographic that natural diamonds are the better choice.

“Because just as love is the result of a journey marked by time, growth, and resilience, so too are natural diamonds, which are formed deep within the Earth over billions of years,” a De Beers representative stated.

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This interview was recorded on October 21, 2024. The transcript has been lightly edited for clarity.

Ollie Williams: What did you talk about? What kind of understanding was reached?

Caitlin Cleveland: There was myself, minister Wawzonek, the premier and minister Macdonald in the meeting, so it was good, because it had kind-of an all hands on deck perspective.

I think it speaks volumes to how important our diamond industry is to the Northwest Territories as well. It was an opportunity for Ekati to really raise the issues that they highlighted in their letter, and for us to to work through them collaboratively together.

Was cabinet surprised to get that letter?

For the last year that I’ve been in this role – or almost a year – it’s not surprising to me to get outreach from industry at all. It’s something that is part of my life on a regular basis, and so I hope all members of industry feel that we live in a part of the world where we welcome involvement and feedback, and want to make sure we’re working as collaboratively as possible.

Sure, but this was a quite a blunt letter. “Government agencies are inflexible to change. The burden placed on the asset is increasing. Should this trend continue, then Burgundy will need to revisit the viability of the Ekati asset and focus on growth elsewhere.” That is quite a critical statement for a mine owner to make. Did they echo that statement in the meeting, and how did you and other ministers address that?

The meeting was fairly collaborative, and they very honestly went through where they’re at right now. And I think what that speaks to is the current state of the commodity market for diamonds. That is putting some serious stress on our diamond mines.

There are a significant number of people in the world who are really focusing on lab-grown diamonds these days, and it’s having a significant impact on diamond markets globally. We know that some of our biggest diamond market purchasers have not recovered post-Covid, and that continues to have an impact on our NWT diamond mines.

I think that pressure – and reaction – is what you are feeling in that letter and in that meeting. And so it was definitely welcome to be able to sit down and to hear their concerns, and then discuss how we can work through them.

How are you going to work through them? There were five or six quite specific supports they requested. With any of the asks Burgundy made, has the GNWT identified ways it can make a difference?

For example, within the diamond royalty valuation, that’s one that falls under ITI. That is a common concern, not just with Burgundy. We have put together a team with representation from all of our diamond mines to sit down and figure out a solution that works for all – a common solution for each of the diamond mines, so they are each getting the same treatment.

The solution can’t be at a cost to the GNWT, for obvious reasons. And then we’ve asked that we get creative with solutions that don’t require regulatory changes, because, as you know, our minerals and land legislation and regulations are co-managed. We want to make sure we can be as responsive as possible.

Burgundy had a request around mine reclamation provisioning, where the company basically said the amounts of money that have to be set aside – or for insurance for the closure of the mine – are too much for a “small, independent mining company” – that’s their phrase – to cope with. Is the GNWT open to doing things differently so the company has to set aside less money for closure?

Our goal is to make sure that our mines continue to produce, that people are continuing to be employed. We definitely acknowledge how much of an investment mines make within our economy on an annual basis. So certainly, we’re willing to have conversations and look and see how creative we can get together.

But ultimately, we need to make sure we’re being responsible to taxpayers in the Northwest Territories and ensuring that the proper amounts for reclamation exist.

The legacy of mining in the Northwest Territories is not a secret to any of us, and we need to ensure we’re protecting the interests of northerners.

How have you left this with Burgundy? What happens next in terms of figuring out where both parties go from here?

Meetings at the official level were booked in to follow up on all of the conversations. This week, all of the diamond mines will be getting together with ITI to specifically discuss solutions for the diamond royalty valuation.

The same thing is happening on the ECC side so we can essentially sit down, put pen to paper and figure out what this looks like going forward, and do some tabletop exercises, if you will, about how to move forward, to make sure that we are all committed to the regulations in place, the laws in place in the Northwest Territories, but ensuring we’re also being responsive to the need to right-size where we’re at.

We want to ensure we’re understanding of where the markets are at right now, because we both, at the end of the day, have the same goals. We want to ensure mining is responsible and sustainable in the Northwest Territories.

We also want to ensure northerners who are employed by these diamond mines continue to work, that contractors who are employed by diamond mines continue to work. That’s a really critical part of our economy in the Northwest Territories.