Canadian Diamond Market Overview

Canada is a recent entrant into the club of diamond producing nations and has redefined the organization, stepping almost immediately into the number 3 spot in terms of value. In 2005, Canada produced 12 million carats of diamonds with a value of $1.663 Billion CDN. Canada is currently ranked sixth in the world in diamond output based on volume and third in the world in terms of value.

Canada's diamond production reached 11.2 million carats with a total value of $1.3 billion in 2003, well above the country's 2002 production level of 4.9 million carats worth just over $600 million.

There are currently two operational mines in Canada, the Diavik and Ekati mines. However, a third mine, the Jericho mine, came online in the spring of 2006 and two additional mines will be fully operational within the next two to three years:

Victor Project

Snap Lake Project

These three new mines are expected to produce an additional three million carats of high value diamonds and continue the long-term growth of the Canadian diamond market. Tiffany & Co. has already signed up to purchase the entire production from the Jericho project for their own requirements and they have agreed to sell the balance into the international market.

With the announcement that Aber Diamond Corporation has taken a controlling interest in Harry Winston's jewelers, Canadian companies are continuing to become major players in the international diamond market through integration.

Why Canada is an Important Diamond Producer?

It has long been known that when a mining company discovers diamonds, their share price will grow significantly. However, investors have had difficulty investing in diamond companies because privately held De beers used to control over 80 % of supply and new diamond discoveries in the 20th century were in areas of turmoil, such as Congo and Angola.

Canada offers investors the chance to profit from the enormous growth of the diamond industry while enjoying the stability and peace of an established democracy.

Political Stability

Unlike Africa and Russia, where corruption is rampant and corporate oversight is minimal, companies in Canada are held to comparatively high levels of accountability and are subject to strict environmental regulations.

The high standards, in turn, have earned Canadian diamonds a reputation for being "ethically clean," standing in stark contrast to African gems, which continue to be sullied by the specter of child labor, and by blood diamonds -the illicit gems used to finance murderous civil wars in Congo and Sierra Leone.

Profitability

Canadian mines are amongst the most profitable diamond mining ventures in the world. Bloomberg news recently reported that every $1 dollar of sales from the Ekati mine in the Northwest Territories results in 56 cents of profits.

The Diavik mine is even more profitable, with a gross operating margin of eighty-two percent, say analysts, compared to less than ten percent for a base metal mine.

Pricing

Canadian rough tends to have much better colour and buyers for these goods are plentiful. That is why Canadian rough is more expensive than De Beers. Buyers like the fact that there are few surprises.

Canada created a certificate of authenticity that guarantees its diamonds have been mined, cut, and polished locally. To date it has spent millions marketing the merits of its trademark "Canadian Arctic Diamonds" in the U.S., Europe, and Japan.

Canada has a consistent supply of good quality rough at a time when major sources of supply are dwindling. This means that as demand for diamonds increases, it is expected that Canadian diamonds will continue to garner premium prices.

Efficiency

The ratio of diamond-producing kimberlites is also much higher in Canada. It has been reported that 3.1 % of the 540 kimberlites found in Canada prior to 2003 were worth mining. By comparison, only 0.7 % of the 6395 kimberlites found across the globe were worth mining. That means Canadian mines are four times more likely to be successful.

Canada's Future Role in the Diamond Market

With the diamond mines in Russia and the Argyle mine in Australia reaching their productive limits, many in the internaational diamond community are looking to Canada to keep the global supply steady. With two new mines coming on line in Canada over the next three years and critical areas of discovery in Nunavut, Quebec, Saskatchewan, Northwest Territories and Ontario continuing to see hundreds of millions of dollars annually in exploration expenditures, Canada is forecasted to become the most important diamond-producing country in the world over the next twenty years and may be relied on to be the country to fill the estimated future production gap.