What happens if the N.W.T.'s diamond mines close early?

The N.W.T. Has been tonic for its adamant mines to come together for years, but recent announcements from 2 of the iii remaining players point to the possibility that it might all come to an end sooner than expected.

Mountain Province Diamonds and De Beers, joint partners in the Gahcho Kué mine, announced last week that a planned expansion for the mine was on hold due to bad market conditions for diamonds, while Mountain Province owed its partner $49 million dollars.

Meanwhile, Ekati diamond mine received a relief loan from the federal government in December, but Burgundy Diamond Mines CEO Jeremy King said at the time if diamond prices did not rebound in the next six to 12 months, the mine may require further funding to avoid bankruptcy. 

Ekati has up until now been slated to close in 2029, and Gahcho Kué in 2031, and new dates have not been announced for either.

"For years we looked at the early closure of the diamond mines as our worst case scenario and probably ignored it a little bit more than we should have," said Graeme Clinton, an economist at Impact Economics in Yellowknife. 

Early closures would be challenging for the territory's labour force, and stress the need to diversify the territory's economy, according to some with knowledge of the industry.

Clinton said if both Ekati and Gahcho Kué were to close within a year of one another in the next two years, for example, "it would be significantly more challenging" than dealing with the mines’ currently planned closure dates.

He said that could mean going from a few hundred people losing their jobs and looking for work at the same time to over 1000 people. 

"Our economy's ability to absorb that volume of available labour becomes more tenuous," he said.

The risk, he said, is that it increases the likelihood of people leaving the territory, leading to a smaller population.

Such an exodus would affect "everything from housing to public infrastructure to government revenues," he said. 

In an interview following the announcement that Gahcho Kué's expansion was now on hold, Industry minister Caitlin Cleveland said if the mine did have to close early, the biggest impact on the territory's economic outlook would be on payroll taxes — if residents end up working lower-paying jobs.

She said this was a "huge concern" for access to meaningful employment in the N.W.T., and that the government is working hard to attract new mining projects.

Cleveland said that the impending closure of diamond mines, whether it happens on time or ahead of schedule, show the importance of diversifying the territory’s economy. 

She said that would require diversifying which regions the projects are in, and what types or resources and commodities they extract.

She said it also involves investing in the right strategic infrastructure, like roads and energy, to support more diverse projects — and that it’s what she hears most commonly when travelling to conferences to attract investment. 

This tracks with what the N.W.T. And Nunavut Chamber of Mines has been hearing, according to executive director Karen Costello.

She said more infrastructure "would definitely be an enabler for future projects."

"But it’s part of a mix," she said. 

She highlighted that the N.W.T. Is a high cost jurisdiction for prospective miners on the international and even domestic stage, which makes it harder to be competitive. 

She pointed to a tax credit on mineral exploration and the finalization of the N.W.T.'s new mining legislation as other factors that could make the territory more attractive.

Cleveland said there are also "exciting things to come" for the territory by way of federal defence investments, which she expects will play a significant role in the territory’s next economic chapter.

Clinton said if military spending increases, it would benefit the territory, but cautioned against becoming complacent as the territory enters a period of reliance on federal investments to keep the economy afloat.

"In my view, we have to continue to be vigilant around growing and supporting a strong and vibrant private sector," he said. 

He said there will still be demand for jobs from the Giant Mine remediation, from military spending, and from clean up activities in Norman Wells following Imperial Oil’s closure. 

"There are things that will take place that are opportunities," he said. "It's just how we navigate between our current very robust active economy into what we’ll see in five or ten years from now, and how we manage that."

Reporter/Editor

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