Study: Diamonds are adding lustre to the Canadian economy

Canada has become a major player in the international diamond scene, according to a new profile of the billion-dollar industry, which is adding lustre to the economy of the Northwest Territories.

From 1998 to 2002, companies have mined about 13.8 million carats of these precious stones of pure carbon, collectively worth $2.8 billion. This is roughly equivalent to a 1.5-kilogram bag of ice each day for five years, with each bag worth $1.5 million.

Recent production data suggest that, by the end of 2003, Canada will have produced almost 15% of the world's supply of diamonds, making it the third largest producer of diamonds, behind Botswana and Russia.

Since 1991, when diamonds were discovered at Point Lake near Lac de Gras in the Northwest Territories, two diamond mines have begun production. A third is expected to be in production in 2005, and a fourth by 2006.

Diamond rush: Dazzling the Northwest Territories economy

Economic output in the Northwest Territories surged ahead 5.1% in 2002, fuelled by the EKATI mine running at full capacity and by construction of the Diavik mine, which neared completion. Diamond mining accounted for just over one-fifth of the Northwest Territories' gross domestic product.

From 1998 to 2001, the number of employees directly involved in diamond mining increased almost seven-fold, from just over 90 to more than 700. More recent figures indicate there are currently about 2,200 jobs related to diamond mining.

The average salary for all workers employed in the diamond mining industry in the Northwest Territories from 1998 to 2001 was $61,639. The average for production employees, those involved in the mining operations, was slightly higher, at $64,336.

These average salaries were roughly 30% higher than for all workers employed in the non-metallic mineral mining and quarrying sector across Canada, and 44% higher than the salaries for production employees in this sector.

From 1998 to 2002, companies invested a total of $2.6 billion in developing Canada's diamond mineral resources. These costs include exploration, capital investment and repair and maintenance expenses.

Investment in diamond mineral resource development represented roughly 12% of all investment in metal and mineral resource development in Canada during this period.

Five million carats in five years

Diamond production has gone from zero to almost five million carats a year in five years. In 2002, carat recovery increased 34% from 2001. This followed a 53% increase the year before.

The value of production has increased accordingly, from zero prior to 1998 to just over $800 million in 2002 alone.

With the opening of the Diavik mine in 2003, there has already been a marked increase in production. In the first six months of 2003, almost 4.2 million carats of diamonds were mined in Canada, just 17% less than the total for 2002.

Not only is Canada rich in rough diamonds, but these rough diamonds are also high-quality. In 2001, the average price per carat for a Canadian-mined diamond was $228. This was the third highest in the world, behind prices for diamonds mined in Namibia and Angola.

The 2003 production data suggest that Canada is poised to become the world's third largest producer of diamonds, producing almost 15% of the world's diamonds by value. This would put Canada just ahead of South Africa, but behind Botswana and Russia.

Trade: From import-driven to export-driven

From 1992 to 1997, Canada's total trade in diamonds - domestic exports plus foreign imports - remained fairly constant, worth on average $197 million a year.

During this time, imports, primarily of gem-quality cut and polished diamonds, were responsible for 93% of the Canadian diamond trade.

This changed in 1998, when Canada began producing and exporting rough diamonds. Since then, exports have been responsible for two-thirds of total diamond trade.

From 1998 to 2002, the trade in diamonds grew at an annual average rate of 44%, reaching almost $1.3 billion in 2002. Almost all this was export-driven. In contrast, the growth of diamond imports has averaged only 5% a year.

During the first six months of 2003, Canada's total trade in diamonds was worth just over $720 million, of which exports accounted for 81%.

The vast majority of exports, about 95%, consist of rough diamonds. In contrast, the vast majority of imports consist of gem-quality cut and polished stones.

Two countries - Belgium and the United Kingdom - are the principal destinations for diamonds from Canada. Most of the world's mined diamonds are sorted and sold through Antwerp and London.

In 2002, imports from Israel, Belgium, the United States and India accounted for 93% of all the diamonds brought into Canada.

The analytical article Diamonds: Adding Lustre to the Canadian Economy (11-621-MIE2004008, free) is now available online in the Analysis in Brief series. From the Our products and services page, under Browse our Internet publications, choose Free, then Trade.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Bruna Santarossa (613-951-0300), International Trade Division.