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Considering the Costs of Canada's Diamonds

Posted by on Friday, February 25, 2011

Photo: Swamibu/flickr

"Diamonds are a girl’s best friend," Marilyn Monroe famously sang in the 1953 classic Gentlemen Prefer Blondes. But are they friends to Canadians too?

Last week a Canadian diamond named the Ekati Spirit sold at auction for a record $6 million. The cherry-sized, 78-carat rock’s exceptional clarity, carats and colour surpassed that of the previous record holder which sold for $1.2 million just a few years ago. It wasn't disclosed whether the Spirit's buyer was male or female, but somewhere in the world a girl has a new best friend.

Earlier this month, DeBeers got the green light to open a new mine located roughly 300 kilometres northeast of Yellowknife on the shore of Kennady Lake. Estimates say that the $600 million Gahcho Kue project could start production in 2014. Yet since the kimberlite (ancient underground magma) that holds the diamonds is actually located under the lake, the plan is to lower the water level in some spots and completely drain the lake in others. This overhaul of the natural landscape is fueling concerns that the diamond business is not as clean-cut as the stones they produce.

Canada’s diamond industry was launched from a standstill in the late 1990s after the discovery of one of the gems at Point Lake, NWT. Since then, the industry has surged and Canada now produces 15 percent of the world’s diamond supply and is the third largest producer of diamonds after Botswana and Russia. Between 1998 and 2002, 13.8 million carats worth $2.8 billion have been mined in Canada. "This is roughly a 1.5-kilogram bag of ice each day for five years, with each bag worth 1.5 million," reports Statistics Canada.

Diamond mining has also led to a marked increase in Northern jobs. And these positions are more than just stints, but long-term posts. Nearly a third of these jobs are held by aboriginals and average salaries hover around $63,000. The mining has come to account for almost half of the North West Territory's GDP, according to Deb Archibald, director of minerals, oil and gas at the NWT industry ministry.

However, both open-pit and underground mines present significant environmental impacts. Issues such as destruction or loss of habitat, water contamination, excessive waste (rock, soil etc…) and the possibility of heavy metals or toxins leeching into the water table are ever-present factors. In the case of the new Gahcho Rue mine, the displacement of the caribou habitat and migration paths are of great concern.

In response to these threats, First Nations groups set up an independent watchdog organization to protect against environmental damages at the Ekati mine. In 2004, they reported an increase in chemicals in the surrounding lakes and a total habitat loss of 19.7 square kilometres, an area double the size of Yellowknife. And the mine was also in the migratory path of the largest caribou herd in Canada.

The open-pit Victor Mine in the James Bay Lowlands of Northern Ontario produces some 600,000 carats of diamonds every year. It also produces 2.5 million tonnes of processed waste rock every year and pumps 40 Olympic sized pools of salt-water into the Attawapiskat River every day.

Is it worth it?
Diamond companies have laid claim to over 70 million acres of land across Nunavut and the Northwest Territories - an area larger than the UK or New Zealand.

It costs only 10 cents per acre to stake a claim. The two major players in Canada’s North are Ekati, a subsidiary of Australia’s BHP Billiton (of Potash infamy) and Diavik, a branch of UK based Rio-Tinto PLC.

Although the Ekati Spirit diamond is an excellent example of the natural riches we are fortunate enough to possess, the toll on the land is extremely high. So is the $6 million dollar diamond worth the cost of environmental degradation?

  Comments (2)

Maybe the question should be: why are diamonds so valuable? After all, with relatively few practical applications, their value depends mostly on their value as a status symbol. We live in an age of abundance. Wouldn't it be better if we spent those 6 million dollars on the things we know bring about genuine happiness: social relationships, connection with nature, health....

Still, given that people are, for the time being, willing to pay such high amounts for diamonds, then I see it as relatively benign, and potentially a benefical thing; a voluntary form of wealth redistribution. You're taking billions of dollars from silly rich people--worldwide--and reinvesting it in Canada. In particular, in a community that has been historically disadvantaged.

While the environmental effects of a mine seem huge locally, they probably represent a much lower impact, per dollar earned, than most other forms of economic activity. How many acres of farmland--with attendant habitat loss, water diversion and fossil fuel use--would be required to produce the same economic returns? How about forestry? I'm no expert, but I would think that mining, assuming that best practices are observed, has a small footprint relative to other economic activities.

It all depends on how the proceeds are handled. Are the economic benefits being returned to the community broadly and equitably? (The same question applies whether the distribution occurs through socialism ie. redistribution, or capitalism ie. trickle down.) Are the environmental impacts being fully mitigated, at the expense of the company? Through royalties and higher tax revenues, we could potentially fund national parks and other conservation initiatives to a greater amount than the impact of the mine itself.

In other words: because of the ridiculous premium people (with more money than sense) are willing to pay for a meaningless status symbol, we could wind up with a net benefit for our wildspaces and human welfare. Call it voluntary redistribution, or a tax on vanity. If we're smart, we could make this work for our benefit.

Submitted by ESJC on Wednesday, March 16, 2011

I luv diamonds

and minecraft

Submitted by Bruh on Wednesday, May 25, 2016

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