As Indigenous leaders and northern workers absorb the shock of this week’s layoffs at Ekati Diamond Mine in the Northwest Territories, industry observers say the scaling back of operations at Ekati is indicative of challenges facing the diamond industry.
Dene National Chief George Mackenzie said the job losses are going to affect Tłı̨chǫ communities “big time.”
“Some of the workers there have worked there almost 30 years,” said Mackenzie, who is also a former Tłı̨chǫ grand chief. “They have bills, and they have to look after their family, and to be out of work is going to be a huge effect on our community, in our region.”
Ekati owner Burgundy Diamond Mines announced Wednesday that it was suspending open pit operations at Ekati and laying off “several hundred employees and contractors.” The company is still mining at the Misery underground site.
The Yellowknives Dene First Nation (YKDFN) Chief of Dettah said he was “very surprised and disappointed” by the layoffs.
“We have a number of members that worked at Ekati for years and years, and I hope that each one of them will be given a fair treatment with their seniority,” said Chief Ernest Betsina.
Neither Betsina nor Mackenzie could say exactly how many YKDFN or Tłı̨chǫ citizens lost their jobs. Betsina said that for those affected, he’s going to work to ensure they get “the right payout for how many years they’ve been serving” at Ekati.
Johnny McKinney is the regional vice president of the Kimberlite Division for the Union of Northern Workers (UNW). UNW represents about 400 workers at Ekati.
He said UNW was told that around 160 of its members were laid off, but the union has yet to see an official list.
Not all those workers are necessarily northern.
“What we have been ensured of is that through the process of selecting the laid off individuals that they are considering all the IBA (Impact Benefit Agreements) agreements and really keeping in mind trying to keep the Northern numbers up,” said McKinney.
Union members are feeling a full spectrum of emotions, said McKinney: confused, sad, upset, angry, indifferent and disappointed.
He said any worker who was given less than a two-week notice will get two weeks of pay. Laid off workers will be on “recall” for the next 12 months, meaning they don’t get severance pay because they can be called back to work within that period.
But Burgundy hasn’t offered the union a timeline.
“All they’ve really given us is once the diamond prices rebound, and once there’s an increased cash flow, and all these other things that they’re looking at, once that happens then they will be recalling,” said McKinney.
He noted that so far Burgundy appears to be complying with their collective agreement.
‘Mining is a very difficult business’
Industry watchers were less shocked by news that Burgundy was pausing mining at Ekati’s Point Lake open pit, which went into production earlier this year.
Paul Zimnisky, an independent diamond industry analyst based in New Jersey, said several factors likely led the company to downsize operations.
The diamond market has been weak for more than two years, with prices down 10 to 30 per cent from all-time highs in early 2022, he said.
What’s more, said Zimnisky, demand for diamonds in China – the second largest consumer after the US – was down as much as 50 per cent last year. Competition from lab-grown diamonds also continues to put pressure on the natural diamond market.
“So those three factors combined have led to this elongated crisis the last few years,” he said.
Ekati is Canada’s first diamond mine – production began there in 1998 – and Zimnisky said it becomes harder to make mines economical as they age.
Typically, he said, a company will mine their most profitable sources early on so they can pay back debt and costs from building their mine. Over time, the company will look for other opportunities to continue production, “but the economics could get more challenging.”
He said Point Lake was one of the first economic diamond-bearing kimberlites discovered in Canada, but it was one of the last to go into production, which suggests it wasn’t as favourable as other deposits at Ekati.
Zimnisky took a dim view of Point Lake’s future.
It’s possible Burgundy will resume mining there if diamond prices recover, he said, but it will be difficult to maintain equipment and rehire all those workers.
“Mining is a very difficult business and I think this is an example of that,” he said.
Karen Costello, executive director of the Northwest Territories and Nunavut Chamber of Mines, said the situation at Ekati is a “true reflection” of pressures diamond miners are facing amid low prices, increased costs and challenges related to U.S. tariffs.
But she’s encouraged by private N.W.T. company Arctic Blue Diamond’s recent acquisition of a controlling interest in the WO Diamond Project. The project includes eight mining leases about 23 kilometres from Diavik Diamond Mine and 53 kilometres from Ekati.
In an update Friday, Burgundy said it plans to release a “pre-feasibility study on the proposed development of Fox underground as a long-term project.” It described Fox as a “high value per carat deposit” that was last mined in 2014.
The company plans to release a new mine plan by the end of July.
