March 22, 2006

Closure of Canada Arctic ice road hits De Beers

By Rachelle Younglai

TORONTO (Reuters) - The closure of an ice road over frozen
lakes in Canada's Arctic will have "significant implications"
for two of South African diamond giant De Beers' projects in
the country, the company said on Wednesday.

De Beers and other diamond companies depended on the road
to ship crucial supplies to their remote mining sites in the
Northwest Territories and Nunavut territory.

But unseasonably warm temperatures have melted parts of the
road, making it unsafe for loaded trucks and forcing the road's
operators to shut it down on Wednesday.

Mining sites now face shortages of fuel, equipment and
explosives until the winter road opens again next season.

For De Beers, there is more at stake than a fuel shortage.
About 600 of the 2,200 truckloads of material that it had
intended to transport did not make it to its two diamond
projects in the Northwest Territories.

"Part of these loads include accommodation for 200
construction workers, and obviously if you can't accommodate
200 people, that means fewer people on site and slower
progress," said Linda Dorrington, a spokeswoman for De Beers

"There are certain things that are too heavy a load to be
flown in, so there are some things which won't get to site
probably. There are others which can be flown in, but that will
add to the cost."

De Beers had expected its Snap Lake mine to start producing
in 2007. Dorrington said it is too early to say whether that is
still feasible.

As for its Gahcho Kue project, about 90 km east of Snap
Lake and in early stages of development, Dorrington said
further drilling might be affected.


The ice road's operators said they may consider reopening
the road if the weather turns cold and ice conditions improve
before March 25.

"The weather forecast isn't good. It's for more warm
weather, which doesn't bode well," said Tom Hoefer, a spokesman
for the Diavik diamond mine, which is owned by Aber Diamond
Corp. and Rio Tinto Plc.

So far, about 7,200 truckloads of fuel, explosives,
construction supplies and equipment have traveled across the
ice road, which is about 570 km long. Operators had projected
more than 9,000 truckloads for the season.

At Tahera Diamond Corp., chief executive Peter Gillin said
his company remains on track to reach full production next
month at its one and only diamond mine, Jericho, in Nunavut.

The mine site has received 60 percent of its planned loads,
including more than half of its planned fuel supply. It said it
has 6 million liters of fuel on site.

"We will have to trim back some capital expenditures, mine
development, in order to conserve on fuel," Gillin told

Jericho is Canada's third diamond mine and is forecast to
produce around 500,000 carats a year once operating at full

As for the much larger Diavik mine, Hoefer said that the
goal is to maintain operations and production.

"We have a lot of things going on in the site, so what we
will need to do is strategize how we are going to do that," he
said, noting that operators will examine fuel conservation as
well as the timing of projects.

Diavik produced about 8 million carats last year, and
several capital projects are under way, including the building
of a second dyke to access a third ore body.

Aber said the mine has about 44 million liters of diesel
fuel on site, sufficient for about 10 or 11 months of
operation. It said critical loads that exceed size limitations
for air transport already have been hauled to site with the
exception of 10 truckloads of excavation and dyke-construction

($1=$1.16 Canadian)