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Closure of Canada Arctic ice road hits De Beers

Posted on: Wednesday, 22 March 2006, 20:19 CST

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 Canada.

"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.

WARM WEATHER LOOMS

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 Reuters.

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

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 components.

($1=$1.16 Canadian)

Source: REUTERS

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