Edmonton Journal (Alberta), Canada
May 27, 2012 Sunday
Final Edition
Quebec wants cut of gem trade; Most diamond processors have exited N.W.T
BY: Levon Sevunts, Postmedia News; Montreal Gazette
“It was minus 61 degrees when we landed in Yellowknife in 2001, it
took my breath away,” Gevorg Mkhitaryan recalled, his attention
focused on the brilliant gem he inspected through a powerful
magnifying glass.
“I loved it. It was beautiful and so new to me.”
Mkhitaryan was part of a group of about 60 Armenian diamond cutters
and polishers who were brought to the Northwest Territories to work in
Yellowknife’s nascent diamond processing industry.
Under Soviet rule, Armenia was one of the USSR’s main diamond
processing centres and had developed world-class expertise in cutting
and polishing. But after the collapse of the Soviet Union, Armenia
fell on hard times.
With their skills in high demand everywhere from Botswana to Canada,
diamond cutters joined a mass exodus of skilled workers from Armenia.
Almost one-third of the country’s population emigrated in search of
better living conditions.
Mkhitaryan worked in Yellowknife for two years before he returned to
Armenia to get married in 2003.
Three years later, Canada called again. He and 12 other Armenian
diamond cutters were invited to work at a processing plant in Matane,
a small town on Quebec’s Gaspé Peninsula. Matane was hoping to become
the province’s diamond processing capital, but those dreams vanished
in the aftermath of the 2008 financial crisis that devastated parts of
the industry.
The Diarough plant, where Mkhitaryan was working, shut down in 2009,
and he moved his wife and his newborn daughter to Montreal.
Today, he’s one of the five co-owners of Melisende Diamonds Ltd., a
small polishing operation that opened in 2010 with the lofty goal of
becoming a major player in Canada’s emerging diamond processing
industry.
“We want to grow, we want to expand,” Mkhitaryan, 35, said, squinting
into the magnifying glass again.
It’s an industry where big dreams have been dashed many times before.
Canada is a relative newcomer to diamond mining. The first deposits
were discovered near Lac de Gras in the Northwest Territories by two
enterprising geologists, Stewart Blusson and Chuck Fipke, in 1991.
Diamond production at BHP Billiton’s Ekati Mine on Lac de Gras, about
300 kilometres northeast of Yellowknife, started in 1998. In 2003, Rio
Tinto opened its Diavik Mine not far from Ekati. And in 2008, De Beers
opened its first Canadian mine at Snap Lake, about 220 kilometres
northeast of Yellowknife.
The same year, De Beers started commercial diamond production at its
Victor mine, about 90 kilometres from the First Nations community of
Attawapiskat, in northern Ontario.
In less than a decade, Canada was propelled to the diamond mining
major leagues, becoming the world’s third-largest producer, by value,
of rough stones, behind Botswana and Russia.
But Canada has had a much harder time creating a viable diamond
processing industry.
>From the very beginning, Ottawa and the government of Northwest
Territories pushed diamond mines to set aside about 10 per cent of
their output for processing in Yellowknife. The idea seemed simple
enough. With all the attention that conflict or so called “blood”
diamonds were getting in the international media and even in
Hollywood, Canadian authorities saw a marketing opportunity in
offering “ethical” Canadian diamonds.
Experts reckoned that some customers were ready to pay up to 10 or 15
per cent more for Canadian produced diamonds, knowing that no blood
was spilled and no child labour was used in their production. The
government of Northwest Territories even came up with a clever
marketing gimmick, a tiny laser-etched polar bear on diamonds produced
in Yellowknife.
With no indigenous diamond processing workforce, authorities brought
in experienced foreign cutters and polishers to staff the newly opened
factories. Gagik Tamrazyan, Mkhitaryan’s friend and business partner,
was one of them.
“I came to Yellowknife to teach Canadians how to cut and how to work
with diamonds to get the best yield,” Tamrazyan, 39, said over the din
of polishing machines and Armenian pop music blaring in his Montreal
facility.
At their peak, from 2003 to 2006, the four factories that had set up
shop in Yellowknife’s Diamond Row district – Sirius, Arslanyan Cutting
Works, Laurelton and Canada Dene Diamonds – employed about 200 people.
But they had a hard time competing with factories in India and
Thailand that operated at a fraction of the cost, Tamrazyan said.
“The cost of cutting and working in Yellowknife was very high. Spare
parts for the machinery came from Armenia and it took up to three
months for them to get to Yellowknife.”
Bob Bies, a manager at the Arslanyan Cutting Works, said the factory
owners didn’t have deep enough pockets to operate in the cutthroat
diamond business, where they had to pay mining companies millions in
advance while waiting up to six months to be paid by their customers.
One by one, the diamond processing plants in Yellowknife shut down,
leaving dozens of highly qualified cutters without jobs. Today, only
one facility, operated by Crossworks Manufacturing of Vancouver, B.C.,
with barely a dozen Vietnamese workers, continues cutting and
polishing diamonds in Yellowknife.
Crossworks has a much bigger facility in Sudbury, Ont., where it
processes rough diamonds from the Victor Mine.
Thanks to an agreement negotiated between the Ontario government, De
Beers Canada and the Diamond Trading Company, the marketing and
distribution arm of De Beers, Crossworks receives up to 10 per cent of
the Victor Mine rough diamond output. And that’s the model Harry
Ohanessian, president of Melisende Diamonds, wants the government of
Quebec to replicate when the Renard Mine in the James Bay region
becomes operational in 2015.
“The idea is to get rough diamonds from our Quebec mine and to have
them cut here in Quebec, as they have done it in the Northwest
Territories and Ontario,” Ohanessian said.
Renard is owned by the Vancouver-based Stornoway Diamond Corp. and the
province, which holds a 37-per-cent stake in the mine. The mine is a
key part of Premier Jean Charest’s Plan Nord project for the
development of northern Quebec. The province is also planning to spend
$330 million to extend Route 167 to allow all-season access to the
mine.
Ohanessian, 40, believes there is still a lot of demand for Canadian
diamonds and he says he intends to hire the best diamond cutters from
Northwest Territories and Matane plants to not only work at the
Montreal facility but also to train a new generation of diamond
cutters.
“At this moment we have six cutters and one bruter (bruting is the
process of grinding the rough diamond to give it its outline),”
Ohanessian said. “But when the Renard Mine opens up and, hopefully,
the natural resources ministry insists on keeping 10 per cent or any
percentage of diamonds in Quebec, we will definitely increase those
numbers to 18 to 24 cutters.”
These are well-paying jobs, Ohanessian noted, with experienced cutters
making $50,000 to $60,000 a year.
He said he’d also like to see Quebec develop its own process to
certify diamonds produced in the province and create a distinct
marketing logo similar to the polar bear etched on Northwest
Territories diamonds.
“We have also invented a new round diamond cut, which will be even
more brilliant than the HCA (Holloway Cut Advisor) round brilliant
cut,” Ohanessian said proudly.
For now, he and his partners buy their stones from Brazil and Africa.
Each stone they cut is then sent to New York for certification by the
Gemological Institute of America. With their GIA certificates, they’re
sold to jewellers who put them in engagement rings, earrings,
bracelets and necklaces.
By having some of the best cutters in the business, Melisende said
they can compete with the lower-paid diamond cutters in India or
Thailand.
“It’s very simple. In polished diamonds, the value of the diamond is
not in labour, it’s in the cut,” Ohanessian said.
The price of a diamond cut to an “excellent” grade, according to GIA
classification, could be thousands of dollars higher than the price of
a similar gem cut to a “good” grade, more than making up the
difference in wages paid in India vs. Canada, Ohanessian said.
For Mkhitaryan, every rough stone that ends up on his polishing table
is a creative challenge.
“I love this job, I love seeing the light play in the stone and
working the stone, realizing that, thanks to my hands and eyes, I can
achieve an almost perfect symmetry.
“I love giving the diamond its sparkle.”
From: A. Papazian