The Diamond IndustryThe Diamond Industryacross Canadaacross Canada

MontréalMontréal Round Table Round Table 25 May 200525 May 2005

IntroductionIntroduction

�� Many positive developmentsMany positive developments�� Third largest producerThird largest producer

�� Some challengesSome challenges�� Many opportunitiesMany opportunities

Outline of presentationOutline of presentation

�� Evolution of the industryEvolution of the industry�� Since May 2004Since May 2004�� Review the pipelineReview the pipeline�� Parallel segmentsParallel segments

�� ChallengesChallenges�� OpportunitiesOpportunities

ExplorationExploration

�� Close to half of the world explorationClose to half of the world exploration�� Over 190 companiesOver 190 companies�� Over 100 projectsOver 100 projects�� Three territories and six provincesThree territories and six provinces

�� Over 100 million acres Over 100 million acres �� Over $169 million in 2004Over $169 million in 2004

USA

ALASKA

Yellowknife

Edmonton

Vancouver

Whitehorse

Ellesmere Island

Melville Peninsula

Otish MountainsJames bay

Buffalo Hills

Fort a la Corne

Coronation Gulf

Rankin Inlet

MinesMines

�� EkatiEkati�� 5 million carats in 20045 million carats in 2004�� Underground miningUnderground mining�� Koala underground Koala underground

feasibility studyfeasibility study�� ISO 14001ISO 14001�� Top 100 employersTop 100 employers Ekati

Mines (cont’d)Mines (cont’d)�� DiavikDiavik

�� 7.6 million carats 7.6 million carats �� AA--418 dike approval418 dike approval�� Underground feasibilityUnderground feasibility�� ISO 14001 (Environment)ISO 14001 (Environment)�� ISO 9001 (PSF)ISO 9001 (PSF)�� Gold level of PARGold level of PAR�� PDAC E3 National AwardPDAC E3 National Award�� John T. Ryan Safety John T. Ryan Safety

TrophyTrophy

Diavik

ProjectsProjects

�� JerichoJericho�� Snap LakeSnap Lake�� VictorVictor�� Fort Fort à à la la CorneCorne�� Star DiamondStar Diamond�� GahchoGahcho KuKuéé

JerichoJericho

�� TaheraTahera Diamond CorporationDiamond Corporation�� All approvals in placeAll approvals in place�� Construction 2005Construction 2005�� Production early 2006Production early 2006

Tahera

Snap LakeSnap Lake

�� De Beers Board of De Beers Board of Directors approval Directors approval

�� Construction 2005Construction 2005--0606�� Production 2007Production 2007�� Full Production 2008Full Production 2008 De Beers

VictorVictor

�� De BeersDe Beers�� Comprehensive Comprehensive

Study ReportStudy Report�� Construction Construction

20062006--0707�� Production 2008Production 2008 De Beers

Fort à la Fort à la CorneCorne

�� Advanced Exploration and Advanced Exploration and Evaluation PlanEvaluation Plan

�� $25 million$25 million�� Joint partnersJoint partners

�� De BeersDe Beers�� Kensington ResourcesKensington Resources�� CamecoCameco CorporationCorporation�� UEM IncUEM Inc

De Beers

Star DiamondStar Diamond

�� Shore GoldShore Gold�� Fort à la Fort à la CorneCorne

areaarea�� 27,837 27,837 tonnestonnes

bulk samplebulk sample�� PrePre--feasibility feasibility

studystudy

GahchoGahcho KuéKué

�� Joint partnersJoint partners�� De BeersDe Beers�� Mountain Province Mountain Province

Diamonds Inc Diamonds Inc �� Camphor Ventures Camphor Ventures

�� Technical study Technical study �� $25 million$25 million

�� 20122012De Beers

ManufacturingManufacturing�� ArslanianArslanian Cutting WorksCutting Works�� Canada Canada DeneDene DiamondsDiamonds�� Sirius Diamonds N.W.T.Sirius Diamonds N.W.T.�� Laurelton Diamonds Inc. Laurelton Diamonds Inc.

�� HRA InvestmentsHRA Investments�� Les Les Diamants Diamants du Stdu St--

LaurentLaurent�� DiaroughDiarough CanadaCanada

CDC

Jewellery ManufacturingJewellery Manufacturing

�� Solid demandSolid demand�� ManufacturersManufacturers

�� LibmanLibman�� CoronaCorona�� BirksBirks

HRA Investments

Retail Retail

�� In CanadaIn Canada�� Solid demandSolid demand�� AvailabilityAvailability

�� AbroadAbroad�� Attractiveness of Canadian Attractiveness of Canadian

diamondsdiamonds�� Increasing demandIncreasing demand

Code of ConductCode of Conduct

�� Larger membershipLarger membership�� National signatoriesNational signatories�� International signatoriesInternational signatories

�� Endorsed by the Endorsed by the Competition BureauCompetition Bureau

�� Endorsed by CIBJOEndorsed by CIBJO�� Diamond authentication Diamond authentication

standardstandard

SecuritySecurity�� RCMP Diamond Protection ServicesRCMP Diamond Protection Services

�� Customs and Excise BranchCustoms and Excise Branch�� RCMP Forensic laboratoryRCMP Forensic laboratory�� Ontario Provincial PoliceOntario Provincial Police�� CSIS ReportCSIS Report

�� No penetrationNo penetration�� Risk is presentRisk is present

�� Canadian Diamond Security GroupCanadian Diamond Security Group�� Risk analysisRisk analysis�� Exchange of best practicesExchange of best practices

�� Security companiesSecurity companies

LaboratoriesLaboratories

�� Exploration samplesExploration samples�� Saskatchewan Research LaboratorySaskatchewan Research Laboratory�� SGS Lakefield ResearchSGS Lakefield Research

�� CertificationCertification�� International Gemological InstituteInternational Gemological Institute�� European Gemmological LaboratoryEuropean Gemmological Laboratory�� GemscanGemscan International IncInternational Inc�� Harold Weinstein LtdHarold Weinstein Ltd EGL

ResearchResearch�� UniversitiesUniversities

�� University of AlbertaUniversity of Alberta�� University of British ColumbiaUniversity of British Columbia

�� LaboratoriesLaboratories�� Saskatchewan Research CouncilSaskatchewan Research Council�� EGLEGL

�� Diamond fingerprintingDiamond fingerprinting

U of A

PublicationsPublications

�� Canadian DiamondsCanadian Diamonds�� 5,0005,000�� Governments, Governments,

IndustryIndustry�� InternationalInternational

�� United StatesUnited States�� JapanJapan�� BelgiumBelgium�� EnglandEngland�� South AfricaSouth Africa

Canadian Diamonds

StudiesStudies

�� Indian and Northern Affairs CanadaIndian and Northern Affairs Canada�� Knowledge Based Study of Canada’s Knowledge Based Study of Canada’s

Diamond IndustryDiamond Industry�� Canadian Diamond Council CorporationCanadian Diamond Council Corporation

�� Human Resources Industry wideHuman Resources Industry wide ScopingScopingand Scanning Studyand Scanning Study

�� GNWTGNWT�� Diamond tourismDiamond tourism

TrendsTrends

�� Vertical integrationVertical integration�� AberAber Diamond Diamond

Corporation/WinstonCorporation/Winston�� Tiffany/Tiffany/TaheraTahera Diamond Diamond

CorporationCorporation�� BHPBHP Billiton CanadaMarkBilliton CanadaMark

�� BrandingBranding�� Polar bearPolar bear�� TundraTundra�� CanadiaCanadia

�� CertificationCertification

OrganizationsOrganizations

�� Canadian Diamond Council CorporationCanadian Diamond Council Corporation�� Canadian Diamond Manufacturers Canadian Diamond Manufacturers

AssociationAssociation�� Canadian Diamond Code CommitteeCanadian Diamond Code Committee�� Centre canadienCentre canadien de valorization du de valorization du

diamantdiamant

Government initiativesGovernment initiatives

�� Kimberley ProcessKimberley Process�� Action Plan Approval by Premiers July 2004Action Plan Approval by Premiers July 2004�� GNWT officialGNWT official--mark licensing guidelines mark licensing guidelines

promulgatedpromulgated�� Québec Québec Strategy on diamondsStrategy on diamonds�� Excise tax gradual eliminationExcise tax gradual elimination

�� Private member billPrivate member bill

Human resourcesHuman resources

�� EmploymentEmployment�� Primary and secondary industriesPrimary and secondary industries

�� TrainingTraining�� Primary and secondary industriesPrimary and secondary industries

�� Business opportunitiesBusiness opportunities�� Capital and operatingCapital and operating

Challenges facing the industryChallenges facing the industry

�� ExplorationExploration�� MiningMining�� ManufacturingManufacturing�� JewelleryJewellery manufacturingmanufacturing�� RetailRetail�� SecuritySecurity

ExplorationExploration

�� Limited northernLimited northern geosciencegeoscience�� Challenging regulatory Challenging regulatory

environmentenvironment�� Limited infrastructureLimited infrastructure�� Land accessLand access�� Tax environmentTax environment

�� Federal flowFederal flow--through through shares on permanent basisshares on permanent basis

Fugro

MinesMines

�� Regulatory environmentRegulatory environment�� Limited infrastructureLimited infrastructure�� ManpowerManpower

�� CapacityCapacity�� Aboriginal participation Aboriginal participation

objectivesobjectives�� Taxation regime Taxation regime

�� Canadian Exploration ExpensesCanadian Exploration Expenses�� Performance requirementsPerformance requirements

�� Marketing of roughMarketing of rough

Ekati

Diamond ManufacturingDiamond Manufacturing

�� Human resourcesHuman resources�� Immigration Immigration �� TrainingTraining�� RetentionRetention

�� AutomationAutomation�� National National

CertificationCertification HRA Investments

Jewellery productionJewellery production

�� “Definition” of a Canadian diamond“Definition” of a Canadian diamond�� The The Canadian DiamondCanadian Diamond officialofficial--markmark�� Certification of small diamonds mined in Certification of small diamonds mined in

CanadaCanada

RetailRetail

�� “Definition” of a Canadian diamond“Definition” of a Canadian diamond�� ConfusionConfusion�� UncertaintyUncertainty

�� The The Canadian DiamondCanadian Diamond officialofficial--markmark�� Certification of small diamonds mined in CanadaCertification of small diamonds mined in Canada

�� Workable solution neededWorkable solution needed�� Consumer ConfidenceConsumer Confidence

�� ManMan--made diamondsmade diamonds�� Treated diamondsTreated diamonds�� CertificationCertification

SecuritySecurity

�� Industry growing without increasing the Industry growing without increasing the resources of law enforcement agenciesresources of law enforcement agencies�� Industry has doubledIndustry has doubled�� Five mines by 2008Five mines by 2008�� Visibility increasesVisibility increases�� Vulnerability increasesVulnerability increases

Industry wide issuesIndustry wide issues

�� “Definition” of a Canadian diamond“Definition” of a Canadian diamond�� Clear consensus requiredClear consensus required�� Code of ConductCode of Conduct�� Mined in CanadaMined in Canada

�� Canadian DiamondCanadian Diamond officialofficial--mark mark �� Promulgated in 2004Promulgated in 2004�� Uncertainty and burdenUncertainty and burden�� Guidelines March 2005Guidelines March 2005

Federal government participationFederal government participation

�� Limited participationLimited participation�� Areas of responsibilitiesAreas of responsibilities�� Maximize synergyMaximize synergy

OpportunitiesOpportunities�� Superb geologySuperb geology�� Characteristics of diamonds mined in CanadaCharacteristics of diamonds mined in Canada

�� Exotic locationExotic location�� Environmental recordEnvironmental record�� SocioSocio--economic recordeconomic record

�� Growing local and world diamond demandGrowing local and world diamond demand�� Supplier of ChoiceSupplier of Choice�� India and ChinaIndia and China�� World economyWorld economy

�� Potential SynergyPotential Synergy�� WinWin--winwin--winwin

ConclusionConclusion

�� Much has progressedMuch has progressed�� Challenges remainChallenges remain�� Great opportunitiesGreat opportunities

RTD