The federal department of Aboriginal Affairs and Northern Development has approved an eight-year water licence for the Jericho diamond mine in Nunavut.
The mine, which is about 360 kilometres south of Cambridge Bay, closed in 2008.
Shear Diamonds then bought the property and wants to reopen the mine. The company's CEO Julie Lassonde said the water licence will help them do that.
"It really is a monumental step towards putting Jericho back into production," she said. "It's extremely important."
Lassonde said the company hopes to have the mine back into production by June 2013.
Jericho was Nunavut's first working diamond mine. It operated for just two years before financial problems forced its closure in 2008.