The N.W.T. government says it's not giving up on the secondary diamond industry despite the fact it is now selling two polishing plants.
Last fall, the government looked near and far for companies interested in reviving the abandoned factories, but says none of the potential buyers had the right combination of experience and a business plan to become N.W.T. diamond manufacturers.
With the sale, the government is now trying to recoup some of the money it has spent since the late 90s in an attempt to develop the secondary industry.
"It's perhaps and expensive way to learn a lesson," said Pietro de Bastiani, the director of diamonds for the territory.
"But it was, in fact, the only way we would have our foot in the door to understand the value of a very, very particular mineral that is mined in our backyard. And I believe those lessons are going to serve us very well."
Industry experts point to high operation and labour costs as some of the biggest challenges.
Government not giving up on secondary industry
David Ramsay, the territory’s Minister of Industry, Tourism and Investment, says the government isn't giving up on developing the secondary diamond industry.
He says 15 per cent of the world’s diamond production happens in the Northwest Territories. He said if the government offers higher quality diamonds to N.W.T.-approved manufacturers, it will offset high operation costs.
"I don't believe we are wasting money on it. I believe we do have a chance to be successful in this area and we have seen some growing pains, but we aren't providing loan guarantees any more – some of the companies we are talking to feel it’s important for them to be in areas of the world that produce diamonds. We have that going for us," said Ramsay.
Only one polishing plant left in the N.W.T.
The buildings are on the market for $900,000 each.
Ramsay says he's optimistic that when the right operator comes along, more diamond polishing factories will open in Yellowknife.
Today, only one polishing plant – Crossworks Manufacturing – is still cutting diamonds.
de Bastiani says they're looking internationally for buyers but haven't found the right company.
"We previously had companies approach us that were interested in access to rough [diamonds] and established a business and tried to build their business model on the basis of an N.W.T. operation," said de Bastiani. "Now I think the wisdom is you look at companies that have proven that they can go into producing country like Botswana, Namibia and other places that have a global operation and marketing and so forth, and that see the value in the N.W.T. brand."
Marketing plays strong role
Harry Winston CEO Bob Gannicott says marketing is also key for success.
"Marketing a Canadian diamond brand well enough to be able to obtain that premium - that's not an easy thing to do. You know, Harry Winston spends $40 million on marketing in order to keep our brand at the forefront," said Gannicott.
Right now the territory is in talks with five companies. No one has bought the diamond polishing plants yet, but Ramsay says there is interest generally in manufacturing in Yellowknife.