Diamond in the rough: Yellowknife-based diamond company looks to succeed where others have failed
Diamonds de Canada recently granted Approved NWT Diamond Manufacturer status from the territory
Starting next week, Yellowknife-based Diamonds de Canada will ship its first batch of cut and polished diamonds down south to Las Vegas for grading before heading off to market.
It's the first of what the company hopes will be many shipments as it looks to do something so many others have failed at — establish a viable diamond cutting and polishing operation in the Northwest Territories.
"You cannot compete with India and China on a per carat basis doing it the conventional way," says Benjamin King, the interim CEO of Diamonds de Canada.
"Our philosophy and the core of our business is to integrate technology that gives us a competitive parity with India and China."
That means a smaller labour pool and more specialized training on "very high tech equipment" flown in from all over the world, King said. So far, the company has invested north of $3 million U.S.
King said the company has hired three people locally and plans to add more on the marketing side.
The company will use an automated cutting and shaping system, according to an Aug. 25 release from the government of the Northwest Territories, "that will minimize the company's footprint while allowing it to be on par with some of the world's most advanced manufacturers."
King wouldn't reveal where exactly the work is going on. It's not however, in Yellowknife's notorious Diamond Row near the airport where cutters and polishers like Laurelton Diamonds and Arslanian Cutting Works have tried and failed to make a go of it over the years.
"We looked at those buildings. It just didn't quite fit the blueprint of what we needed from our technology and accessibility type of setup," he said.
Diamond in the rough
Diamonds de Canada recently became an Approved NWT Diamond Manufacturer, the second company to do so in the territory after Almod Diamonds. The designation allows the companies to access rough diamonds directly from mines operating in the territory.
Typically, in order to access rough diamonds, you need to be a steady customer of some of the largest producers in the world, according to diamond expert Pierre Leblanc.
That means spending millions of dollars on rough diamonds usually sold en-mass in Antwerp before they're flown to India to be cut and polished.
But in Diamonds de Canada's case, it's able to get them directly from the mines — up to 10 per cent of the total volume the mines are eligible for beneficiation, according to King.
'Tough place to do business'
The main reason why other cut and polish companies have failed comes down to labour costs, says Tom Hoefer, the executive director of the NWT & Nunavut Chamber of Mines.
"It's been a tough place to do business in the past simply because the Northwest Territories couldn't compete very well with its costs," Hoefer said. "Under the new model and perhaps with new technologies, hopefully these new manufacturers can make a go of it."
The new model allows Approved NWT Diamond Manufacturers to not only access rough diamonds but to export more than half of what it procures under certain conditions to be cut and polished elsewhere.
But King said Diamonds de Canada has made a commitment to cut and polish 100 per cent of its diamonds in Yellowknife.
After that, the diamonds will be sent for grading. King says that will typically happen at the American Gem Society in Las Vegas. From there, the diamonds will be sent to the company's New York office, which will then sell to retailers and wholesalers, both in Canada and the United States.
Little room for error
The diamond cutting and polishing industry has thin margins, somewhere between two to five per cent, according to Leblanc.
That's why he says for the business to be successful it will need to rely on the use of technology as much as possible to reduce the cost of labour, as well as reduce the number of errors that are made on diamonds.
"If any of your business model elements are weak, you will end up losing money and eventually exiting the Northwest Territories like many have done in the past," he said.
King though is not dissuaded.
"Our goal is to cut the most beautifully cut diamonds from the most beautiful country and give it its best version of itself, telling the story of the land that it comes from."