De Beers to flood its subarctic diamond mine

Bloomberg

Anglo American Plc’s De Beers will flood a massive diamond mine located beneath a subarctic lake in Canada’s Northwest Territories after failing to find a buyer.
De Beers will begin inundating tunnels at its Snap Lake mine in early January, it said in a statement distributed recently. In April, it put the site on care and maintenance, saying it would decide whether the mine could be made viable in the next year. The company hired Bank of Montreal as an adviser to sell it, but no agreement could be reached.
The rich diamond deposit beneath Snap Lake is in a remote area 220 kilometers (137 miles) northeast of Yellowknife. Since it opened in 2008, it has never turned a profit, plagued by engineering challenges related to keeping the site dry. It was originally expected to operate until 2028.
Allowing the mine to flood will preserve the mineral resource “until market conditions and improved technical methods make the kimberlite more economic to operate,” De Beers said in the statement. But while reopening the mine in the future might be “theoretically” possible it would be extremely expensive to do so, Paul Gait, an analyst with Sanford C Bernstein said in by telephone from London.
“You’d have to dewater the mine so significant pumping would need to go on,” Gait said. “You’d then have to make sure that the mine was safe and that itself would require significant investment.”
COST SAVINGS
Anglo American has vast underground mining experience, but Snap Lake never produced the quality and volume of stones needed to justify its production costs, Gait said, meaning it’s difficult to imagine anyone else would have more success.
While flooding the mine preserves its option value on paper, the main reason to do it would be to avoid the rehabilitation costs of a full closure, he said. Flooding will also save the company significant care and maintenance costs to keep it dry, he said. Subarctic mining presents vastly different engineering challenges. Temperatures can drop to minus 50 Celsius (minus 58 Fahrenheit) and there are no all-weather roads, meaning access is either by air or, for a few months each year, via costly ice roads built across frozen lakes.
Flooding will take six to eight
weeks, after which 35 people will be involved in the mine’s care and maintenance, De Beers said. An ice road
will be built to bring fuel supplies to the site and to remove some inventory and equipment.
The mine was the first built by
De Beers outside Africa. Earlier this year, De Beers’ opened the largest new diamond mine in the world in the same region.