On the semi-frozen surface of Faraday Lake in Canada's subarctic, two diamond rigs are drilling around the clock. It's spring breakup north of the 63rd parallel, which means the Kennady Diamonds exploration team is running out of time.
"It's starting to candle," says geologist Martina Bezzola, scuffing her rubber boot over the fast-melting ice where vertical tunnels, or "candles," have recently appeared. The thaw means the team has two weeks to extract kimberlite samples from beneath the lake before they're banished to drilling onshore. "Basically it's like sticking a needle into a haystack to determine what's in the haystack."
Twenty-five years after the first diamonds were found in Canada's Northwest Territories, it's still a game of hurry-up-and-wait. For every thousand grassroots exploration projects, only one becomes a mine.
Snap Lake, one of three operating mines in the region, was shuttered by De Beers last year, a casualty of harsh geography and falling diamond prices.
Government attempts to add production value with a cutting industry collapsed years ago; all that remains of "Diamond Row" in the territorial capital Yellowknife is a line of derelict buildings behind barbed wire.
And yet the dream lives on.
At a time when global miners are shedding assets, De Beers is about to open the largest new diamond mine in the world, Gahcho Kué, 280 kilometers (175 miles) northeast of Yellowknife. A little further north, Rio Tinto Group last year found-and just sold-the largest gem-quality diamond ever recorded in North America at its Diavik mine, the 187-carat Foxfire. Dominion Diamond last week agreed to extend the life of the neighboring Ekati mine beyond 2020.
"The return in diamonds is fantastic, but you need the patience of Job,'' says Jonathan Comerford, chairman of Kennady Diamonds, on site at the Kelvin Camp on Faraday Lake to represent the interests of Irish billionaire Dermot Desmond.
Desmond owns almost a quarter of Toronto-based Kennady and 23 percent of its former parent company, Mountain Province Diamonds, which these days is focused on developing Gahcho Kué with De Beers. Canada has a couple of marks in its favor that keep the majors interested amid a grim market, says Kim Truter, chief executive officer of De Beers Canada.
Prices for rough stones have rebounded 10 per cent this year after plunging 44 per cent in the five years ending in January. The country is politically stable and has a long mining history, mitigating the snail's pace at which projects proceed; Gahcho Kué took 21 years to bring into production. And Canada's diamond deposits tend to be predictable, with high concentrations of bridal-quality gems.
Canada produces approximately 10 percent of world diamond output by volume but about 15 percent by value, said Truter, 51. "The price we receive for the diamonds in Canada is actually quite high compared to other regions of the world."
So is the cost to produce them. Gahcho Kué's billion-dollar price tag could have been 30 percent less elsewhere in the world, Truter says. In seven years of operation, Snap Lake never made money, crippled by the costly engineering challenge extracting diamonds from beneath a subarctic lake.
The best way to understand what it takes to mine diamonds in this part of the world is to view it from above. The landscape, for hundreds of miles in all directions, is almost entirely binary: snow-covered rock and too many lakes to count. The temperature ranges from minus 50 degrees Celsius (-58 Fahrenheit), to plus 35 in the summer. Scattered aboriginal communities inhabit the area, along with caribou and grizzlies.
Each winter, mine operators spend three months constructing a 350-kilometer ice road across this terrain. Once the ice is thick enough to support the movement of heavy equipment, a convoy of trucks crawls along at one-kilometer intervals to avoid stressing the ice. This year, the road was open eight weeks before it started to melt. After that, the only way in is by air.
The price we receive for the diamonds in Canada is actually quite high compared to other regions of the world.
Historically, diamonds in Canada have tended to be found by lean and nimble junior exploration companies, although De Beers continues to invest heavily in exploration. Those that go broke scare off future investors, making a benefactor like Ireland's Desmond and his private equity money invaluable.
"Without the support of the Irish we would be up the creek," says Patrick Evans, 60, Mountain Province's CEO and, until this April, also of Kennady. It was Desmond's team that insisted Kennady be spun off to maximize the value of both companies. The Irish billionaire, who made his fortune in software and betting shops, has done well this year with diamonds: Kennady's stock is up about 40 per cent in Toronto. Mountain Province has gained about 60 per cent. Neither company has any revenue.
Evans, Comerford and Kennady's new CEO, Rory Moore, have flown into Kelvin Camp to go over the geological data. It's a spare but cozy operation: two neat rows of red-walled sleep tents surrounded by an electric bear fence. There's also a plywood office, communal washroom (hand sanitizer, no sinks), carb-heavy kitchen and a core shack. The latter is crowded with executives, a handful of camp personnel and Tom McCandless, an independent director of Kennady.
A geologist, McCandless, 61, has been wheelchair-bound since a desert bike accident in 1975. That's never kept him out of the field; he's spent the day gamely wheeling through snow. At frequent intervals Evans and the others step in to lift his chair in and out of buildings, vehicles and aircraft, at one point jury-rigging a sled to drag him through a challenging patch of slush.
Inside, crowded between tables of kimberlite samples and geological maps, this esprit de corps morphs into a friendly debate between McCandless and Moore as they grill Bezzola's fellow geologist David Cox, 31, on the team's progress.
The discussion is technical but the underlying question is clear: could Kelvin Camp be sitting on the kind of deposit De Beers is developing a stone's throw away?
Kelvin Camp is located just up the road from Gahcho Kué (or would be, if there were a road). How Ireland's Desmond came to have a foot in both camps is a story Evans and Comerford never tire of telling.
The area was discovered by Mountain Province in the early '90s. Like most exploration companies, to fund development it ended up in bed with a major, in this case De Beers.
Back in 2005, as Evans recounts it, De Beers was focused on developing Gahcho Kué and balked at paying C$10,000 ($7,600) to extend permits on the surrounding land. "I sat in the meeting and thought: my God, what fools," he said. Mountain Province leapt in to take over the mineral rights for free and when it got around to drilling in 2011, Evans's instinct was validated. "It was clear from the results we were getting that they'd put their holes in the wrong place and we asked the question: what the hell is going on?"
The Mountain Province team tracked down a geologist who solved the mystery: A builder changed the height of the building on which the radio beacon was located without alerting the geologists and the company ended up drilling the wrong coordinates.
It was clear from the results we were getting that they'd put their holes in the wrong place and we asked the question: what the hell is going on?
How Chuck Fipke and Stewart Blusson, two prospectors down to their last nickels, found diamonds in this part of the world back in 1991 is also the stuff of legend. The discovery started a frenzy reminiscent of the 1940s gold rush on which Yellowknife was founded.
Tom Hoefer, executive director of the NWT & Nunavut Chamber of Mines, remembers the heady days well. People mortgaged their houses and every helicopter for miles around was booked, ferrying prospectors to remote areas. Above the tree line, even the wood for the stakes had to be flown in after Yellowknife hardware stores ran out of two-by-fours. Some 50 million acres were staked, he says.
Since then, strong personalities have persevered but also, at times, got in the way of investors, says Comerford. Consolidation makes sense yet has been slow in coming. Rio Tinto's Diavik mine and Dominion's Ekati are on the same lake and Dominion has a 40 per cent interest in Diavik.
"We've been quite public that if they were ever for sale, we're certainly interested," Dominion's CEO Brendan Bell said in an interview. He said it appears "Rio Tinto is committed to the diamond space and the asset isn't for sale."
In a recent interview in New York, Rio Tinto's former head of Diamonds & Minerals, Alan Davies, wouldn't discuss the possibility of consolidation other than to say the company is looking at options to extend Diavik's life beyond 2024.
"For whatever reason, the stars haven't aligned quite yet" for consolidation, says De Beers' Truter. "There's probably a bit of inevitability about it."
Evans agrees but for now he's focused on more nitty-gritty matters. Back at Kelvin Camp, the Hagglunds all-terrain ground vehicle has broken down and a helicopter is being discussed as the best option to ferry the executives to the Twin Otter plane waiting a few hundred meters out on the lake.
"Can't we walk?" Comerford demands impatiently. "Let's just walk."
Given the melting ice, it will mean a stroll through shin-deep water. David Cox looks at him like he's mad. "You can try."