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In many respects, it is men and women who comprise Canada’s diamond exploration community that have provided the fuel that powered the growth of a producing countries that, in little more than a decade, raced into the list of the top five diamond miners.

 
Twenty years back, Canada rarely required mention as a producer of rough diamonds. Indeed, its first diamond mining operation only came on stream in 1998, at the Ekati diamond mine in Canada’s Northwest Territories (NWT). Then, with the start of operations at the Diavik mine in 2003, the country rapidly established itself as a major producer of rough diamonds.
 
By the end of 2003, Canada had already become the world's third-largest producer of diamonds, providing 15 percent of the world's supply. The top two diamond producers are Botswana and Russia.
 
Canada's development as a diamond power is all the more remarkable given the extremely inhospitable weather conditions which allow road transport in the diamond-rich northern areas to operate for little more than six weeks per year.
 
One of the most intriguing junior diamond exploration firms at work in the country is Stornoway Diamonds, which has 12 properties scattered across the vast country. Stornoway Diamond Corporation was formed in July 2003 through a merger between Stornoway Ventures and Northern Empire Minerals. The company merged with Contact Diamond and Ashton Mining of Canada in 2007 and presently has interests in more than 6.6 million acres of prospective diamond properties situated in northern Canada.
 
Stornaway is involved in the discovery of over 200 kimberlites in seven Canadian diamond districts. Its most advanced operation is the Renard project which the firm aims to turn into Quebec's first diamond mine in 2013 and whose development has been aided by the state government agreeing to pay $700 million towards the construction of a road into the Otish mountains area where the project is located. The road is critical to the viability of the Renard project, which is at the pre-feasibility stage and which the company estimates could contain up to around 21 million carats.
 
Indeed, Stornoway clearly has high hopes for the Renard mine, according to executive chairman Eira Thomas who has an excellent pedigree when it comes to diamond exploration. She served as a geologist with Aber Resources Ltd. which became Aber Diamond Corporation before it became part of Harry Winston Diamond company. Thomas worked as a geologist from 1992 to 1997, leading the field exploration team that discovered the Diavik diamond project pipes in the Northwest Territories in 1994 and 1995.
 
"We are not currently in production at any of our mines," she said. "However, we are at the pre-feasibility stage on our most advanced project, Renard, which is on track to become Quebec's first diamond mine. By the time Renard gets into production, around 2013, we expect the rough diamond market will have recovered and prices to be trending higher."
 
Despite widespread media reports of the likelihood of consolidation in the diamond industry as a result of the financial crisis which has slashed demand for diamonds, Thomas said Stornoway's main focus and number one priority is to bring the Renard project to a production decision as soon as possible. "We hope to be commencing with a final feasibility study in 2010 that would lead to a production decision in 2011.
 
The difficulty for diamond exploration firms, given their inability to generate income, but which need to raise money in a difficult financial climate to continue exploration projects was seen in the firm's latest financial results released on September 14. From a profit of $11.7 million a year ago, the firm reported a loss of close to $700,000. "As an exploration stage company, it is currently unable to self-finance its operations," the company said in its financial statement. "The recovery of the company’s investment in its resource properties and attainment of profitable operations, and its ability to continue as a going concern is dependent upon the discovery, development and sale of diamond reserves, the ability to joint venture or sell its resource properties and the ability to raise sufficient capital to finance its operations."
 
Stornoway said its management plans to seek additional financing, through equity financings, the sale of non-core assets or through other means to further the exploration and development of properties and to provide sufficient working capital. However, there is no assurance the company's management will be successful in these endeavors, the statement added.
 
Thomas expanded on the theme, saying, "Stornoway does not currently generate any cash flow and, therefore, most of our capital has historically come from the public equity markets. We will be targeting the debt markets at a later stage, likely once we have made a positive production decision at Renard."
 
"Some consolidation in the industry is starting to happen and is probably healthy. Thomas noted. "Stornoway, however, is focused on advancing its own assets, principally the Renard diamond project, which we believe is one of the world’s best, undeveloped diamond deposits. We continue to evaluate any and all strategic opportunities that have the potential to add shareholder value."
 
Looking at the situation of the global diamond industry in a wider context, Thomas said although rough prices have been on the rise since March they are still well below their year-earlier figures. As for when demand will substantially rise again, she said, "There are signs that the market is recovering, and the consensus amongst analysts today is that the trend in rough diamond prices should be positive in 2010."
 
Thomas said that Stornoway, as with the rest of the diamond industry, had been surprised by the speed and force of the onset of the global recession. The subsequent credit freeze, as banks retreated from lending, particularly to the diamond and jewellery industries, which are seen as manufacturing goods that consumers will delay purchasing in a recession, made securing financing extremely difficult, Thomas said.
"Given how strong the rough diamond market had been performing in the preceding period, our view was that a short-term correction was likely. However, we did not anticipate the depth and speed of the global recession that followed. As an exploration/development company that depends on raising equity from the public markets to fund our projects, the downturn has made access to capital very difficult."
 
She believes that diamond miners, such as De Beers which slashed production by 91 percent in the first quarter of this year in line with plummeting demand and in order to bolster prices, chose the correct path. From a realistic standpoint, there was little that companies can do to increase sales during a crisis which had no precedent for most people. Firms had to cut production and staff numbers and wait for inventories to run down.
 
"In times of recession and market uncertainty, I believe it is prudent to respond to declining demand by scaling back production,” she said. “It is my view that during times of crisis, the business strategy should be focused on reducing risk by preserving capital and lowering costs, to ensure survival. I think companies must then monitor their target markets very closely and be in a position to react to opportunities as they arise."
 
Looking ahead, Thomas believes the outlook for the diamond industry is positive due to a long-term fall in supply and the likelihood that emerging markets, particularly China and India. "I believe the long term fundamentals of the diamond business are sound and strong. World rough diamond supply is on the decline and demand will be driven not only by America but by the strong, emerging markets in Asia.