Northwest Territories facing a hard-as-diamonds reality as pivotal industry wanes

Lac de Gras surrounds the Diavik mine pit about 300 kilometres northeast of Yellowknife, N.W.T., on July 19, 2003. THE CANADIAN PRESS/Adrian Wyld

It’s said that pressure makes diamonds, but a diamond mining downturn is what’s putting pressure on the Northwest Territories economy these days.

Diamond mines have long been a vital source of well paying local jobs, with spinoffs in hospitality, construction and other areas. It’s been estimated that the region’s three operating mines directly and indirectly employ more than 1,500 residents — a significant chunk of the territory’s population of almost 46,000 — and account for about one-fifth of the N.W.T.’s gross domestic product.

“Diamond mining in the Northwest Territories has been incredibly pivotal to our economy over the last 25 years,” said Caitlin Cleveland, the N.W.T.’s minister of industry, tourism and investment.

“It’s put over $30 billion into the Canadian economy, $20 billion of which has stayed here in the Northwest Territories.”

But diamonds aren’t forever, and that reality is hitting home.

Rio Tinto’s Diavik mine is scheduled to close down in March, having reached the end of its productive life. The Gahcho Kue mine, operated by De Beers Canada and Mountain Province Diamonds, is expected to run until 2031.

Those mines are reaching their end of life at the same time the rising popularity of less expensive lab-grown jewels undercuts the business case for digging up raw diamonds in the Far North. The International Diamond Exchange’s price index shows a steep decline since early 2022.

The Ekati mine, owned by Australia-based Burgundy Diamond Mines Ltd., has a plan that could see it operate as long as 2040, but it’s been under financial strain. It asked the Australian Stock Exchange in September to suspend its stock trading until it can secure new funding and it undertook major staff cuts last year.

Burgundy blamed “ongoing challenging market conditions,” but said U.S. President Donald Trump’s tariffs have also been a big headwind. Most of the world’s diamonds are sent to India for cutting and polishing, and imports into the U.S. of those finished gems are subject to 50 per cent tariffs.

Last month, the federal government extended a $115-million Large Enterprise Tariff Loan to a Burgundy subsidiary so Ekati can continue operating.

Even without the recent geopolitical and market challenges, the territory has been urged to contemplate life beyond diamonds.

“Mines aren’t forever. They are finite resources,” said Paul Gruner, CEO of Tlicho Investment Corp., the business arm of the Tlicho Nation.

The corporation has been working with Rio Tinto on keeping people on the job as the Diavik mine winds down. He figures the reclamation and remediation work will buy the community about three years until employment disappears.

Heather Exner-Pirot, senior fellow at the Macdonald Laurier Institute, agrees mine closure and rehabilitation is going to be “big business” for a few years.

“In terms of jobs and contracts in mining, they still exist,” she said. “But those are not things that produce royalties and taxes.”

Diamonds make up most of the territory’s own-source revenue, said N.W.T. Finance Minister Caroline Wawzonek, who is also responsible for the territorial power corporation, strategic infrastructure, energy and supply chains.

If not for its funding relationship with the federal government, the territory’s coffers would be in much worse shape.

“It’s not really a story of ‘Do I think our government is going to be in financial trouble’ — not exactly,” Wawzonek said.

“Do I think the economy here will be in financial trouble? I would say that’s our real risk.”

Gruner said population decline is a serious threat. Transfer payments are calculated based on population, so a drop could hit territorial revenue. And then the public sector — itself a huge employer — might have to shrink.

“It becomes a bit of that death spiral.”

While there’s much beyond the territorial government’s control, Gruner said it can “get creative” on ways to keep as many people employed for as long as possible to avoid brain drain.

“It’s not just about driving revenue, it’s also about building and preserving skills, driving employment, getting those numbers up.”

Indigenous economic development corporations like Gruner’s have grown up around diamond mining into sophisticated businesses over the years, said Exner-Pirot. Others include ones run by the Yellowknives Dene First Nation, North Slave Metis Alliance and Lutsel K’e Dene First Nation.

“You don’t want those workers to have to move and you don’t want those corporations to atrophy,” said Exner-Pirot.

Contracts with diamond mines account for 54 per cent of the total gross output of the N.W.T.’s four Indigenous economic development corporations, those groups said in a report last year.

Territorial leaders have been setting their sights on critical minerals as a potential longer-term economic driver. That would mean more, but smaller, mines than the diamond trio that has long anchored the territorial economy.

Cleveland said the territory has almost three quarters of the resources on Canada’s list of critical minerals.

The economy has diversified somewhat into tourism, film and other areas, but “we absolutely are a mineral extraction economy here in the Northwest Territories,” she said.

The key, she said, is diversifying within that sector — mining a more varied array of materials so the booms and busts aren’t so severe.

Getting new mining industries off the ground is going to mean big investments in year-round transport infrastructure, as roads now serving diamond mines can only operate in the winter, the ministers said. Energy infrastructure is also needed in a territory still largely dependent on pricey and inefficient diesel generation.

The federal government has listed the Arctic Economic and Security Corridor as a potential nation building project that could be referred to its new major projects office for a speedy review. It would include ports, all-season roads, runways and communications systems in Nunavut and the N.W.T. serving both military and commercial functions.

Wawzonek said she’s noticed a shift in her interactions with the federal government lately.

“You go to the federal ministers and they can’t ask enough questions,” she said.

She added that she’s spoken to major projects office head Dawn Farrell and got the impression she “gets it” when it comes to the need for northern infrastructure.

Exner-Pirot questioned whether it’s worthwhile to sink billions into new roads before critical mineral investment is a sure bet.

“If you don’t have the private sector using this kind of infrastructure, it can become a real drag on the territorial economy. They don’t have the tax base to maintain a couple hundred kilometres of linear infrastructure or transmission lines that no one is really using,” she said.

“So they’re certainly in a pickle.”

Investor enthusiasm in critical minerals in the Far North could perk up if the right commodities hit the right price at the right time, Exner-Pirot added.

“They would have to go up a lot — a lot — to make the deposits in the Northwest Territories more attractive and there’s nothing on deck that would replace or even come close to replacing what the impact of the diamond mining sector was.”

This report by The Canadian Press was first published Jan. 1, 2026.

Lauren Krugel, The Canadian Press