Diamond downturn forces a rethink in Canada’s Northwest Territories
For more than three decades, diamonds reshaped life across the Northwest Territories. Mines such as Diavik, Gahcho Kué and Ekati supported thousands of jobs, powered Indigenous-led businesses and paid for roads, housing and local services. Now, with operations winding down, projects delayed and revenues squeezed, the territory faces a familiar but urgent problem: what happens when a region built around a single resource loses its footing?
Why the shock landed now
The sector is being pushed from several directions at once. Global demand for luxury goods has softened, while the supply chain from mine to market has become more expensive and uncertain. At the same time, lab-grown diamonds—chemically identical to mined stones but often far cheaper—are taking market share, especially among younger buyers who weigh cost and provenance differently than previous generations.
Those market shifts translate quickly into local pain. Lower prices for rough stones and tighter margins at the cutting and polishing stage reduce cash flow across the supply chain. Some firms have paused projects, scaled back operations or sought emergency financing. Where mines are the fiscal backbone, shrinking royalty and payroll streams create immediate budget stress for municipal and territorial governments.
Who’s most exposed
The impacts ripple through several groups:
- – Indigenous-owned businesses that supplied catering, transport, construction and other services to mine camps. Contracts shrink or vanish as mines cut back.
- Fly-in communities and regional municipalities that relied on steady payrolls and tax revenue to maintain schools, clinics and infrastructure.
- Workers—especially those with skills highly specific to diamond extraction—facing lay-offs or shorter seasons.
Imagine a mechanic who spent 15 years servicing heavy equipment at a camp: his steady seasonal income lets him support a family and run a small in-town repair shop. When a project pauses, that ripple hits household budgets, local stores and school enrolment.
A turning point, not just a slowdown
The modern diamond boom transformed the N.W.T.’s economy, but many operations are now approaching the end of their mine lives. Expansion plans have stalled and at least one operator has turned to federal supports as revenues fell. These are structural shifts, not momentary blips—meaning communities, companies and governments must treat this as an opportunity to reset rather than only a crisis to weather.
Paths to resilience
Territories that once depended on a single commodity have broadened their economic base in several practical ways; many of these approaches are already under discussion in the N.W.T.:
- – Diversifying minerals: Companies and explorers are looking beyond diamonds to rare earths, copper, zinc and other critical minerals whose demand is rising with electrification and clean-tech supply chains.
- Investing in renewables: The North’s abundant wind and hydro potential can lower energy costs for communities and mines, reduce diesel dependence and create new local jobs in construction and maintenance.
- Tourism and culture-led economies: Indigenous tourism, cultural experiences and seasonal outdoor recreation can provide complementary income streams—especially when marketed around unique landscapes, guided by local stewardship and benefit agreements.
- Workforce retraining and entrepreneurship: Tailored retraining programs can convert site-specific skills into transferrable trades, small-business capacities and roles in emerging sectors. Supporting Indigenous entrepreneurs to bid on new contracts keeps money circulating locally.
What works on the ground
Research on resource-dependent regions shows diversification reduces volatility and stabilizes public finances—but the method matters. Successful transitions combine short-term supports (income assistance, wage top-ups, bridge financing for local firms) with longer-term investments in education, infrastructure and business incubation. Local decision-making and Indigenous leadership are key: top-down plans that ignore community priorities tend to fail, while co-designed strategies mobilize local assets and trust.
Immediate actions communities are taking
Across the territory, municipal governments and Indigenous organizations are already moving:
- – Reworking procurement rules to favor local suppliers where feasible.
- Partnering with training colleges to fast-track certifications for displaced workers.
- Attracting small-scale renewable projects to reduce energy bills and keep jobs on the ground.
- Encouraging explorers to file robust community benefit proposals before projects begin, not after.
Policy levers and private-sector responses
Governments can ease the adjustment by enabling cross-border trade, streamlining permitting for diversification projects and providing targeted transition funds. For companies, embracing transparency in sourcing and investing in workforce mobility helps retain local talent. If consumer demand rebounds or trade frictions ease, the sector could recover some ground—but diversification lowers the stakes if diamond revenues remain volatile.
A practical outlook
The N.W.T. is not starting from scratch. Decades of diamond activity left infrastructure, skilled people and entrepreneurial networks that can be repurposed. The challenge is converting those assets into a broader, more stable economy. That will require creative policy, patient capital, and most importantly, leadership from communities whose lives and livelihoods depend on the outcome.
Why the shock landed now
The sector is being pushed from several directions at once. Global demand for luxury goods has softened, while the supply chain from mine to market has become more expensive and uncertain. At the same time, lab-grown diamonds—chemically identical to mined stones but often far cheaper—are taking market share, especially among younger buyers who weigh cost and provenance differently than previous generations.0