UPDATE 2-De Beers suspends operations at Canada's Snap Lake diamond mine

(Adds comments from De Beers on profit outlook, adds mine
contractor numbers)
By Susan Taylor
TORONTO, Dec 4 (Reuters) - De Beers Canada is suspending
operations at its unprofitable Snap Lake diamond mine in the
Northwest Territories due to poor market conditions, and said on
Friday it will evaluate the Arctic mine's potential over the
next year.
De Beers, 85 percent owned by Anglo American AAL.L and 15
percent by the government of Botswana, said work to put the
underground mine on care and maintenance has started and will
last up to nine months.
The mine, which had 595 employees and 200 contractors, has
not turned a profit since it began production in 2008. Despite
efficiency gains in recent years, Snap Lake was not expected to
become profitable for three years due to declining prices, said
spokesman Tom Ormsby.
Technically challenging to mine, Snap Lake also had
groundwater problems that added to high costs. Planned to
operate until 2028, it produced 1.2 million carats last year.
De Beers is terminating 434 employees and will employ 120
for the suspension work. Ongoing care and maintenance operations
will require about 70 staff, it said.
Another 41 employees have been transferred to Gahcho Kue
mine, now being built in the Northwest Territories (NWT) with
Mountain Province Diamonds MPV.TO , a 49-percent project
partner. Sixty more could be transferred in 2016.
Gahcho Kue is due to start production in late 2016 and
operate for 11 years.
Mountain Province Chief Executive Patrick Evans said the
suspension will further trim De Beers' output, already cut to 29
million carats from 32 million carats this year.
"Supply restraint on the part of the major producers is very
prudent and it's certainly going to help relieve the pressure
that exists in the mid-stream and balance the supply-demand
equation," he said.
Slower demand growth in China for diamond jewelry along with
a glut of supply held by stone cutters and polishers have helped
push the price of rough stones down by 18 percent this year.
"It's going to be a shock to our economy," said Tom Hoefer,
executive director of the NWT and Nunavut Chamber of Mines.
Diamonds directly contributed 18 percent to the NWT's gross
domestic product last year, but some put the figure closer to 40
percent when related spending for such things as construction is
included, Hoefer said.
Rio Tinto RIO.L sees production at its majority-owned
Diavik mine ending in 2023. Dominion Diamond DDC.TO , which
holds 40 percent of Diavik and 89 percent of Ekati mine, could
extend Ekati operations to 2031.