NEWS RELEASES

October 31, 2003 (9:40 a.m. EST) No. 166

CANADA TO CHAIR INTERNATIONAL PROCESS FOR

CURBING TRADE IN CONFLICT DIAMONDS

Foreign Affairs Minister Bill Graham and Herb Dhaliwal, Minister of Natural Resources, today announced that Canada has accepted to chair the Kimberley Process (KP), beginning January 1, 2004.

The KP is a South African-led international initiative to curb the global trade in conflict diamonds. Conflict diamonds originate in areas controlled by rebel groups and are used to fund military action that targets governments. Tim Martin, director of the Peacebuilding and Human Security Division at the Department of Foreign Affairs and International Trade (DFAIT), will succeed South Africa's Abbey Chikane as the new chairperson of the Process.

"This chairmanship is an endorsement of the leadership role that Canada has played in developing measures to fight the global trade in conflict diamonds," said Minister Graham. "We welcome progress by participants in implementing the KP Certification Scheme and remain committed to ensuring that the system advances human security while protecting the legitimate diamond trade."

"I am very pleased that the international participants of the Kimberley Process have selected Canada to chair this global initiative in 2004," said Minister Dhaliwal. "We look forward to working with all participants to ensure the credibility and momentum of the Process as we move forward."

Both ministers praised the remarkable progress that had been achieved under the stewardship of South Africa.

Canada was selected to assume the new role at a KP plenary session in Sun City, South Africa, taking place from October 29 to 31. At the session, participants reviewed progress on the implementation of the Certification Scheme, including statistical reporting. They also developed guidelines for a peer review mechanism.

Canada is one of 46 international participants in the KP (see full list in attached backgrounder). DFAIT leads Canada's involvement in the KP in close consultation with Natural Resources Canada, which is responsible for domestic implementation of the Certification Scheme.

The KP has brought together governments, representatives of the diamond industry and non-governmental organizations since May 2000 to curb the trade in conflict diamonds. In March 2002, KP participants agreed to implement an international certification scheme for rough diamonds to help ensure they would be importing and exporting only conflict-free diamonds. The Scheme, which includes measures such as exporting rough diamonds in tamper-resistant containers and providing validation certificates, was officially launched on January 1, 2003.

This year, Canada became the world's third largest producer of diamonds by value, after Botswana and Russia. Canada exports its entire production of diamonds for sorting. Some gem-quality diamonds are returned to Canada in support of a growing cutting and polishing industry.

Further information is available at http://www.nrcan.gc.ca/kimberleyprocess or at the Kimberley Process Office, Natural Resources Canada, 10A7, 580 Booth Street,

Ottawa, Ontario K1A 0E4 (tel: 613-996-0947; fax: 613-943-2079;

e-mail: kpc-cpk-Canada@nrcan.gc.ca).

- 30 -

A backgrounder is attached.

For further information, media representatives may contact:

Isabelle Savard

Director of Communications

Office of the Minister of Foreign Affairs

(613) 995-1851

Media Relations Office

Department of Foreign Affairs and International Trade

(613) 995-1874

Alexandra Muir

Office of the Minister of Natural Resources

(613) 947-8246

Ghyslain Charron

Media Relations

Natural Resources Canada

(613) 992-4447

This document is also available on the Department of Foreign Affairs and International Trade's Internet site: http://www.dfait-maeci.gc.ca

Backgrounder

THE KIMBERLEY PROCESS AND CANADA'S DIAMOND INDUSTRY

Introduction

Canada is playing a leadership role in international efforts to end the trade in conflict diamonds, which has had a devastating impact on peace and human security in several African nations, including Angola, Sierra Leone and the Democratic Republic of the Congo.

Unlike the legitimate trade in rough diamonds, which benefits several developing and developed economies, including Canada's, conflict diamonds originate in areas controlled by rebel groups and are used to fund military action that targets governments. However, the illicit trade in conflict diamonds represents a very small percentage of the world's rough-diamond trade.

Canada has actively promoted efforts at the United Nations and with the G8 countries to curb the illicit trade in conflict diamonds. Most recently, Canada has assumed a more prominent role in the Kimberley Process (KP) by accepting to chair the Process beginning in January 2004.

The Kimberley Process

The Kimberley Process was initiated by South Africa in May 2000 to develop an international certification scheme for rough diamonds to prevent conflict diamonds from entering legitimate markets. Currently chaired by the Government of South Africa, the Process brings together a broad range of international stakeholders in the diamond trade, including government officials, industry representatives and non-governmental organizations.

At a KP meeting held in Ottawa in March 2002, participants finalized proposals for an international certification scheme for rough diamonds. Under the Scheme, participants are required to export rough diamonds in tamper-resistant containers and provide certificates validating that their diamond exports are conflict-free. Participants are also prohibited from importing/exporting rough diamonds from/to countries not implementing the Scheme.

KP participants officially launched the Scheme on January 1, 2003. To date, 46 international participants--representing more than 98 percent of the world's diamond trade market and including Canada, the United States and the European Community--have been deemed fully compliant (see complete list at end of document).

At the plenary session in Sun City, South Africa (October 29 to 31), KP participants developed guidelines for a peer review mechanism that will help ensure effective implementation of the Scheme.

Canada and the Kimberley Process

Canada's overarching goal vis-à-vis the KP is to ensure that the Certification Scheme advances human security while protecting legitimate diamond trade. To this end, Canada is actively implementing the Scheme under the Export and Import of Rough Diamonds Act, which was passed in December 2002.

The Department of Foreign Affairs and International Trade leads Canada's involvement in the KP in close consultation with Natural Resources Canada, which is responsible for domestic implementation of the international certification scheme.

Canada's Diamond Industry

Canada's first diamond mine, the Ekati mine, is located in the Northwest Territories, approximately 300 kilometres northeast of Yellowknife. It employs 650 people and produces three to four million carats of gem-quality rough diamonds each year. This is equivalent to nearly 4 percent of current world diamond production by weight and 6 percent by value.

The Diavik diamond mine, located near the Ekati mine, began operating in 2003. Three more projects--one in the Northwest Territories, one in Nunavut and one in Ontario--could open by 2007. These five mines would provide direct employment for about 2,000 people and could bring the value of total annual production to approximately $2 billion.

This year, Canada became the world's third largest producer of diamonds by value, after Botswana and Russia. Canada exports its entire production of diamonds for sorting. Some gem-quality diamonds are returned to Canada in support of a growing cutting and polishing industry.

Participants in the Kimberley Process (as of October 31, 2003):

Angola

Armenia

Australia

Belarus

Botswana

Brazil

Bulgaria

Canada

Central African Republic

China

Congo

Côte d'Ivoire

Croatia

Democratic Republic of the Congo

European Community

Guinea

Guyana

Hungary

India

Israel

Japan

Laos

Lebanon

Lesotho

Malaysia

Mauritius

Namibia

Poland

Romania

Russia

Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu

Sierra Leone

Slovenia

South Africa

South Korea

Sri Lanka

Switzerland

Tanzania

Thailand

Togo

Ukraine

United Arab Emirates

United States of America

Venezuela

Vietnam

Zimbabwe