JERICHO MINE, Nunavut Territory - An employee of the Jericho mine points to a small pile of rusty brown pebbles that just hours ago were dug from the open pit and processed in the nearby mill.

Among the tiny stones are several frosty crystals -- rough diamonds freshly extracted from the volcanic rock that has held them captive for millions of years. About six months from now, after they have been sorted, cut, polished and priced, these tiny stones could be glittering in the display case at Tiffany & Co.

Toronto-based Tahera Diamond Corp. officially opened the mine this week, making Jericho Canada's third operating diamond mine, all of them in the North. Tahera celebrated the event by chartering a jet to fly analysts, diamond executives and journalists to the remote site.

"This type of success will help build the new North, paving the way for new and exciting business," said Stephen Harper, the Prime Minister, at the gala opening.

Jericho, 420 kilometres northeast of Yellowknife and just across the Nunavut border, will eventually produce 500,000 carats of diamonds a year over its expected eight-year life-span. Tiffany's, the famous jewellery chain, has first dibs on the mine's output, and has a contract to market any remaining stones on Tahera's behalf.

The Jericho mine pops out of nowhere on a desolate Arctic vista of weathered rock, mossy grass, finger lakes and endless sky. Caribou laze along the gravel road from the airstrip to the mine. The blasting of the rock and the rumble of the trucks don't seem to bother them.

Nor does the open pit, which is about 300 metres long and 75 metres wide. The animals are certainly not moved by the talk of gems, enhanced shareholder value and man-hours of employment at the mine opening.

"Nunavut is committed to building a strong mining industry," said Paul Okalik, Premier of the territory. "Jericho is the first mine I've had the pleasure of opening in Nunavut, and how special it is that it's a diamond mine. I think there's a saying that a diamond is a woman's best friend, but I think there should be a new saying that it's Nunavut's best friend."

Jericho isn't Canada's biggest diamond operation. BHP Billiton PLC's Ekati and Rio Tinto' PLC's Diavik lie roughly 170 kilometres to the south. Both are at least eight times bigger in terms of annual output. But the rapid construction of Tahera's tiny mine demonstrates that junior mining companies can still finance and develop their own projects without the help of a major mining company. Jericho cost about $120-million to build, a fraction of the $1-billion price tags attached to Ekati and Diavik.

"I think it is a significant mine, particularly for Canada. Canada's North is an extremely expensive place to build," said Matt O'Keefe, mining analyst with Westwind partners in Toronto. "What Jericho demonstrates is that Canada can support mid-tier diamond companies as it does gold and base-metal companies."

Indeed, Nunavut is home to a bustling diamond exploration business. Such companies as Diamonds North Resources Ltd. and Stornoway Diamond Corp. have developed huge land packages in the region, and hope their properties will some day give rise to a new wave of Canadian diamond production.

Ekati, Diavik and Jericho won't last forever, and new mines will be needed if Canada is to hold on to its current ranking as the world's third-largest diamond producer, after Botswana and Russia.

Vancouver-based Stornoway's flagship is the Aviat project on the Melville peninsula. "We've got a number of diamondiferous bodies there that look very interesting from a grade point of view," said Eira Thomas, chief executive of Stornoway.

At full tilt, the plant at Jericho will process 2,000 tonnes of ore a day, releasing an average 1,700 carats worth of diamonds. The ore is crushed, then stones are filtered for size. X-rays are beamed through the stones, unveiling the tiny diamonds trapped within. Jets of air blast at the rock and knock the diamonds loose.

Because the mine is located in Nunavut, every five weeks a team of diamond sorters examines the gems on-site to determine how much royalty Tahera must pay the territorial government. Initial inspections have valued the stones at between US$85 and US$100 a carat. Last year, the average price for rough stones around the world was US$84 a carat.

Production at Jericho is no simple matter. The mine's only ground link to the outside world is a seasonal ice road that operates in the winter months over the frozen barrenlands. The situation isn't perfect and not always reliable. A warmer-than-average winter this past season meant the road was in operation for only 17 days, rather than the usual 40 or 50.

Essential supplies had to be flown to the mine site, something that added significant costs to Jericho's operation. Tahera has been forced to delay some non-essential capital projects in order to save costs and conserve fuel.

Still, Tahera could be looking at a significant payday. Analysts say diamond prices are poised to rise 30% over the next six years, due both to declining mine capacity and booming demand for luxury goods in emerging economies such as China. According to the World Diamond Council, the market for rough diamonds is about US$7-billion a year. Canada's three operating mines contribute more than 10% of global supply in terms of value.

Canada's role in the global market will get a further boost next year, when De Beers Canada Corp. is expected to open its Snap Lake mine 220 kilometres northeast of Yellowknife, producing an estimated 1.5 million carats a year.

Tahera's Jericho, while small, stands out because it is the only publicly traded company that is devoted to diamond production. Toronto-based Aber Diamond Corp. has a 40% stake in Ekati, but recently moved into the diamond retail business with the purchase of luxury jewelry Harry Winston Inc.

Tahera was created in 2002 through the merger of two exploration juniors that had been developing the Jericho property since the mid-1990s. Construction of the mine took 18 months to complete, and the mine will operate for less than a decade.

Tahera is looking for ways to extend its presence in Nunavut. Tahera and exploration partner De Beers are evaluating a diamond property called Muskox, about 14 kilometres west of Jericho, said Peter Gillin, Tahera's chief executive. "We hope this activity will provide us with many more years of production and prosperity."

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