New York jeweler Tiffany & Co. is opening a diamond-cutting office in the rugged mining town of Yellowknife early next year, Reuters reports.

The diamond-mining boom is on in the Canadian north, and Tiffany has agreed to cut a portion of the $50 million in rough stones it will buy each year from Canada’s Aber Diamond Corp. in Yellowknife, capital of the Northwest Territories, Reuters reports. Aber is minority partner in the country’s second diamond mine, Diavik.

This will be the first diamond-cutting operation ever undertaken by Tiffany. It has traditionally bought cut-and-polished diamonds from major centers in Antwerp, Tel Aviv and New York, but the retailer now wants greater control over its product-supply chain, spokesman Mark Aaron told Reuters.

Diavik is scheduled to open in early 2003 with annual diamond production peaking at just over six million carats. Average value is about $63 per carat.

The mine is located at Lac de Gras, northeast of Yellowknife, and north of a diamond mine being developed by industry giant De Beers, the company’s first in Canada.

Tiffany’s 1999 agreement to buy diamonds from Aber was viewed as unique in the industry as it was the first time a large retail jeweler had bought a stake in a diamond mine’s production.

Aaron said Tiffany would cut about 25% of its Diavik parcel at the new $3 million, 12,000-square-foot Yellowknife facility, Reuters reports.

Yellowknife—where the winters are long, dark and cold—is already home to three diamond cutting companies, which handle rough diamonds from Ekati, Canada’s first diamond mine, which is owned by Australia’s BHP Billiton Ltd.

“As we have approached the start of production, we had to address the issue of who will cut those stones, and the diamonds we are buying from Aber must meet Tiffany’s quality standards, but we then get to issue who will do the cutting,” Aaron reportedly said. “We made the decision to do a portion of the cutting internally by establishing a facility in Yellowknife, as well as to parcel out the majority of the diamonds to other cutters.”

He said the company plans to recruit experienced industry professionals from outside Canada to train Yellowknife staff and will initially employ about 20 people, a number that could grow to 75.

“In many ways the cutting facility parallels another merchandising strategy to increase internal manufacturing of jewelry,” Aaron reportedly said. “It wasn’t that many years ago that very few people knew about the potential for diamond mining in the Northwest Territories, and it has gained much greater awareness and we’re very excited.”

Martin Irving, director for diamond projects in the Northwest Territories, reportedly said on Monday that Tiffany’s presence would boost the region’s reputation as a diamond center.

The diamond-cutting industry in the Northwest Territories employs about 80 to 100 people, about half of them locals, he said.

“It’s the policy of the government of the Northwest Territories that we will endorse the production of diamonds if a portion of the diamonds are made available for cutting and polishing in the Northwest Territories,” Irving reportedly said.

He said there was a lot of interest and support for a so-called Canadian diamond at the retail level.

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