Diamond industry giant De Beers and Mountain Province Diamonds entered into a joint venture to develop the Gaheho Kue diamond mine in Northwest Territories.

Bernard Valcourt, minister of aboriginal affairs and northern development, approved the project on Tuesday. With the green light, the Mackenzie Valley Land and Water Board could begin processing the JV's application for water and land use permits.

The project is found 280 kilometres northeast of Yellowknife. De Beers owns 51 per cent of the mine and the remaining 49 per cent is held by Mountain Province.

According to Edward Sterck, analyst for Bank of Montreal, Gahcho Kue is one of the best undeveloped diamond projects globally. He believes that De Beers may buy Mountain Province to boost its ownership of the project.

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News of the approval led to a 0.6 per cent increase in Mountain Province's share prices to C$5.05 in Toronto.

Meanwhile, Paul Zimnisky, chief executive officer of PureFunds, the first company to successfully bring a diamond ETF, PureFunds ISE Diamond/Gemstone ETF, opined that physically backed diamond investment vehicle would not become available any time soon.

He said what is preventing that is the uniqueness of each diamond, which is the same factors that boost the price of the stone upward and also hold it back.

"I don't see what they can do to make it work because the underlying fundamental issue is that physical diamonds are not tangible, they're not price transparent," Forbes quoted Mr Zimnisky.

Among the other barriers he cited are the different ways to grade a diamond, the lack of a spot market for diamonds and the different opinions on what diamond prices are actually.

He forecast a supply shortage due to the high demand for diamonds, particularly in Asia, which would trigger an inevitable increase in prices.

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