An underground drilling contractor says it will have to lay off some of its workers at the N.W.T.'s Snap Lake diamond mine.

Monika Portman, the director of marketing and corporate management for Boart Longyear, says the cutbacks are necessary because De Beers Canada is trimming its underground drilling program at the mine, located 220 kilometres northeast of Yellowknife.

"When they cut those drilling programs, there's a downstream effect on all drilling contractors," said Portman.

Water problem to blame: analyst

Paul Zimnisky, an independent, New York-based diamond industry analyst, says Snap Lake is encountering problems common to all diamond mines right now, such as weakened diamond prices due to a credit crunch among cutters and polishers as well as a dip in luxury spending among Chinese customers.

But he says Snap Lake's troubles have more to do with problems unique to that mine, such as the water management issue that has been the subject of an ongoing water licence amendment process. De Beers is encountering a higher-than-expected amount of underground water rich in total dissolved solids, and has spent at least $20 million managing it.

"It has plagued the mine since it opened in 2008 and as a result, it has not been a profitable mine for De Beers," said Zimnisky.

"I think this can only go on for so long before...the best decision is to shut the mine down and move on. I think it's getting to that level."

De Beers lowers worldwide diamond target

De Beers offered little comment and few details about what's going on at Snap Lake.

"We are constantly looking to find efficiencies in our operations and are working with our partners here in Canada and around the world to continue to identify those efficiencies," said Tom Ormsby, the company's senior external and corporate affairs manager in Canada.

While Ormsby says Snap Lake is still working toward its full production targets for 2015, in April De Beers downgraded its estimate of how many carats it would produce worldwide this year to between 30 million and 32 million carats, from an earlier target of as much as 34 million carats. The company cited "current trading conditions."

Neither De Beers or Boart Longyear would confirm how many employees may be affected by the cutbacks at Snap Lake.