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By Sarah Hurst
For Mining News 

Jericho foundations looking unsteady

Nunavut's first diamond mine suffers teething trouble with winter road closing early, processing hiccups and lower grade than expected

 

Last updated 4/29/2007 at Noon



AFter years of exploration, permitting and construction, the day when a junior company brings its first mine into production should be a cause for celebration. Many juniors never even see such a day. But it is also the moment of truth, when all the wealth that has been promised must start to show itself. Some investors are already starting to wonder when Toronto-based Tahera Diamond Corp.'s Jericho mine in Nunavut will bring them a return.

Jericho commenced operations in August 2006 and immediately experienced start-up difficulties. A new crusher had to be brought in and was operational by late September. Shorter than expected winter road access resulted in a fuel and explosives shortage, which negatively impacted the mine's production rate. Perhaps most worryingly, the average grade of the kimberlite was lower than forecast.

According to Tahera's year-end report published March 27, the average recovered grade in 2006 was only 0.55 carats per ton. The company's management still believes that the life-of-mine expected average grade at Jericho will be the expected 0.85 carats per ton. The mine produced a total of 296,000 diamond carats in 2006, which sold at an average of US$93 per carat, resulting in a total production value of C$31 million.

A 59-carat gemstone that sold for US$450,000 was the most valuable diamond recovered last year and three other low-quality stones were in excess of 100 carats each. But the continuing negative cash flow from Jericho has spurred Tahera to seek additional financing. Jericho's mine plan envisages that it will eventually produce 375,000 carats a year to yield 2.6 million carats over the initial eight-year life of the mine.

Teck Cominco has purchased 16 percent of Tahera

Last December Vancouver-based Teck Cominco purchased 30 million units of Tahera at a price of $1 per unit, making the larger company the owner of 16 percent of Tahera's shares. Tahera will be trying to improve Jericho's operations in consultation with Teck Cominco's technical team, Peter Gillin, Tahera's chairman and CEO, told investors in a conference call March 27. Meanwhile, Tahera's share price has fallen steadily from a high of $4 a year ago to around 91 cents currently.

Tahera hopes to boost its prospects by succeeding in exploration projects close to Jericho, including the Polar project, where the company is in a joint venture with De Beers Canada. Last year Tahera completed a 900-ton bulk sampling program at Polar's Muskox kimberlite, which earned it a 50 percent interest in the project, since the company had spent the required $11 million. "As we announced in the past, the grade results from that program were a little bit disappointing, however we have not lost faith in it," Gillin said.

Tahera also conducted a bulk sampling program at the JD-3 kimberlite, four miles west of Jericho, and results are pending. In addition, the company is drilling at the Anuri kimberlite on its Rockinghorse property, 56 miles northwest of Jericho.

On April 16 Tahera announced that its vice president for operations, Daniel Johnson, was stepping down "to pursue other business interests". Johnson was hired by Tahera in 2004 to lead the development and construction of Jericho. Previously he worked for BHP Billiton for 16 years, and he was president and CEO of Diamond Fields International for four years.

 

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