Tahera shares active as company struggles with Nunavut mine

The Tahera Diamond Corp. was one of the most active companies trading Thursday on the Toronto Stock Exchange in light of news that the company is facing financial hardships with its Jericho mine in Nunavut.

Tahera shares closed at 10 cents Thursday on trading of more than 4.5 million shares.The stock price was $1.10 a year ago and was trading as high as$4.15 in February 2006.

The recent market action came after Tahera announced Tuesday that it's making conditional arrangements with two major creditors, including a deal for American jewelry retailer Tiffany & Co., to convert some of its debt into a 19 per cent stake in the Toronto-based mining company.

In a release, company CEO Peter Gillin said it has to raise $30 million of equity in a rights offering, or it may have to look at shutting down the mine, located about 360 kilometres southwest of Cambridge Bay in western Nunavut. The mine, Nunavut's first and only diamond mine, is Tahera's main asset.

"Athough the company has continued to make progress with its improvement plan at the Jericho mine, continuing financial losses have been incurred and, as a result, its financial position has deteriorated," the release stated.

"Failure by the company to raise $30 million in the rights offering would result in the company not being able to take advantage of the upcoming winter road resupply and further develop and implement its program of operational improvements at the Jericho mine. The company will then face significant and dire financial difficulties."

Teck Cominco Ltd., which owns 16 per cent of the company's stock, has already said it does not intend to take part in the urgently needed issue of new equity.

"Teck Cominco remains, however, very supportive of the Jericho mine and will continue to provide operational and technical support to the Jericho mine on an as-needed basis," the release stated.

It added that Dundee Precious Metals Inc.currently its second-largest investor with an eight per cent holding, "has indicated that at this point in time it is unsure whether it will participate in the rights offering."

In addition to Tiffany — which buys Jericho's diamond production and provided a $35-million construction loan and an $8-million working capital facility — Tahera said it has reached a debt-for-equity deal with its mining contractor, Nuna Logistics Ltd.

Nuna Logistics is to convert $3.2 million owed by Tahera into shares, and "has agreed to make certain concessions with respect to labour and equipment costs," the company stated.

In its third quarter report, released last month, Tahera reported a loss of $143 million over the first nine months of this year, and it has also written off $73 million it had spent on the mine but now does not expect to recover.

Company officials cited the high Canadian dollar, soaring oil prices, and operational problems as some issues the mine faces.