Guy Quenneville
Northern News Services
Published Monday, December 17, 2007
NUNAVUT - As the financial state of the Tahera Diamond Corporation's Jericho mine grows more precarious, one aboriginal lobby group is worried about the economic impact that could result if the mine closes - a very real possibility, according to Tahera.
As of September, the company had incurred a deficit of over $143 million in 2007. On Friday, Tahera stock was trading at $0.09 a share, compared to $1.10 at this time last year and $2.24 when the Jericho mine opened in August 2006.
The company issued a press release last week announcing a rights offering totalling $36.7 million in an effort to raise capital.
While repeated calls to Tahera were not returned, the press release was hardly sparing in its grim details - if the company does not raise $30 million through its rights offering, it may be forced to interrupt operations, close the mine, sell the company or seek bankruptcy protection, the release stated.
The company blamed factors like the high Canadian dollar and the price of diamonds for its financial difficulties, as well as delays in realizing benefits from operational improvements following a rocky start to 2007, when the company faced problems such as low diamond grade.
Teck Cominco, a Vancouver-based mining company and Tahera's largest shareholder, announced it would not take part in the rights offering.
"We invested $30 million dollars with them last year and we're comfortable with that level of investment," said Greg Waller, vice-president of investor relations.
"We will continue to work with them on a technical basis in mining and processing. We'll continue to have a person their board, too.
"But at this point we've decided to keep our investment position the way it is now."
According to last week's press release, one of Tahera's creditors, Tiffany & Co., has agreed to convert a portion of the debt into common shares. Contractor Nuna Logistics has also agreed to convert $3.15 million owed by Tahera into shares and to make concessions with respect to labour and equipment costs.
Both agreements are contingent on Tahera's success in raising $30 million in its rights offering.
If Tahera is unable to raise the necessary capital and the mine is forced to close, it would have a major economic impact on the region, said Freddy Pedersen, communications co-ordinator for the Kitikmeot Inuit Association.
"It would have a big effect on local Inuit employment within the region," Pedersen said, citing Kugluktuk, a community of approximately 1,200 people located northwest of the mine, as an example.
"There's about 30 Kugluktuk community members working there," said Pedersen.
"There are other mining developments in the region (BHP Billiton's Ekati mine and Miramar's Hope Bay project) that some of the workers could probably transfer into, but I'm not sure if everybody would be able to get jobs."
Pedersen has seen for himself the enormous impact the mine has had on its Kugluktuk employees.
"The last time I was in Kugluktuk, the guys who are working at the mine, like any members from the communities around Yellowknife, have nice new vehicles, whether it's a truck or snowmobile or ATV," he said.
"The income they get from working in the mines definitely helps their personal lifestyle at home immensely."
But there's more at stake than shiny new cars, added Pedersen.
"For anyone that lands good, meaningful employment, I think it always helps with their self-esteem."
