Guy Quenneville
Northern News Services
Published Monday, January 21, 2008

NUNAVUT - Things just got worse for Tahera Diamond Corporation, and if they don't start improving soon, the company could end up selling the Jericho mine or laying off workers.

Tahera President and CEO Peter Gillin, pictured here at the opening of the Jericho diamond mine in August 2006, says the current state of things at Tahera is "not good." - photo courtesy of Tahera Diamond Corporation

Due to the crumbling financial state of its main asset - the Jericho diamond mine in Nunavut - Tahera went into court-ordered protection from its creditors on Wednesday, saying it needs a lot more money to help fund its operations.

Tahera specifically needs to raise capital in order to ship fuel and explosives up the winter road to its Jericho site, said Peter Gillin, the company's CEO and President.

Jericho, which opened in the summer of 2006, is Nunavut's first diamond mine.

"It's not an easy time for the company or its employees," said Gillin.

Tahera attempted to raise money through a rights offering last month totalling $36.7 million, but that effort was unsuccessful.

"We needed a substantial minimum, which it was clear we weren't going to get," he said.

"We got some, but not enough to justify carrying forward with it. So we thought that the best course of action was to do this."

Tahera will work with a monitor, PricewaterhouseCoopers, to frame a restructuring plan for the company.

"What we're focusing on now is to see if we can get financing to resupply over the winter road. And if we can't do that, we're going to have to change our plans, to say the least," said Gillin.

The company is considering other, far-reaching alternatives.

"The prospect of selling the company or the asset is there," said Gillin.

There are just under 100 workers - both Tahera employees and contractors - working at the mine located 360 kilometres southwest of Cambridge Bay. Gillin cautioned it "remained to be seen" whether staff layoffs would be part of the restructuring plan.

"It depends on how the next few days and weeks go," he said.

The company's fourth quarter results for 2007 will not be released until next month, but previous financial statements documented a clear financial downturn.

As of September, the company had incurred a deficit of over $143 million in 2007.

"Our cash flow from the (third quarter of 2007) was substantially negative, and it's continued to be negative over the last quarter," Gillin said.

Last week, Tahera stock was trading at $0.07 a share, compared to $2.24 when the Jericho mine opened.

The company blamed factors such as the high Canadian dollar and the price of diamonds for its financial difficulties, as well as a slow recovery after a rocky start to 2007, when the company faced problems such as low diamond grade.

The workforce at Tahera's Nunavut sites is approximately 30 per cent Inuit, and layoffs will be felt hard in communities such as Gjoa Haven, Kugluktuk and Cambridge Bay.

Sarah Kamimmalik, the economic development officer in Gjoa Haven, said she knows of four people in the community who work at Jericho.

The mine is "good for the people up in my community," she said. "We don't have much employment here and it's expensive to live here."

Layoffs would definitely affect workers' ability to support their families, she added.