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Tahera not ready to give up on Jericho

by Lauren McKeon
Northern News Services
Published Friday, April 24, 2009

NUNAVUT - Tahera Diamond Corp is at it again, penning some key deals in the past week -- both of which are intended to get the company's beleaguered Jericho Diamond Mine back into production.

"Hopefully we'll be there when the winter road opens up in 2010," said Paul Champagne, president of Caz Petroleum Inc, Tahera's senior secured creditor.

NNSL Photo/Graphic

It may not look like much, but a good part of Tahera's hopes for restarting the Jericho Diamond Mine are based on what's shown here - a revised mine plan for Jericho, which focuses on underground mining instead of open pit mining. The new underground plan will be developed by Procon Mining and Tunnelling, the underground mine contractors for BHP Billiton's Ekati diamond mine. - graphic courtesy of Caz Petroleum.

Jericho closed early 2008 after mounting operating costs began to significantly outpace diminishing revenues. Jericho, which opened in 2006, was Nunavut's first diamond mine, and is located 350 km southwest of Cambridge Bay.

Champagne has no illusions reaching activity by 2010 will take a lot of elbow grease.

"It's a tall order," said Champagne, whose company recently pledged up to $5 million to finance the restart of Jericho.

"But we've gotten over the first hurdle with the Ag Growth deal," he added, referring to the deal announced Monday between Ag Growth, the Winnipeg-based Income Fund; Tahera; and Tahera's subsidiary company, Benachee Resources Inc.

The deal will allow Ag Growth - a agricultural equipment manufacturer -- to convert from an income fund into a corporation, essentially using Benachee as a corporate shell.

Ag Growth benefits by making the switch before the federal government eliminates the special tax advantage to income funds on Jan.1, 2011. For a tax-free conversion to a corporation, a transaction, like Ag Growth's, must happen before 2013.

So what does this have to do with Jericho?

In short, the transaction will provide Tahera with cash to put back into the company - both Jericho and all related mining assets remain with Tahera -- with the goal of taking preliminary steps towards restarting commercial mining operations.

One of those preliminary steps is figuring out how Jericho might look if it restarts commercial production.

"It's not going to be open pit," said Champagne, adding such methods weren't economical for Jericho. Procon Mining and Tunnelling - underground mine contractors for BHP Billiton's Ekati Diamond Mine's since 2000 - has been hired to design a plan for commercial production at Jericho, this time as an underground mine.

Such an operation is generally costlier - and employs fewer people once in production.

Perhaps keeping that in mind, Tahera also entered into a financial advisory agreement with Cormark Securities Inc last week. The agreement makes Cormark one of Tahera's many financial advisers, giving Cormark the role of finding financing for the mine's restart - an estimated $30 to $40 million.

Meeting the $30 to $40 million mark won't be easy, admitted Champagne.

"Raising money to restart a mine that has shut down is a difficult task," he said.

Especially if the same company that owns the mine is facing Companies' Creditors Arrangement Act (CCAA) proceedings, he added.

Tahera was granted a stay of proceedings by the Ontario Superior Court of Justice on Jan. 18, 2008. The stay has since been extended several times, most recently to May 29, 2009. It essentially places Tahera under bankruptcy protection; once it's lifted creditors can move in and seize the company's assets.

But the hard work will be worth it if Jericho reopens.

"I think people want to see it happen. And we will work hard to make it happen," said Champagne.

Certainly, Derrick Power, current SAO of Kugluktuk and former mayor, is one of those who wants to see it happen.

“Before, 10 -15 people (from Kugluktuk) worked at that mine. They were two weeks in, two weeks out” he said.

When Jericho closed, the community lost those 10 -15 jobs, he added.

Power said news that Tahera is putting effort into restarting the mine by using its resources and putting money into Jericho has him optimistic.

“We will benefit if they open it back up,” he said.