Technical upgrades could save Jericho

Taking recommendations from shareholder Teck Cominco, Toronto-based Tahera Diamond Corp. is making rapid changes to its operations at the newly opened Jericho mine in Nunavut. For now, the cost of producing diamonds far exceeds their value, according to Tahera's first quarter report. The value of production in that period was US$6.4 million, compared with a cash operating cost of $17.1 million.

Jericho processed 171,000 metric tons of ore in the first quarter of 2007, at an average grade of 0.44 carats per ton, resulting in production of 74,500 carats. The value per carat of the diamonds was $88, slightly lower than the $93 value achieved in 2006, Tahera's chairman and CEO, Peter Gillin, said in a conference call May 7. The company did raise more cash in the first quarter, though, completing a $22.5 million equity financing in mid-April.

Fortunately for Tahera, the winter road from Yellowknife to Jericho was able to stay open for about 10 weeks this year - enough time to transport all the needed supplies. In 2005-06 the road closed early due to warm temperatures, causing problems for several mining operations in Canada's far north. The number one focus at Jericho now will be waste stripping, to fully expose the kimberlite ore, Gillin said.

"This kimberlite is structured, essentially, in such a way that the richer ore body is lower than where we are at the moment," Gillin told investors. "This is still relatively early days in the mine plan, and going back to the feasibility, going back to our preliminary assessment analysis, the richer grades are at the deeper levels, and we're not even yet now down to the level at which the original bulk sample was done that gave rise to the 0.84 resource grade and the 1.20 reserve grade. So, as I say, we're optimistic that we're on the right path here, and I think that once we get our operational bugs ironed out, we'll be back on track."

Processing expected to be less than forecast

Tahera predicts that around 650,000 tons of material will be processed at Jericho this year, which is less than originally forecast. Operating improvements will be made over the next two quarters, so the company doesn't expect to make a profit this year, but it is still aiming to ultimately reach a healthy level of production. The sift size in the processing has already been reduced to catch smaller-sized stones, Gillin said. The strategy of only going for larger stones didn't prove too successful, so the company is changing tack to try and extract more value from the mine.

The departure of two key executives from the company isn't a case of rats leaving a sinking ship, Gillin said in answer to a shareholder's blunt question. Daniel Johnson, executive vice president for operations, is leaving to pursue other interests, and Grant Ewing, executive vice president for corporate development, has taken a job as president and chief operating officer of Halifax, Nova Scotia-based Linear Metals.