Tahera’s Jericho mine brings some sparkle to Nunavut

Jericho mine, Nunavut — It may be a small beginning, but it is certainly an auspicious one. Toronto-based Tahera Diamond (TAH-T, TAHEF-O) recently celebrated the official opening of its Jericho diamond mine in Nunavut in good company, with Prime Minister Stephen Harper among its guests.

With expected production of 500,000 carats of diamonds per year over 8.5 years from a single kimberlite pipe, Jericho is small fry compared with its Far Northern diamond-mining neighbours, about 170 km south, and just across the border with the Northwest Territories. BHP Billiton’s (BHP-N) Ekati diamond mine, which exploits multiple open pits and underground mines, is expected to produce 4-5 million carats per year over 25 years, while production at Rio Tinto (RTP-N) and Aber Diamond’s (ABZ-T, ABER-Q) Diavik mine is slated to be more than 8 million carats per year for at least 16 years.

Despite its size, Tahera’s $120-million operation, which began commercial production in July, represents a number of achievements for both Nunavut and the Canadian diamond mining industry. While it is Canada’s third diamond mine, it is Nunavut’s first — in fact, Jericho is the first mine to open in Nunavut in more than 20 years. It also illustrates Canada’s growing status as a diamond producer.

“Mines like Jericho are making Canada one of the largest and most important diamond producers in the world,” Harper said at the opening ceremony. “This type of success will help build a new North, paving the way for new and exciting business enterprises.”

Canada’s share of world diamond production is growing, and with De Beers’ Victor mine in Ontario and Snap Lake mine in the Northwest Territories under construction, the diamond rush is only gaining momentum. By value, Canada currently produces more than 10% of world supply, making it the world’s third-largest diamond producer after Botswana and Russia.

“Canada is now a major global diamond producer and Tahera intends to play a significant role in increasing that presence,” said Tahera chairman and CEO Peter Gillin.

The company is evaluating the potential of kimberlites within the Jericho claim block, as well as at the nearby Polar project to possibly extend the life of its operation and increase production.

Tahera is the first Canadian diamond explorer to enter production without a partner — a daunting prospect for a junior with no previous operations experience, especially in the harsh Arctic.

Gillin, who joined the company in 2003, said it wasn’t the company’s first choice.

“We investigated in the past, prior to my time, different arrangements — either sales of this asset or joint ventures of this asset — none of which were successful, so we then decided to do it ourselves,” he explained.

During the ceremony, Gillin credited the experienced contractors and consultants that helped get Jericho off the ground, as well as De Beers Canada and Tiffany & Co. (TIF-N) for being the company’s “bookends.” Tahera has forged partnerships with both companies: a purchasing agreement with Tiffany, with the high-end jeweller also selling the rough diamonds it doesn’t buy on the world market; and a joint venture with De Beers Canada on the nearby Polar project.

There have been some glitches for Tahera: capital costs came in at one-third more than originally estimated; and since March, a problem with the processing plant’s primary crusher has reduced the average tonnes processed per day to 1,600 from an expected 2,000. The company says a replacement crusher will be in place by the end of August.

But a 59-carat gem diamond recovered during the second quarter and valued at upwards of US$400,000 — the most valuable diamond recovered yet at the project — points to the project’s possibilities. The currently defined reserve at Jericho is 2.6 million tonnes grading 1.2 carats per tonne.

Tahera has a number of properties in the area, but it sees the Muskox pipe, 14 km west at the Polar project, as the most prospective. The company earned a 50% stake in the project this year from De Beers Canada by spending $11 million on exploration.

In 2004, De Beers Canada took “a bet on the management of Tahera” when it gave the junior a chance to explore its claims (including the Muskox, Unicorn, Voyageur, and Rush kimberlites), and a crack at earning a 50% interest in those claims, said John Hughes, senior vice-president for new business with the diamond powerhouse.

“We would never have done this if we didn’t think Tahera had the operational skills and the finance, particularly, to pull it off,” Hughes said.

A 900-tonne bulk sample recovered from Muskox is currently being tested. The results — which will give the company a better idea of the economic potential of the pipe — are not expected until sometime in the fourth quarter.

Unlike the Jericho pipe, Muskox is mostly underwater, making access somewhat difficult. De Beers found the pipe in the mid-1990s and drilled a number of holes, which yielded a preliminary grade of 0.36 carat per tonne (T.N.M. July 24-30/06).

Jericho is not just a promising start for Tahera, but also for Nunavut. Canada’s newest territory was carved out of the Northwest Territories in 1999, and Jericho is the first mine to be reviewed by the Nunavut Impact Board, established under the Nunavut Land Claims Agreement.

An Inuit impact and benefits agreement was also signed with the Kitikmeot Inuit Association, detailing employment and training opportunities for Inuit at the site. While Jericho only employs about 180 people at the moment — 90 on-site at any one time — both Nunavut Premier Paul Okalik and Gillin expressed hope that for many years it would provide jobs for local Inuit.

“More than 20 years ago, I first started working in a mine as an apprentice welder and mechanic,” Okalik said. “Back then, I didn’t see a lot of Inuit working in the mine, but I must say I’m impressed with the number of Inuit that are working here already.”

Okalik also said Nunavut is hoping to attract more exploration and mining investment.

Shares in Tahera are trading at around $2.28 in a 52-week window of $1.87-$4.15.