Shear Diamonds suspends production at Jericho

Shear Diamonds (SRM-V) suspended production from stockpiles at its Jericho diamond mine, in Nunavut, in early September.

The company, led by president and CEO Julie Lassonde, had been hoping to prove the viability of the project this year. Jericho was a past producer from 2006-2008.

In a release, Shear explained that diamond prices had dropped below the company’s break-even prices earlier this year. The company’s diamond marketing partner and lender, Taché, had funded production through the summer in hopes of a revived diamond market.

Shear has a $2-million term loan with Taché, and has also drawn down US$1.6 million against a US$3-million revolving line of credit with the diamantaire. The junior is seeking to complete a financing, sale, or other transaction to advance the project, focus on near-mine exploration, or otherwise realize value for shareholders.

Shear is in default of certain terms of its credit agreement with Taché, who “has provided notice of intention to enforce security,” the junior announced in October.

Shear succeeded in meeting some of its goals for 2012, namely renewing its water licence, recovering diamonds from stockpile material, and achieving 24-hour production (more than 80 tonnes per day) in June.

Between April, when it restarted production at Jericho, and early September, Shear delivered three parcels of diamonds to Taché of 47,516.32 carats in total, including individual stones of up to 6.01, 4.43, and 3.53 carats.

Shear Diamonds shares traded at a new low of 4¢ at presstime. The shares had traded as high as 46.5¢ in March. The company has 53.3 million shares outstanding.