Business will soon collapse: Tahera

Tahera Diamond (TAH-T) said today that it has filed for protection from its creditors after a failed financing attempt left the already struggling diamond miner in fear of going under.

Many who have hung on to their shares for this long were finally giving up hope today as more than 19 million shares changed hands, causing the stock to fall 46%, or 6.5, to just 7.5 each.

Tahera is seeking protection under the provisions of the Companies’ Creditors Arrangement Act (CCAA).

The company needs money for winter supplies and for maintenance of the winter road leading to its remote Jericho diamond mine in Nunavut, which has experienced production problems since it opened in July 2006.

The company also has a fully-drawn credit facility for $50 million with Laurelton Diamonds, an affiliate of Tiffany & Company. Loan payments have been rescheduled three times now, with nearly $4.7 million owed on Jan. 31.

Tahera owes another $25 million in trade debt, mainly to contractors. That includes mining contractor Nuna Logistics, which is owed more than $14 million and Dyno Nobel Nunavut, an explosives contractor, owed $920,000.

Dyno has filed a $620,000-claim for lien (a right to withhold the goods/property of another until a payment is made) on a number of Tahera’s mineral claim and mining leases.

Tahera unsuccessfully tried to raise $40 million at 6.5 per unit in December and has been working on a restructuring so that it can continue.

In an affidavit to the Ontario Superior Court of Justice, Tahera chief financial officer Andrew Gottwald said the company “is in serious financial difficulty.”

Gottwald says that Tahera has little hope of survival if the company isn’t able to operate outside of formal restructuring proceedings.

“Tahera’s liquidity will continue to deteriorate and its business will soon collapse,” Gottwald writes.

CCAA protection will allow Tahera to continue its day-to-day operations at Jericho until its status changes.

The company says the implications for shareholders are unclear and will remain unknown until the end of the restructuring process. The restructuring will depend on the terms of the plan approved by the affected stakeholders.