Dark third quarter for Tahera Diamonds

It cost Tahera Diamonds (TAH-T) $17.9 million to produce $8.6 million worth of diamonds over the third quarter and investors are not impressed.

Tahera chairman and CEO Peter Gillin left investors uneasy about the future in a conference call today.

The company, which brought the Jericho diamond mine in Nunavut into production in July 2006, is blaming ongoing operations troubles, the appreciation of the Canadian dollar against the U.S. dollar and higher oil prices for the mines lack of success over the last year.

To the layman on the streets that sounds like lousy business, said investor Ron Arnold during the conference call. What I would like you to tell me, Peter, is that all is well in Paradise because what Im seeing is some pretty dark clouds.

For the first nine months of the year, Taheras total revenues were $20.7 million with an operating loss of $45.5 million.

The companys total net loss for the year was $143 million, or 71 per share, compared to a net loss of $8.2 million, or 5 per share, last year.

This years loss includes asset impairment charges of $73 million, write downs of deferred exploration and development balances of $21.4 million.

Tahera owes jeweler, Tiffany & Co. $12.5 million in debt repayments. Tiffanys, which has a marketing and diamond purchasing agreement with Tahera, has agreed to defer payments due at the end of September until the end of the year. Tahera says Tiffanys has also indicated that it would convert the $12.5 million into equity.

The company says it plans to raise new equity through a share purchase rights offering to its shareholders, but the details of that wont be worked out until the end of the year.

Gillin told investors that the company has been working to increase throughput at the plant, which processed 127,500 tonnes at an average grade of 0.78 carats per tonne resulting in the production of 99,300 carats in the third quarter, an increase of 34% over the second quarter.

We cant control the value, we cant control the dollar so what we can control, or what we hope we can control is tonnage throughput in the plant, Gillin said when asked about future guidance.

Production reached its highest yet in October, with 55,000 tonnes processed at an average grade of 0.85 carats per tonne, resulting in 47,000 carats.

Tahera shares fell 29% to 20 today on a trading volume of 5.1 million shares.