Tahera needs cash injection

As 2007 winds down Tahera Diamond (TAH-T, TAHEF-O) will have to go down as one of the more dire mining stories of the year.

The company, which has been bleeding cashflow since its Jericho mine opened in 2006, updated its refinancing plan on Dec. 11 and the news sent shares tumbling yet again.

Since trading for $1.34 at the beginning of February, its shares have fallen all the way down to the paltry sum of 10 on Dec. 13.

Tahera’s woes are twofold. Not only is the company losing cash at the mine, but it needs more for a winter road and to re-supply so that it can improve operations to the point where, hopefully, mining the diamonds will stop costing more than double what the diamonds are worth.

To do it, the company is in the process of finalizing a rights offering which it says will raise $36.7 million.

It also cut a deal with jeweler Tiffany & Co. (TIF-N), who was set up as a buyer of Tahera’s diamonds from the inception of the mine, but who Tahera owes $12.5 million.

Unable to make the payment Tiffany agreed to convert a portion of the debt into shares. The number of shares amounts to 19% of outstanding common shares after the rights offering is completed.

The Tiffany deal will be closed alongside the rights offering which must be completed by December 18.

Nuna Logistics is also owed money — $3.15 million to be exact but it too has agreed to take Tahera shares in place of cash. Nuna also agreed to make certain concessions with respect to labour and equipment costs.

Both the Tiffany and Nuna deals are conditional on Tahera raising at least $30 million in its rights offering.

Notably, Teck Cominco (TCK.A, TCK.B-T, TCK-N), which owns roughly 16% of Tahera’s shares, is not partaking in the rights offering.

But, Tahera says, Teck Cominco will keep providing operational and technical support on an “as needed basis.”

Tahera concedes that its financial position has “deteriorated”, as a result of the cost of mining diamonds being more than double the cashflows generated by them and if it can’t raise the $30 million things will go from bad to worse.

“Failing to find an alternative source of financing,” a company release reads, “Tahera would be forced to consider various alternatives such as interrupting activities at the Jericho Mine, mine closure, sale of the Company or seek creditor protection under Canadian insolvency legislation.”