Shear secures Jericho water licence

Shear Diamonds (SRM-V) has earned a final approval on a water licence renewal for its Jericho diamond project in Nunavut.

The eight-year licence, which the company reports is the longest in Nunavut’s history, clears the way for the company to advance the project towards commercial production.

On news of the approval the company’s share price gained 6¢, or 20%, to end at 36¢, although the company announced in late December that the Nunavut Water Board had recommended the licence’s approval to the minister of Aboriginal Affairs and Northern Development Canada.

In December the company completed a US$2-million financing deal with Belgian-based diamond dealer Tache Company. The deal will see Tache selling rough and polished diamonds from the mine, and Shear participating in the sale’s final net profits.

Shear acquired the Jericho mine and related infrastructure in August 2010, along with the former exploration assets of Tahera Diamond, for $2 million cash, 80 million shares and a 2% royalty to Caz Petroleum, the leading creditor. At the time of the purchase Shear raised $13.1 million in a private placement, issuing 139.4 million shares at 6.5¢ each. Months later the company rolled back its shares 1 for 10.

The Jericho mine, sitting 420 km northeast of Yellowknife in Nunavut’s Kivalliq region, was in production between January 2006 and May 2008. In that time Tahera Diamonds mined 13.6 million tonnes, including 1.5 million tonnes of kimberlite. Tahera recovered 780,000 diamond carats from 1.26 million tonnes of ore before operations finally ceased.  

Tahera Diamonds invested more than $200 million in the mine — building a 2,000-tonne-per-day diamond recovery plant, 225-person camp, and other infrastructure — but the mine never reached design capacity. The company had planned a nine-year open-pit mine and expected to mine a 5.5-million-tonne kimberlite resource grading 0.85 carat per tonne at a 5.2-to-1 strip ratio. Tahera also planned to produce 4.7 million carats at US$95 a carat, but high operating costs and low mining recoveries hampered its efforts. 

Shear had SRK Consulting prepare an updated resource estimate that shows the Jericho kimberlite complex contains indicated resources of 1.8 million tonnes grading 1.06 carats per tonne, which is equivalent to 1.9 million carats worth an estimated US$103 per carat. Inferred resources host a further 1.7 million tonnes averaging 0.65 carat, equal to 1.1 million carats valued at US$100 per carat.

In October 2011 Shear outlined a new geological model for the Jericho kimberlite complex, now interpreting it as a series of pyroclastic kimberlite eruptions trending in a south-to-north direction from two vents known as the south-central and north lobes. 

The company has a 52-week share price range of 12¢ to 58¢, with 45.9 million shares outstanding.