Tiffany strikes glittering deal with Tahera

The Tahera Diamond Corp. last week found most of the cash it needs to start building Nunavut’s first diamond mine, in a deal with the renowned U.S. jewellery retailer, Tiffany & Co.

Under the deal, announced Oct. 7, Tiffany will:

* loan Tahera $35-million over the next five years, to be spent on development and construction of the Kitikmeot’s Jericho Mine;
* buy most of the diamonds produced at Jericho, to be manufactured into high-end jewellery and gift products;
* act as Tahera’s marketing agent for those diamonds they don’t buy, and sell them into the international market.

Tahera executives are hailing the deal as a seal of approval for the diamonds they expect to take out of their Jericho mine, located about 350 km southwest of Cambridge Bay.

“This is an absolute plus for the company. Our arrangement with a prestigious firm like Tiffany speaks volumes about the quality of our Jericho diamonds,” said Greg Missal, Tahera’s vice president of regulatory affairs.

Tahera will ship diamonds to the Tiffany cutting and polishing plant in Yellowknife, which opened in 2003. The plant is actually operated by Laurelton Diamond Inc., a wholly-owned subsidiary of Tiffany.

Tiffany opened its first store in New York City in 1837, and now runs a $2-billion luxury gift business, with retail stores on five continents.

The human rights group Global Witness praised Tiffany earlier this year for ensuring that blood diamonds — gems sold by African guerrilla armies and bandit groups to finance bloody wars — don’t find their way into Tiffany jewellery.

That’s why Tiffany has a keen interest in buying diamonds from companies like Tahera, the second Canadian firm to strike a supply deal with Tiffany. Last year, Tiffany reached an agreement with Aber Diamond Corp., the B.C. company behind the Diavik Diamond Mines, to buy $30 million worth of diamonds over the next 10 years.

Gillin said Tahera is now ready to ship construction materials to the Jericho site in February 2005 along a winter road to Yellowknife, and to start building the mine later in the spring. The company hopes to start producing diamonds by early 2006.

Though small when compared to the gargantuan diamond mines at Diavik and Ekati in the Northwest Territories, the Jericho mine would be Nunavut’s first new working mine in many years.

Tahera estimates that 45 to 120 people will be needed to construct the mine and an on-site diamond processing plant. Between 48 and 116 employees will be needed for at least three years to work on open-pit mining, while another 48 people will work for two years doing underground mining.

Under Tahera’s Inuit impact and benefit agreement with the Kitikmeot Inuit Association, the company will use its “best efforts” to ensure that, after five years, 60 per cent of its workers are Inuit.

The Inuit firm, Nuna Logistics, owned by the Nunasi Corporation and the Kitikmeot Corporation, is Tahera’s “preferred contractor” for mine construction work.

One of the last bureaucratic hurdles left for Tahera is to get a water licence. Gillin said the Nunavut Water Board recently accepted the company’s water licence application and has scheduled public hearings for Dec. 6 and Dec. 7 in Kugluktuk.

Tahera must also finish signing land leases for the site, and arrange other necessary permits.

After Tahera made some changes to the design of a processing plant at the mine, the company now estimates the cost of building the mine at $72.5 million. That money will come from the Tiffany loan, and from selling shares on the stock market.

Gillin says diamond prices are expected to keep on rising, and predicts a rosy future for Jericho. Over its nine-year life, the mine will produce about 4.7 million carats of diamonds, generating an estimated $142 million in before-tax profits.

“We are clearly bullish about the outlook for the rough diamond business,” Gillin said.

As for how Jericho’s product will be marketed and branded, Gillin said that’s up to Tiffany. He said it’s possible any extra diamonds that Tiffany chooses not to use for jewellery may be branded as “Jericho” diamonds if sold in Canada. But Tiffany is unlikely to do that with the diamonds that they will buy for its own use.

For a small company like Tahera, the deal with Tiffany means they don’t have to carry the cost of maintaining their own sales and marketing department.

“It eliminates a lot of worry, and issues that might arise out of a small producer having to arrange and provide those activities for themselves,” Gillin said.