Shear seeks buyer, partner, new financing for Nunavut diamond mine

A year ago the future looked bright for Nunavut’s Jericho diamond mine, which had last operated from 2006 to 2008. But now Shear Diamonds Ltd., which bought the mothballed mine in 2010, faces the loss of key staff and directors as well as financial problems. (FILE PHOTO)

The troubled mining junior, Shear Diamonds Ltd., now faces new challenges that include the loss of top people and a debt of about $3 million to the Belgian diamond firm Taché.

The company announced Nov. 15 that its chief financial officer and two of its directors, Pamela Strand, who is also president of the Northwest Territories and Nunavut Chamber of Mines, and David Prince, have resigned.

And in the news release, Shear said it wants to enter into “a transaction, whether financing, joint venture, sale or otherwise that will either allow Shear to advance its Jericho project or to otherwise realize value for Shear’s stakeholders.”

The resignations and acknowledgment of financial problems follow the Sept. 4 announcement by Shear that it had suspended production of its high grade stockpiles at its 100-per cent owned Jericho diamond mine as a result of continuing weak world diamond prices.

Taché had agreed to purchase rough and polished diamonds from the Jericho project and to provide Shear with a loan of $2 million, repayable over 12 months, after Shear began receiving the proceeds of diamond sales

In addition to its $2 million term loan, Shear had also drawn $1.6 million against its $3 million revolving line of credit with Taché, Shear said in September.

In order to protect its interests and preserve its priority as Shear’s lender, Taché has now given notice to Shear of Shear’s “default of certain terms of the credit agreement between the parties and provided notice of intention to enforce security,” the company said Nov. 15.

“At this time, diamond and financial market conditions continue to make it difficult for Shear to secure a financing or other transaction. There can therefore be no assurance that an appropriate transaction will be found,” the company said.

Shear, purchased the mine, located roughly 350 kilometres south of Cambridge Bay in 2010.

The Jericho mine, which operated from 2006 to 2008, was Nunavut’s first diamond mine.