Tahera Diamond agrees to sell 16% stake to Teck Cominco for $30M
Wed Nov 15, 3:37 PM
By Craig Wong
VANCOUVER (CP) - Teck Cominco Ltd. (TCK-B.TO) agreed to invest at least $30 million in Tahera Diamond Corp. (TAH.TO) for a 16 per cent stake in the diamond miner, which has had troubles at its Jericho diamond mine in Nunavut.
The deal gives Tahera a much needed infusion of cash as well as mining and other technical advice and assistance on the Jericho project under a technical support agreement with Teck Cominco.
Shares in the company gained 16 cents to trade for $1.17 on the Toronto Stock Exchange after the news was announced.
Under the agreement, Teck Cominco will buy 30 million units of Tahera at a price of $1 per unit. The units will include 30 million shares and 22.1 million share-purchase warrants. If all the warrants issued are exercised, Teck would increase its stake to 24.9 per cent.
"We believe that there are numerous benefits to this strategic alliance with Teck Cominco and it is further fulfilment of Tahera's strategy to be associated with leading industry partners," said Peter Gillin, Tahera's chief executive.
The agreement will give Teck Cominco the right to nominate a director to the board so long as Teck Cominco maintains at least a 10 per cent stake in the company.
Teck Cominco also has the right to maintain its percentage interest in Tahera, so long as the Vancouver-based miner maintains at least a 10 per cent holding in the company.
"Our investment in Tahera is consistent with our goal of further diversifying our portfolio especially into non-exchange traded commodities," said Teck Cominco chief executive Don Lindsay.
"As we continue to actively explore for diamonds, we view this alliance with Tahera and its existing partners as an attractive opportunity to expand our knowledge of all phases of the diamond business from mining through marketing, while helping to add value to the Jericho project."
The Jericho diamond mine was Canada's third diamond mine and the first in Nunavut.
Tahera shares plunged earlier this year after the company raised concerns about its cash flow and warned it expected to produce fewer diamonds than originally planned, due to lower-grade kimberlite rock and slow processing rates.
The company said at the time that it was in talks with Tiffany & Co., one of the company's lenders, about deferring a scheduled loan repayment.
Tahera said Wednesday that, with the Teck Cominco investment, Tiffany & Co. has agreed to defer scheduled repayments until Sept. 30, 2007, in consideration for the marketing rights for any production from the Muskox kimberlite which Tahera would be entitled to under its agreement with De Beers Canada Inc.
Teck Cominco had said it is looking for investments after failing in its hostile bid for Inco. With more than $3 billion in cash, the Vancouver-based company said it had a shopping list of 13 possible projects it was considering.
Shares in Teck Cominco were up $1.70 at $80.65 in trading on the Toronto Stock Exchange.
