Tahera's Jericho prefeasibility study positive
Tahera Corp
TAH
Shares issued 159,300,000
1999-11-29 close $0.06
Tuesday Nov 30 1999
Mr. Roy Meade reports
The Jericho diamond project, wholly owned by Tahera Corporation, is located in the new territory of
Nunavut, approximately 420 kilometres northeast of Yellowknife, NWT, and 170 km north of Ekati,
Canada's first diamond mine.
SRK Consulting (Steffen, Robertson and Kirsten Canada Inc.) has completed a prefeasibility study for
the Jericho diamond project. DRA Mineral Plant Design Engineers, which has extensive experience in
design and construction of diamond plants worldwide, provided detailed diamond plant engineering for
the study.
The prefeasibility study indicates that approximately 2.7 million carats will be produced over an
eight-year mine life. The current plan consists of open pit mining of the Jericho kimberlite, and
processing 300,000 tonnes of kimberlite ore per year.
DRA examined two options for the location of the proposed diamond plant, namely adjacent to the
Jericho open pit or sited at the Lupin gold mine (owned by Echo Bay Mines Ltd.), located 28 km
southeast of the Jericho kimberlite. The facilities use agreement between Echo Bay Mines Ltd. and
Tahera provides that upon completion of a positive feasibility study, and subject to the terms set out in the
agreement, the Lupin mine site and facilities will be available to Tahera for the purpose of construction
and operation of a long-term commercial production facility.
Based on the prefeasibility study, the option to construct a new diamond plant at the Lupin mine site is
favoured. Current plans call for ore to be mined by contractor and stockpiled at the Jericho site. A
contractor will haul ore seasonally via a winter road from the Jericho site to the Lupin mine site where it
will be stockpiled next to the proposed diamond plant. The proposed diamond processing plant will have
a 50 tonne-per-hour capacity and operate year-round.
Tahera favours the option to use the Lupin facilities as the location of the diamond processing plant due
to its central location in relation to the company's extensive exploration landholdings in the area. Future
economic kimberlite discoveries could be treated at the proposed Lupin mine site diamond plant. In
addition, Tahera believes that permitting of the mining project will be facilitated, environmental impacts
will be minimized and capital cost savings will be achieved as a result of locating the diamond plant at the
Lupin mine site.
The following pretax parameters have been defined for the proposed mine in the prefeasibility study:
Total geological resource -- 6.5 million tonnes at 0.82 carats/tonne
Potential mining reserve -- 2.345 million tonnes at 1.13 carats/tonne
Diamond valuation -- $65 (U.S.) per carat ($96 (Canadian) per carat)
Capital cost (Canadian dollars)
Process plant $13.8 million
Infrastructure at Lupin 2.6 million
Jericho site (site prep.,
roads, and prestripping) 8.8 million
Other (Echo Bay credit,
contingency, working
capital) 15.1 million
-------------
$40.3 million
Production rate -- 300,000 tonnes per year
Diamond production -- 2.7 million carats
Operating costs -- $63/tonne
Gross revenue -- $254-million
Operating cash flow -- $106-million
Mine life -- eight years
IRR -- 33.2 per cent
Payback -- two years
Tahera has very considerable tax pools that will be allocated to the project.
Sensitivity analysis indicates that the project economics are most sensitive to diamond valuation, grade
and the US-Canadian dollar exchange rate. The prefeasibility study concluded that the project is
economically viable based on the current assumptions.
Feasibility study
SRK Consulting recommended that further resource definition of the Jericho kimberlite at depth be
undertaken to complete the feasibility study. This work program, entailing a four-hole 1,800 metre
diamond drilling program has recently commenced. The objective of the program is to provide better
definition of the geometry of the Jericho kimberlite between the 100 and 300 metre level, and convert the
resources in this area from inferred to indicated. Due to the conservative nature of the geometric
modelling in this area, the drill program is expected to add to the current resource base. A conceptual
underground mine plan has been developed for resources below the proposed open pit in anticipation of
the resources being converted to reserves which could potentially improve the project economics
significantly.
A revaluation of the 10,500 carat parcel of diamonds, extracted from the Jericho kimberlite during the
underground bulk sample program, is currently under way. The updated diamond valuation was
commissioned to provide valuation numbers for the feasibility study that reflect current world diamond
market conditions. Tahera plans to sell the diamonds on completion of the analysis.
Results from both the drilling program and the diamond revaluation will be incorporated into the final
feasibility study.
Project development
The permitting process for the Jericho diamond project is under way. A water licence application for the
proposed Jericho mine site was submitted to the Nunavut Water Board in November 1999. The
application is supported by a revised project proposal which was prepared to meet the requirements of the
Nunavut environmental assessment and review process. This project proposal will assist the various
regulatory bodies in their evaluation and assessment of the Jericho diamond project.
Echo Bay Mines Ltd. and Tahera negotiated a facilities use agreement in October, 1996. The agreement
entitles Tahera to construct and operate the proposed production facility at the Lupin mine site, subject to
terms set out in the agreement. A joint technical committee will review the proposed development and
ascertain the capital and operating cost benefits achieved by locating the diamond plant at the Lupin mine
site. The agreement stipulates that one-half of the capital cost savings will be credited to Echo Bay Mines
Ltd.
Current plans call for completion of the feasibility study in the second quarter, 2000. Subject to obtaining
regulatory approvals, finalizing arrangements with Echo Bay and project financing, plant commissioning
is planned for the fourth quarter, 2001, followed by commencement of commercial production in the first
quarter, 2002. Tahera is currently evaluating options to finance the proposed Jericho mine development.
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