Editorial: Tiffany Breaks Out Smelling Salts for Woozy Tahera

The end of a financial quarter always springs a few surprises, and the week ended Sept. 29, the 39th trading week of 2007, had one for beleaguered Tahera Diamond shareholders, who have watched their investment in the money-losing diamond miner slowly melt away over the past two years.

* On Sept. 28, Tahera was thrown a financial lifeline by Tiffany & Co., with the high-end U.S. jewellery retailer allowing Tahera to defer until year’s end all scheduled repayments of principal and interest under a credit facility provided by Tiffany. These payments had been scheduled to begin on Sept. 30, 2007. This appears to be a stop-gap measure, with Tahera saying it hopes to have a more comprehensive financial restructuring in place within weeks.

Tahera owns and operates the Jericho diamond mine in Nunavut, and has long had a cornerstone diamond-purchase and marketing arrangement with Tiffany. Almost a year ago, things were briefly looking up when Teck Cominco struck a deal to invest millions in Tahera, with an understanding that the miner could also provide the junior with technical assistance at the mine. The reality this year was glummer, though, with the recent second quarter seeing Jericho yield $5.9-million worth of diamonds at a cash cost of $17 million.

* In happier news, the 3-month old hostile takeover attempt by Yamana Gold of Meridian Gold turned very friendly after Yamana threw yet more cash on the table. It was all smiles and handshakes between the two management teams at the Denver Gold Forum, as the Meridian board gave the nod to Yamana’s latest, best offer of C$7 in cash plus 2.235 Yamana shares for each Meridian share.

* How quaint! Overseas, shareholders of public companies are still allowed to do things like vote on massively diluting takeover offers for smaller rivals. In separate meetings held in September, shareholders of Rio Tinto plc and Rio Tinto Ltd. approved the US$38-billion friendly takeover of Alcan by 709 million votes for to 20 million against. Rio Tinto still looks set to achieve its ambitious goal of completing the takeover before year-end.

* In the wildly unpredictable Mongolian mining scene, there was an encouraging sign that the Mongolian government is taking seriously the year-old partnership between Ivanhoe Mines and Rio Tinto at the Oyu Tolgoi copper-gold project in Mongolia. This past week an envoy of Mongolian government officials flew to Utah to tour Rio Tinto’s huge Bingham Canyon copper mine, roughly analogous in scope to Oyu Tolgoi’s planned mine development.

The delegation comprised six Mongolian members of parliament, including the finance minister, and representatives of several political parties. Playing host was Bret Clayton, CEO for Rio Tinto’s copper division and Bill Champion, president of Rio Tinto’s U.S. subsidiary, Kennecott Utah Copper. Next, the delegation headed off to tour the huge Las Escondidas copper mine in Chile.

Speaking at the Denver Gold Forum, Ivanhoe chairman Robert Friedland reiterated his view that a fair development agreement will be hammered out at Oyu Tolgoi.

* Barrick Gold’s Rob McEwen-esque “Unlock the Value” contest is now under way, with the gold major offering US$10 million to anyone who can dramatically enhance the silver recovery from its 2-year-old Veladero open-pit gold mine in Argentina’s San Juan province. Right now, there are some 180 million oz. of silver at Veladero, but it is encapsulated in silica, which results in 6.7% recovery rates using conventional methods. Until late January, Barrick will accept proposals with merit and then fund any required research and development. If the idea is successfully implemented at Veladero, Barrick will pay out the performance bonus of US$10 million. Interested metallurgists can check out Barrick’s new www.unlockthevalue.com website for details.

* Canadians of all stripes are getting used to a Canadian dollar that is all of sudden trading slightly above parity with the U.S. dollar. Long gone are the jokes about the “Canadian peso,” which were most fitting when the loonie bottomed out at US63.11 on Aug. 27, 1998. Much of the loonie’s strength is a reflection of the greenback’s weakness, though, so Canadian miners will still have a tough time increasing profit margins amid rising costs for almost every cash input, from labour to oil to chemicals.


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