Tahera Diamond Corp has signed an agreement with Tiffany & Co in which the luxury jeweler will buy or market all of the diamond production from Tahera’s Jericho Diamond Project and provide a CA$35 million ($28 million) loan facility to assist in the construction of the project.

Under the deal, Tiffany will purchase a significant portion of the diamond production from the Jericho Project in the Northwest Territories for its own manufacturing requirements, and will sell the balance on behalf of Tahera on the international market.

 

The agreement covers the entire life of the Jericho Project, estimated to be nine years.

 

Valuation and price discovery mechanisms are in place to ensure Tahera will achieve competitive market prices for its diamonds.

 

Tahera will pay no sales or other fees on the diamonds bought by Tiffany, and will share in the diamond manufacturing profits on a formula basis dependent on diamond size.

 

Tiffany will act as agent and will market for a fee the portion of the Jericho diamond production that it does not purchase.

 

For Tahera, the deal mitigates many of the costs associated with marketing diamonds independently, including the development of a large marketing staff, and shipping, insurance, and security.

 

Regarding the $28 million credit facility to be used to finance development and construction of the Jericho Mine in Nunavut, approximately 420 kilometers northeast of Yellowknife in the Northwest Territories, the draw down of the credit facility will be conditional on Tahera completing an acceptable equity financing and on receipt of all necessary permits.

 

The loan will be secured by a first priority security interest over the Jericho Project. Tahera plans to finance the balance of the Jericho diamond mine development and construction costs through the sale of equity.

 

“To support our growing sales of diamond jewelry, Tiffany’s strategy is to align with direct-from-mine sources that can help us to secure increased availability at our quality levels,” said James N. Fernandez, Executive Vice President and Chief Financial Officer of Tiffany & Co.

 

“We are excited to enter into this agreement with Tahera, which meets those criteria. Tiffany benefits in terms of expanded access to rough diamonds and favorable costs, as compared with typical polished diamond sourcing arrangements, and will be able to leverage its established diamond infrastructure and organization.”

 

Meanwhile, Tahera sees the deal as giving a prestigious seal of approval for the diamonds it expects to mine. “Obtaining the support and commitment from Tiffany is a major milestone in Tahera’s history and reflects very favorably on the quality of the diamonds which will be mined from the Jericho Diamond Project,” said R. Peter Gillin, Tahera’s Chairman and CEO.

 

“Entering into a diamond purchase and marketing agreement with Tiffany will provide Tahera with the opportunity to realize superior values for its diamond output and enables the Company to focus on exploration and mine development.”