Tahera, Kennecott rework deal again

Tahera (TAH-T) has inked a letter of understanding with Kennecott Canada Exploration outlining the terms and conditions under which Tahera’s Jericho claims may be incorporated into the companies’ existing joint venture.

Under an already revised joint-venture agreement, Kennecott, a division of Rio Tinto (RTP-N), can earn an initial 25% interest in the Rockinghorse and Hood River properties by spending $25 million on exploration by 2008. Kennecott can earn up to a 62.5% stake by funding all costs up to and including a bankable feasibility study.

The company has budgeted expenditures of $2.2 million for 2001.

Under the new deal, Tahera will continue to seek regulatory approval for the development of the Jericho kimberlite. The draft environmental impact statement (EIS) for the project is under the review of several regulatory agencies. Tahera will submit a final EIS as part of the permitting process.

Also under the new understanding, Kennecott has a one-year option to incorporate the Jericho claims and their known kimberlites into the existing joint venture.

Kennecott must also:

• spend at least $1 million and drill at least 20 kimberlite targets within a year of signing;
• spend at least $1 million per year on the Jericho claims in addition to the $1.5-million-per-year commitment on the rest of the joint venture;
• accelerate exploration on encouraging targets;
• make a $1-million private placement in Tahera at a 10% premium over the market value at the time and make similar, annual private placements over the next four years at premiums of 25%, 50%, 100% and 200%, respectively, on the original placement price; and
• market all diamonds from the Jericho claims for the first five years of production — then Tahera could market its own share of production and would have the right to purchase diamonds produced by the joint venture.

Tahera would also retain a 2% gross royalty on Kennecott’s share of production from the known kimberlites on the Jericho claims.

If Kennecott does not have a plan in place to mine the Jericho kimberlite within two years of incorporating the Jericho claims, Tahera may elect to develop, mine and market diamonds from the kimberlite on its own.

Kennecott would transfer any rights and interest in the Jericho kimberlite to Tahera.