How about a Partner?Teck is looking but as MTX is still early into their diamond projects, perhaps they should offer up the non-diamond properties at this time.
Teck Cominco eyes new diamond plays
2007-02-12 13:58 ET - Street Wire
by Will Purcell
Teck Cominco Ltd. is eyeing more diamond deals. The mining major dabbled in diamonds on occasion over the past 15 years without much success, but an arrangement with Tahera Corp. suggests the company is willing to try gems yet again. "We do want to be involved with diamonds in a bigger way in the future," said Teck vice-president, Greg Waller.
The Tahera deal
Late last year, Teck Cominco agreed to purchase 30 million shares of Tahera at $1 each. The cash infusion put $30-million into Tahera's depleted treasury, and the 22 million warrants accompanying the shares could add another $30-million to Tahera's coffers. If Teck exercises all the options, it would hold 52 million shares of Tahera, which would give it nearly one-quarter of Tahera's outstanding shares.
The agreement is much more than an investment according to Teck. The company also agreed to provide mining and technical advice to Tahera, and Mr. Waller thinks Teck can add value to Tahera's Jericho mine through its experience in operating mines in the North. Jericho went into production last summer but is off to an unspectacular start, mainly because fuel and supply shortages have boosted costs and forced Tahera to start with lower-grade rock.
Tahera has three other advanced diamond projects under exploration providing Teck with an added incentive. Tahera completed a small bulk sample of the Muskox pipe last year through an arrangement with De Beers Canada Inc., and it plans smaller tests of the JD/OD-3 and Anuri pipes this year. The company is also scouting for new pipes in the area.
Diamond diversification
Teck is a diversified miner that primarily produces base metals and coal, currently hot commodities that experience wild price swings. Mr. Waller said Teck was looking to diversify further, and the company is interested in commodities that have more stable pricing.
Teck considers the diamond sector to be something of a hybrid market that does not have a firm pricing regime, but offers the desired price stability. Mr. Waller said the Tahera arrangement gives Teck an opportunity to learn about the downstream end of the diamond business. "That is important if we want to get involved in diamonds in a bigger way in the future, which we do."
Teck apparently will consider striking out on its own, but property options and joint venture deals with junior explorers may be the preferred routes. The company is highly respected by junior explorers, the result of dealing with them fairly for decades, and being agreeable to their promotional ways. It routinely works with juniors on exploration plays and typically has equity investments in at least 50 junior companies at any one time, but just a few of those are currently involved in diamond exploration.
Teck's new diamond focus will be in Canada, likely in the North or in Ontario. "You want to look for elephants in elephant country and you want to look for diamonds in diamond country," said Mr. Waller. There are plenty of diamonds in elephant country, but Teck apparently has no interest in pursuing African gems.
Teck's first foray into diamonds occurred in Brazil in the 1990s, but it quit after failing to find an economic deposit. In 2002, Teck signed an option deal with Rhonda Corp., covering its Inulik property in the Coronation district of Nunavut, and it reached a similar deal with Diamonds North Resources Ltd. on Victoria Island. Teck quit both projects a few years later, after deciding neither offered the likelihood of a major find.
Teck currently has an option deal with Indicator Minerals Inc. that will have the major spending at least $2-million exploring the Darby property in Nunavut this year. Teck is also participating in the Wilson Lake project in Northeastern Ontario with Temex Resources Corp.