From Will P tonight Eric Friedland's Peregrine Diamonds Ltd. (PGD), up one-half cent to 22.5 cents on 260,000 shares, has transferred three diamond projects to a spin-off subsidiary, Peregrine Exploration Ltd. The fledgling has received mother Peregrine's Lac de Gras property in the Slave district of the Northwest Territories, and the Nanuq and neighbouring Nanuq North properties in central Nunavut. As well, Peregrine Exploration gets an exclusive right to use the elder Peregrine's North American diamond exploration database. Mr. Friedland, executive chairman of both companies, says the transfer is the "first step toward ensuring that we capture maximum value" for what he now refers to as "non-Chidliak assets." (Chidliak is the Baffin Island diamond project that Mr. Friedland believes will be Nunavut's second -- and first profitable -- diamond mine.) Meanwhile, Peregrine's shareholders will be plenty pleased if the move captures any value at all: the company's market value is currently under $50-million, significantly less than the $90-million accorded the less-advanced Kennady North project being worked by Kennady North Diamonds Inc. (KDI: $3.12).
The Lac de Gras project -- the DO-27 pipe and a host of surrounding duds in other words -- is the most advanced of Peregrine Exploration's existing projects. The elder Peregrine used the pipe for its TSX-V coming out party in the mid-2000s and it spent over $30-million on a series of bulk samples. The work led to a 2008 resource estimate of 19.5 million tonnes indicated at 0.94 carat per tonne, about 18.2 million carats. The downside was the value of the diamonds, which were appraised at about $45 (U.S.) per carat and which the company's consultants modelled at $51 (U.S.) per carat. Mr. Clement has not had the diamonds reassessed but he reminds investors that rough prices are now about 65 per cent higher than they were during the previous appraisal. That would suggest the current value is about $85 (U.S.) per carat.
Diamond promoters often come up with novel ways to boost marginally economic plays toward profitability. In its 2011 feasibility study, Shore Gold Inc. (SGF: $0.24) was not content with a rosy modelled value of $210 (U.S.) per carat for its Star-Orion South project in Saskatchewan. It tacked on an additional 15 per cent to that value, which it used for its economic projections. Shore also inflated its drill-indicated grades substantially, to account for losses and breakage.
Mr. Clement and Mr. Friedland hope to boost their grades more conventionally by eliminating much of the waste material by scrubbing away much of the fines and mud, before it trucks the rest to a processing plant. Peregrine's tests show that the grade can be increased nearly 10-fold with the uppermost kimberlite, and at least doubled with the deep material. If so, DO-27 might hold five million tonnes of concentrated kimberlite with Diavik-sized grades. That has Mr. Clement and Mr. Friedland thinking that the material could be "excellent blending stock for a third-party facility." (By third party, they undoubtedly mean Dominion Diamond Corp. (DDC: $22.11) and by facility they mean the processing plants at Diavik or Ekati.