Peregrine Diamonds Ltd. PGDIF

RE: RE: RE: RE: ch6 value

[Durkastan]

I can see where the interpretation of the option is a little confusing:

Under the terms of the earn-in agreement announced on November 24, 2008, BHP Billiton must incur a total of $22.3 million in exploration expenditures to earn a 51 percent interest in Chidliak. BHP Billiton sole- funded the 2009 $9 million Chidliak exploration programme with Peregrine as operator. Upon completion of the approved $13.5 million 2010 exploration programme, aggregate exploration expenditures incurred at Chidliak since November 2008 are expected to exceed the Earn-in Amount by approximately $2 million.

So, at the end of this exploration season, BHP will have met its required commitment for 51% interest.

Upon earning its 51 percent interest, BHP Billiton is entitled to a one-time option ("the Second Option") to earn an additional seven percent (7%) interest in the Project by sole-funding the complete costs of a bankable feasibility study.

You're right, the language does suggest that the one-time option could come at the end of this year. The problem is that a bankable feasibility study just wouldn't be useful at this point in time. There's just not enough data in, imo. Even if we end up finding some highly prospective kimberlites out of the new bunch, they will need to be bulk sampled. And CH-6 is definitely going to need a larger bulk sample than 13 tonnes... I'm actually kind of surprised that they didn't do a more standard 50 toness, but I would assume that given limited resources, they chose to pursue CH-7 in the hopes that something significant would come of it. Anyway, I digress.

I think we're looking at 2 more years minimum before a full feasibility study would be remotely useful.