Peregrine Diamonds Ltd. PGDIF

RE: RE: BHP diamond revenues

[beachbum1]

Not that i am any expert, but in my humble view the "pick up a few more pipes" is exactly why BHP is not jumping at this. BHP is currently in for half of the cost of the exploration (roughly) and have a half interest in Chidliak, so it is fairly apparent they are in for the long haul. I doubt very much they would ever let another major take up a part interest in Chidliak, so to my mind the only way this thing sells to anyone other than BHP is if BHP loses interest in it.

So the big question is what is there game. In my view there are two possible answers: 1) we know that despite the fact that they own the majority stake in the project they have continued to let and fund PGD to operate it. To me this signals that they have confidence in the exploration capabilities of PGD, which is likely where their value lies. It is also apparent, that this is not going to be a diamond mine next year, or even likely in 5 years. So there is probably a good chance they are willing to be patient. Particularly realizing that they are miners more than they are prospectors. They have 51% of the project locked up on what is arguably a pretty speculative play. They are probably thinking that if they have to buy the other 49% at prevailing market prices they will have made the lions share on their first 50 and that is fine with them. This leads to 2) we all know that BHP has deep pockets. That said, a diamond mine, and particularly one that is only at this stage of the game, is a very unpredictable and expensive undertaking to get going. We know they opted out of funding pre-feasibility on this for an aditional 7% stake. In my view there is an equally possible chance that they see this project as continuing to have a very uncertain return and therefore as being very risky. If this is the case there is a very real possibility that they may never invest more than their 51% share in this property, and even that they may try to sell at some point in the future, if things don't work out. Given that they didn't jump last year, to my thinking, they are not likely to jump this year unless their are very positive finds coming from the mini-bulks they have taken. They are more apt to wait until closer to the end of pre-feasibility as there is still a very large chunck of capital to be spent on that phase of the process.

Keep in mind that the fact that they are a huge company means that they have to continue to show huge results to their shareholders. Frankly, a diamond mine the size of one of the other major canadian mines would be great for BHP (obviously) but it is not the be all and end all, so they have to consider risk reward and ROI. Investors are buying stability when they buy a company like BHP. They are not buying speculation.

It will be interesting to see how it all shakes down in the end. I still feel that this years results will tell the tale as to whether this thing is the mother load ... or just barely economical.