RE:From will P. tonightHere is the entire Will P blog:
Eric Friedland and Tom Peregoodoff's Peregrine Diamonds Ltd. (PGD), down one-half cent to 14.5 cents on 327,000 shares, got some good news with its first successful drill hole this summer at CH-6, on the Chidliak property in southeastern Baffin Island. The hole, drilled 30 degrees from vertical toward the east, was designed to pass through the company's target for further exploration, a projected area of kimberlite deeper within the pipe that has not been sufficiently drilled to be considered a resource. Peregrine's geological model of CH-6 predicted a 100-metre-long intercept. Instead, the company encountered 152 continuous metres of kimberlite before passing through the eastern wall of the pipe.
The hole hit kimberlite at a vertical depth of 200 metres, and at that point CH-6 now appears to be 90 metres across, compared with the modelled width of 55 metres. As well, the drill did not pass through the eastern wall until a depth of 330 metres, and at that point the eastern wall of CH-6 now appears to be nearly vertical. (As an added twist, the hole encountered kimberlite at a depth of 361 metres, but the significance of that is unclear, as the hole had to be abandoned at that point.)
Mr. Peregoodoff, president and chief executive officer, is naturally eager to press ahead with the drilling but it is a slow process. The first hole took just over two weeks to complete and two others, the company's first and third attempts of the year, had to be abandoned because of poor drilling conditions. Another hole is under way. Peregrine plans to test the western expansion of CH-6 with further holes this summer, which will examine the pipe at depths between 380 metres and 500 metres. The planned program called for 7,500 metres of drilling, but the good news and the tougher than expected drilling conditions have prompted Peregrine to call in a second drill, which Mr. Peregoodoff says will add between 2,000 and 4,000 metres of drill capacity to "support completion of resource expansion objectives" this year.
Mr. Peregoodoff says that the resulting expansion in tonnage potential at CH-6 has significant implications for the total contained carats within the pipe, adding that it could significantly influence future planned engineering and development studies. He presumably is referring to an updated preliminary economic assessment and a future feasibility study, which will take on rosier hues with an increase in the carat count. Peregrine's current dream sheet, just over a year old, credited the project with a discounted net present value of $471-million after taxes, based on a $435-million, 2,000-tonne-per-day mine. That plan considered 9.6 million inferred tonnes at CH-6 and CH-7, which contain 15.6 million carats.
Earlier this year, Peregrine considered an alternate plan, involving an open-pit and underground mine at just CH-6 to start, although that would depend upon the company boosting its carat count there. The current inferred resource at CH-6 lists 4.64 million tonnes at 2.45 carats per tonne, or about 11.4 million carats. As well, Peregrine had a target for further exploration of between 2.3 million and 3.75 million tonnes to a depth of 380 metres, which could provide between 5.5 million and nine million more carats at a comparable grade. Now, with the good news from the western wall, Peregrine could easily surpass the number of carats considered in the first study.