Nice long writeup from Will P on Stockwatch Eric Friedland and Tom Peregoodoff's Peregrine Diamonds Ltd. (PGD), down one-half cent to 13 cents on 513,000 shares, is waiting for caustic fusion results from the kimberlite recovered during drilling this summer at CH-6, its top pipe at Chidliak on southeastern Baffin Island. The company completed nearly 5,300 metres of delineation drilling across 15 holes in the program. That was less than the 7,500 metres initially proposed as the work went slower than expected. Nevertheless, Mr. Peregoodoff, president and chief executive officer, and Mr. Friedland, executive chairman, were plenty pleased with the outcome as some of the holes encountered significantly more kimberlite than Peregrine had modelled.
Mr. Peregoodoff says that the company is pressing ahead with a revised resource estimate for CH-6. The company has the drill data to complete its tonnage estimates and based on the published data, investors are expecting a significant increase in the size of the resource. Still, Peregrine needs the microdiamond results to model the grade of CH-6, especially in the fringe areas where the unexpected kimberlite was encountered. The diamond counts are likely to be in hand by late this month, and the resource estimate will follow.
With a new and improved resource estimate in hand, Peregrine will revise its preliminary economic assessment of Chidliak. The first study, completed in the summer of 2016, was based on 4.64 million tonnes of inferred kimberlite at CH-6, which averaged 2.45 carats per tonne, and another five million inferred tonnes at CH-7 that averaged 0.85 carat per tonne for a combined 15.6 million carats. The study contemplated a $435-million mine that supported a discounted net present value of $471-million after taxes.
In March, Peregrine's crew completed an internal concept study of the project based on mining just CH-6, both by open-pit and underground methods. The company is not allowed to disclose the results of that study, other than that it "concluded there is the potential to substantially enhance the economics" of Chidliak. Nevertheless, Peregrine will undoubtedly include CH-7 in its revised preliminary economic assessment, which is expected during the winter. "We would be silly not to include it," said Mr. Peregoodoff.
Peregrine spent at least $7.5-million this year at Chidliak and to do so, it had to complete another rights offering, this time at 10 cents. The company may have to do so again before next summer, as Peregrine is touting plans for a larger bulk sampling program at Chidliak, certainly at CH-6 and probably at CH-7, where it is seeking answers to why a significant number of diamonds had been broken in an earlier test, and what impact that might have had on the diamond grade and value of the pipe.
Peregrine has vaguely acknowledged it is "in discussions with various parties" to finance its big work plans at Chidliak and Mr. Peregoodoff says that the company continues to work on raising cash, adding that all avenues to do so are still on the table. Peregrine's most travelled road so far has been the rights offering -- the bane of many of its retail shareholders -- but the company is willing to go that route again if no better deal can be had. Rumours persist that the company is chatting with potential partners, but Peregrine is unlikely to be forced into an unattractive deal.