Greenflag Ventures Inc. V.DVV

Tli Kwi Cho Diamond Project Rises Again

[scissors14]

Tli Kwi Cho Diamond Project Rises Again By Lynne Olver Of DOW JONES NEWSWIRES VANCOUVER (Dow Jones)--Private exploration company Peregrine Diamonds Ltd., which has revived an 11-year-old diamond dream in the Northwest Territories, may bring a senior mining company on board as an equity investor to help fund further exploration work, president Eric Friedland says. There's "no shortage" of renewed interest in the old Tli Kwi Cho project in the Northwest Territories, says Friedland, a veteran exploration executive and brother of mining promoter and financier Robert Friedland. Peregrine, operator of what's now called the DO-27 project, released encouraging mini-bulk sample results earlier this month. The project, a diamond-bearing kimberlite pipe, is located about 25 kilometers southeast of the producing Diavik mine, 60% owned by Rio Tinto plc (RTP) and 40% by Aber Diamond Corp. (ABER). Thanks to the new exploration data, observers say DO-27 has once again become an important Canadian diamond play. On June 14, Peregrine said 1,806 diamonds were recovered from 151 metric tons of kimberlite taken from DO-27, including 21 stones larger than half a carat. The company said the average grade of material from five of six large-diameter drill holes was 0.98 carats per ton. The diamonds haven't yet been independently valued, and due to the parcel's small size, valuation estimates will be "very preliminary," Friedland said in an interview. In 1994, Rio Tinto concluded after some underground exploration by its Canadian unit that the Tli Kwi Cho pipe didn't justify further work - much to the chagrin of its junior partners. Not only did the juniors' stocks tank immediately, the principals doggedly insisted for years that the project held promise. In 2003, Peregrine bought an interest in the property from BHP Billiton Diamonds Inc., a unit of BHP Billiton Ltd. (BHP). Explorers and miners had come to understand Canadian kimberlite pipes much better than in the mid-1990s, Friedland says. "We were convinced this was a good gamble to take." Next Step Is Larger Sample Peregrine is now getting calls from mining-industry players, Friedland said, and would like to see the "involvement" of a major mining company since there's much exploration and technical work yet to be done. The focus next year will be taking a bigger sample of the DO-27 kimberlite, anywhere from 3,000 to 10,000 metric tons. "We'll shoot for as much as we can get," Friedland said. Peregrine is considering using a modified drill rig specifically designed to drill deep into kimberlite. Future budgets will be "significant," Friedland said, but haven't yet been set. John Kaiser, a newsletter publisher who follows junior diamond companies, says Tli Kwi Cho has been "reinstated as a world-class diamond mine contender." The 2005 sample taken by Peregrine is smaller than the 1994 sample, but contains proportionately more large diamonds, and these "appear to include high quality stones," Kaiser wrote last week. "The stigma that Tli Kwi Cho has nice small diamonds but lousy and few big diamonds has been abolished," he stated. There remains a lot of exploration work to be done, Kaiser noted, but the project "once again is a legitimate dream target." Kaiser doesn't own shares in any of the companies with stakes in the project - and there are many of them. Peregrine's interest has risen to 54.475%. Archon Minerals Ltd. (ACS.V) owns 13.275%; Aber Diamond Corp. (ABER) has 7.35%; SouthernEra Diamonds Inc. (SDM.T) owns 4.9%; and DHK Diamonds Inc. has 20%. DHK Diamonds is a consortium equally owned by juniors Dentonia Resources Ltd. (DTA.V), Horseshoe Gold Mining Inc. (HSX.V) and Kettle River Resources Ltd. (KRR.V). Since Peregrine's June 14 announcement, the three penny stocks have gained between 36% and more than 100%. As for whether Peregrine can consolidate that fractured ownership, Friedland said "I don't envision anything happening very quickly." Partners who can't raise their share of the necessary funding for future exploration work will see their stakes diluted. A planned merger between Peregrine and exploration company Dunsmuir Ventures Ltd. (DVV.V) is now in a "holding pattern" but the two companies have officers in common. Dunsmuir is considering uranium acquisitions, while Peregrine is pondering whether and how to go public, Friedland said. Peregrine chief operating officer Alan Carter is also president of Dunsmuir. He says the strategy for both companies is to drill as many targets or anomalies as possible, since exploration is a high-risk enterprise. Peregrine has tried to create a portfolio of projects that "span the risk profile," from early stage through advanced projects, Carter said. Aside from diamond exploration in northern Canada, Peregrine is also exploring for base metals in Argentina, Chile and Peru. Company Web Site: https://www.pdiam.com -Lynne Olver, Dow Jones Newswires; 604-669-1595; [e-mail] (END) Dow Jones Newswires 06-29-05 1200ET Copyright (c) 2005 Dow Jones & Company, Inc.