Peregrine Diamonds Ltd. PGDIF

Got an email from TomP

[oiltar]

I asked if PGD would be open to a sale to DDC?

His reply was he can not talk about it,but that the PEA in hand gives PGD lots of options.

It seems WillP sees a possible paper deal for PGD
From today's Will P:

Brendan Bell's Dominion Diamond Corp. (DDC), down 14 cents to $11.47 on 165,000 shares, is widely rumoured to be on the prowl for possible acquisitions. The flurry of rumours follows comments by the company's chief executive officer, Brendan Bell, who sees plenty of encouraging diamond projects in which his company might invest. (He fuelled the speculation by saying Dominion is seeking a new chief financial officer with a lot of experience in mergers and acquisitions.)

That excited retail shareholders of lesser diamond companies, notably Eric Friedland and Tom Peregoodoff's Peregrine Diamonds Ltd. (PGD: $0.245), which is planning a $450-million Chidliak mine in Nunavut, and Ken MacNeill and George Read's Shore Gold Inc. (SGF: $0.20), which needs $2-billion to build its Star-Orion South mine in central Saskatchewan. While Dominion may well be eyeing up its rivals for a prospective meal, the company has a growing list of other uses for its pot of cash. (The company had $480-million (U.S.) in working capital at the end of April and over $200-million (U.S.) available through its credit facility.)

Dominion has recently launched a normal-course issuer bid for up to six million of its shares. That alone could consume over $70-million in cash if Dominion buys back the maximum allowed. Mr. Bell is also looking to return more cash to his shareholders. Investors were briefly worried that the company might cut its annual dividend of 40 U.S. cents as a result of slumping diamond prices, but Mr. Bell now describes the dividend as the "minimum for this year." In fact, he says Dominion had been planning a dividend increase until the $25-million fire occurred at the processing plant at Ekati, forcing a three-month delay in production. He now says that Dominion is considering a dividend increase in the future, perhaps after the financial implications of the fire come clearer, suggesting he will have more to say in September. With 85 million shares outstanding, even a 10-cent increase would consume $8.5-million (U.S.) annually.

Dominion does have some sources of new cash available to it. The company is selling its office building in downtown Toronto. "It is a good time to be selling Toronto real estate, as you well know," said Mr. Bell, adding that he was looking for a "very favourable outcome there." As well, Dominion is expecting to file an insurance claim regarding the Ekati fire. Mr. Bell cautions that the policy is very complex and the company is unable to assess the amount of the potential claim, but he points out that it carries both property damage and business interruption components.

Those sums could cover much of the cash consumed by the share buyback and possible dividend increase, but the company is facing some major capital costs over the next few years. The major expense covers the proposed Jay open pit, which carries a capital cost of $647-million (U.S.). Dominion would be responsible for about $420-million (U.S.) of that sum, much of it coming due over the next three years. The company is also responsible for its share of the costs at Diavik's A-21 pipe, last estimated at $125-million (U.S.). While some of that cash has already been spent, Dominion has budgeted a $41-million (U.S.) investment for its current fiscal year. As a result, while Dominion may have the resources to invest in new projects, the scale of any cash investment may be limited.

[oiltar]

Prior to my email from Tom his right hand man called me and told me Tom was in a flurry of meetings post the PEA and did not have any time to take  my phone calls Meetings ? with who I wonder?