Peregrine: ‘Good things to come’ at Chidliak

When Brooke Clements of Peregrine Diamonds (TSX: PGD) spoke at the Prospectors & Developers Association of Canada (PDAC) convention a year ago, the diamond-exploration company was getting ready to collect a 250-tonne bulk sample from its CH-6 kimberlite on Baffin Island, with the objective of a 500-carat parcel.

But Peregrine exceeded that goal with a 400-tonne bulk sample that gave it a parcel of over 1,000 carats, and the results Clements announced this year at  the PDAC were “really good.”

“We’ve shown that CH-6 is one of the richest kimberlites in the world and that the diamonds are of high value, well above the world average of US$140 a carat,” Peregrine’s president said during a presentation on March 5.

The 404.2-tonne bulk sample that yielded a 1,013.5-carat parcel graded 2.58 carats per tonne for diamonds larger than the 1.18 mm square mesh sieve size. At the end of February, Peregrine reported the results of an independent diamond valuation by WWW International Diamond Consultants in Antwerp, which demonstrated that the average price worked out to US$213 per carat, with the entire parcel valued at US$215,605.

The modelled price ranged from a minimum of US$162 per carat to a high of US$236 per carat, with a base-case modelled price of US$188 per carat. Within the parcel, the four largest diamonds weighing 8.87, 5.83, 4.62 and 4.11 carats had per-carat market values of US$4,076, US$3,455, US$2,900 and US$2,633.

Clements noted in his presentation that the value of the four largest diamonds are “an indication of really good things to come,” adding that “we know we’re going to get bigger diamonds, and this gives us optimism that the larger diamonds are going to have high value. In fact, it gives us optimism that it’s possible that if we go to production, our ultimate diamond production value could be even higher than our higher model value of US$236 per carat.”

He also pointed out that larger diamonds in a mine typically make up a disproportionately high amount of the revenue. “We see that 2% of typical mine production is over 2 carats in size, but that accounts for over 50% of the value,” he explained. “At Chidliak, 10% of our parcel is over 2 carats in size and that accounts for 57% of the price, so it shows that we are kind of in line with world averages with this parcel.”

The CH-6 kimberlite is one of 67 kimberlite bodies on Peregrine’s Chidliak project, 120 km northeast of Iqaluit on south Baffin Island in the eastern Arctic.

Of the 67 kimberlite targets, Clements explained during his presentation, seven have economic potential after two rounds of diamond testing. Six of those seven kimberlite bodies are within an 8 km radius, and well within hauling distance to CH-6.

Clements said that according to a Gemcom model, CH-6 has an estimated 5.7 million tonnes to a depth of 375 metres — about the height of the revolving restaurant at Toronto’s CN Tower. “With potential rock value like we have, it’s clear that there is potential for underground mining in the future and the deposit is still open at depth,” he said, adding that the potential rock value at CH-6 “puts us kind of in an elite club.”

Peregrine is converting some of its tonnage at CH-6 into the company’s maiden resource estimate, which it expects to complete in the second quarter of 2014.

Describing CH-6 as a “good deposit” that “might even have the potential to be a stand-alone operation,” Clements said that CH-6 “is just the beginning,” and that over the next couple of years Peregrine could add more resources.

The company has two other kimberlites bodies — CH-7 and CH-44 — that are ready for bulk sampling in 2015, and is also working to move the CH-1, CH-10, CH-20, CH-45 and CH-31 kimberlite bodies to the bulk-sampling stage.

CH-7 — a 47-tonne sample collected in 2010 — gave Peregrine a grade of 1.04 carats per tonne and a coarse size distribution, with the largest diamond in the sample over six carats in size. Clements believes CH-7 has the potential to prove up to a minimum of 4 million tonnes.

CH-1 — a kimberlite with a 2-hectare surface expression that was discovered in 2008 — will be the focus of Peregrine’s core drill program this year. The company recovered a 2-carat diamond from a 2-tonne sample, and Clements believes there is potential for 1-carat-per-tonne grades at CH-1, and the potential to prove up over 5 million tonnes.

The second-largest kimberlite pipe on the property, CH-31, has a surface expression of 4 hectares, and a drill core totalling 5 tonnes gave a grade of 0.2 to 0.4 carat per tonne and a coarse size distribution. In the first 800-kilogram sample, the company recovered a 1.15-carat diamond, but Clements noted that a lot more drilling is required.

Meanwhile in the CH-6 area, there is a north–northwest trending structure that the company calls the “string of pearls.” The company has drilled two magnetic low features along the string of pearls and discovered the CH-10 and CH-20 kimberlites bodies. Micro-diamond testing of the two sets of kimberlites show potential for 1 carat per tonne this year, Clements said.

De Beers completed the first gravity survey that has been done on the property at CH-6, and Clements noted that there is a visible gravity low developing north of the string of pearls and a gravity low developing south of CH-6. The plan is to expand the gravity survey to the south, drill a number of core holes across the string of pearls structure, and drill the feature to the south of CH-6, he said.

“It’s still early days for exploration on the property,” Clements said. This year Peregrine is already preparing to do a ground geophysics program, and is mobilizing a core drill and a small reverse-circulation (RC) drill so that it can move kimberlite bodies to the bulk-sampling stage and discover kimberlite that can be bulk sampled.

The approved field budget for 2014 is $7 million, with the program ending in September.

In mid-year Peregrine will mobilize a large-diameter RC rig that was designed for Chidliak, and is scheduled to be mobilized to Iqaluit by sealift in September to prepare for bulk sampling in 2015. 

A minimum of 2,500 metres of core drilling will be completed on key kimberlites bodies — including CH-6, CH-7 and CH-44 starting in early July — and results will be incorporated into the final design of the 2015 bulk-sampling program. Starting in April, high-priority kimberlite targets will be drilled by heli-portable RC drills. Drilling will target the string of pearls just north of CH-6 — Area B, 15 km east of CH-6, where high-interest kimberlite float has been discovered — and anomaly 645, a 2-hectare, high-priority geophysical anomaly 13 km southwest of CH-6.

“We believe we’re really on to something good here at Chidliak, and we think we’re on the cusp of putting it over the top.”

Describing the results of the first diamond valuation from Chidliak CH-6 kimberlite as “spectacular,” Peregrine’s CEO Eric Friedland said Chidliak represents a “world-class diamond district” and that he is “more confident than ever that planned bulk sampling beginning in 2015 of other known pipes at Chidliak with economic potential could lead to the development of Baffin Island’s first diamond mine.”

As of March 4, Friedland owns 16% of the company. Earlier this year his brother —
mine financier Robert Friedland — bought a block of 6 million shares in Peregrine, bringing his interest in the company up to 19%. Other significant shareholders are Dundee with 9%, and De Beers Canada with 2.3%.