Monday 24th October 2016

Resource Clips

Posts tagged ‘Peregrine Diamonds Ltd (PGD)’

Diamonds for future demand

July 8th, 2016

Dominion gives Jay the go-ahead while Peregrine brings Chidliak to PEA

by Greg Klein

Spurned by the forces driving gold and silver, diamonds’ sparkle may have sputtered. But looking further ahead Canadian companies remain optimistic, and demonstrably so. This week Dominion Diamond TSX:DDC announced plans to move forward with the previously postponed Jay pipe addition to the Northwest Territories’ Ekati mine. One day later Peregrine Diamonds TSX:PGD outlined an ambitious scenario for Chidliak, suggesting a possible Nunavut gem operation by 2021. Meanwhile progress continues on two very near-term producers in the NWT and Quebec.

Baffin Island remoteness be damned, Chidliak could come online for well under a half billion dollars, according to a July 7 preliminary economic assessment. The study foresees Phase I open pit mining beginning with the property’s CH-6 pipe, followed by CH-7, 15 kilometres away. Output would average 1.2 million carats per year for a decade, peaking at 1.8 million carats.

Dominion gives Jay the go-ahead while Peregrine brings Chidliak to PEA

Peregrine Diamonds sees potential to expand existing
resources and find new deposits on its Nunavut kimberlites.

Using a 7.5% discount rate, the PEA calculates an after-tax NPV of $471.2 million and a 29.8% IRR. Initial capex would come to $434.9 million with payback in two years. Costs include 160 kilometres of all-weather road to the territorial capital of Iqaluit.

Not mentioned in the announcement, however, is the town’s lack of port facilities. The island’s only operating mine is Mary River, 935 kilometres north of Iqaluit. Operator Baffinland Iron Mines runs its own port at Milne Inlet, another 100 kilometres north. The company has proposed replacing the road with a railway.

A March diamond evaluation gave CH-6 an average $149 per carat and CH-7 $114. But assuming 2.5% annual price increases, life-of-mine averages would come to $178 and $153 respectively, Peregrine stated.

CH-6 holds by far the largest resource, with an inferred 11.39 million carats compared with CH-7’s inferred 4.23 million. Both resources remain open at depth.

Anticipating the direction that pre-feas studies could take, company president/CEO Tom Peregoodoff spoke of “optimization studies of the Phase I mine, including the expansion of the CH-6 resource to depth and through the development of a potential Phase II resource expansion from the numerous other kimberlites on the property, of which six currently show economic potential.” Chidliak’s 564,396 hectares host 74 known kimberlites.

A few thousand sub-arctic kilometres away, the world’s third-largest diamond miner by value has put its on-again, off-again Jay pipe back on again. The Ekati mine’s most significant undeveloped deposit, the kimberlite holds a probable reserve of 78.6 million carats.

With two joint ventures in play, Ekati’s ownership gets a bit complicated. Dominion holds 88.9% of the Core zone, which hosts the current operation. Jay is located in the Buffer zone, 65.3%-held by Dominion. The new open pit would rely on Ekati’s existing infrastructure about 30 kilometres away, resulting in a total capex of US$647 million funded through existing loot and internal cash flow.

The project’s new feasibility reported Jay’s total post-tax NPV at US$398 million with a 15.6% IRR. Dominion’s share shows a post-tax NPV of US$278 million and a 16.7% IRR. Jay’s operations would run from 2022 to 2033, two years longer than envisioned by last year’s pre-feas, with ore processing continuing into 2034.

Jay would operate concurrently with the 10.1-million-carat-reserve Sable pipe, already under development, from 2021 to 2023. The current plan has Jay operating solo from 2024 to 2032. But the company intends to “pursue other incremental growth opportunities near our existing operations,” said CEO Brendan Bell.

Last month’s Ekati plant fire, however, forced Dominion to suspend operations on the Pigeon deposit. Mining and stockpiling continues at Ekati’s Misery open pit and Koala underground operations. Preliminary estimates call for about $25 million in plant repairs. Ekati’s 2017 guidance dropped from 5.6 million to 4.7 million carats.

Dominion also has a 40% stake in Diavik, the NWT’s other diamond producer, with Rio Tinto NYSE:RIO holding the rest. The mine’s fourth pipe, the 10-million-carat A-21, has production scheduled for H2 2018. Saying the company’s stock price doesn’t reflect the value of its assets, Dominion this week also announced a proposal to buy back around 7.2% of its issued and outstanding shares.

Meanwhile Canada’s next diamond mine—and the world’s biggest new diamond development—has production slated to begin this quarter. A 51%/49% JV of De Beers and Mountain Province Diamonds TSX:MPV, Gahcho Kué’s expected to average 4.5 million carats a year for 12 years.

Along with those three mines in the NWT’s Lac de Gras region and De Beers’ Victor mine in Ontario, Canada will gain a fifth operation with Stornoway Diamond’s (TSX:SWY) Renard project in Quebec. This one has production scheduled by year-end, bringing an average 1.8 million carats annually for the first 10 years of a 14-year lifespan.

Peregrine Diamonds releases CH-7 maiden resource, plans June PEA for Chidliak

May 5th, 2016

by Greg Klein | May 5, 2016

An initial resource for the CH-7 kimberlite brings the Chidliak project’s inferred total to a near-surface 15.62 million carats, Peregrine Diamonds TSX:PGD announced May 5. CH-7 shows 4.99 million tonnes averaging 0.85 carats per tonne for 4.23 million carats of diamonds inferred. Last month the company reported a 33% carat increase for Chidliak’s CH-6 pipe, 15 kilometres northwest, for an inferred 4.64 million tonnes averaging 2.45 c/t for 11.39 million carats.

Peregrine Diamonds releases CH-7 maiden resource, plans June PEA for Chidliak

Baffin Island’s not without challenges of climate and isolation.

The 513,249-hectare Chidliak project sits on Nunavut’s Baffin Island, about 120 kilometres from the territorial capital of Iqaluit. A preliminary economic assessment for Phase I operations remains on track for late June.

Both resources used a bottom cutoff of 1.18 millimetres. CH-7’s resource reaches only 240 metres in depth, while that of CH-6 bottoms out at 260 metres. Both kimberlites remain open at depth.

Last March Peregrine announced an Antwerp valuation of a 735.75-carat parcel of CH-7 stones showed a current average of $100 per carat, ranging from $73 to $154 per carat. The parcel’s modelled average was $114, ranging from $94 to $155. Modelled prices forecast amounts potentially obtained from a future mining operation. The independent study recommended $114 as CH-7’s base case valuation in the PEA.

The parcel’s eight largest diamonds ranged from 1.35 to 5.33 carats, with current average prices between $713 to $3,106 per carat.

A 2014 valuation for CH-6 showed an average $213 per carat and a modelled base case of $188, ranging from $162 to $236. The 1,013.5-carat parcel’s four largest gems weighed in at 8.87, 5.83, 4.62 and 4.11 carats, with respective prices of $4,076, $3,455, $2,900 and $2,633.

Peregrine holds three other projects in Nunavut, along with interests in Botswana and the Northwest Territories. The company’s 72.1%-owned DO-27 kimberlite in the NWT’s Lac de Gras camp holds a 2008 resource of 18.2 million carats indicated.

In January Peregrine pulled in $5.64 million from a rights offering announced at up to $7 million last November.

Pay as you go

April 28th, 2016

New gold producer Equitas Resources sees revenue for incremental expansion

by Greg Klein

New gold producer Equitas Resources sees revenue for incremental expansion

Equitas Resources meets Alta Floresta during due diligence in Brazil.


Negotiations with minority shareholders dragged out longer than expected but on April 27 Equitas Resources TSXV:EQT officially made the transition from Labrador nickel explorer to Brazil gold producer. On closing its acquisition of Alta Floresta Gold, Equitas now takes over a modest gold operation with the intention of increasing production—and cash flow—incrementally. Should all go to plan, that would bring a step-by-step payback for each new stage of the operation, as well as funding for further exploration.

That certainly contrasts with the traditional exploration model, with which investors can be quick to show impatience. Equitas experienced that first hand after just one season of drilling its Garland project, despite its compelling nickel-cobalt-copper story south of Voisey’s Bay.

New gold producer Equitas Resources sees revenue for incremental expansion

In operation since June, the Cajueiro project holds potential
for greater recovery, as well as expansion of near-surface oxides.

Looking for alternative financing, then-president/now-chairperson Kyler Hardy learned about Alta Floresta’s Cajueiro project through a friend in the company. Hardy not only liked its potential. He also recognized a good fit between the two companies’ teams.

Alta Floresta brings to Equitas its 100% interest in six gold properties with four production licences, part of a portfolio covering more than 184,410 hectares in Brazil’s central states of Mato Grosso and Para. The flagship Cajueiro project’s Baldo zone has been in operation since June, producing around a kilogram of gold a month. That amounts to recovery of only about 30% to 35%, achieved by running alluvium and saprolite through a sluice box.

Equitas hopes to see considerable improvement within months by installing a gravity plant, then about 85% recovery with carbon-in-leach processing that could begin early next year. Full open pit production would be a longer-term goal.

We expect the payback for each stage in less than a year, much less for the gravity plant. We’re derisking it that way, by building in stages.—Chris Harris, president/CEO
of Equitas Resources

The plan is to “develop the project in stages and each stage has to pay for itself,” explains new president/CEO Chris Harris. “We expect the payback for each stage in less than a year, much less for the gravity plant. We’re derisking it that way, by building in stages. That could also provide cash flow for a sustaining exploration program which we hope would then beget further development.”

Of course these are perilous times for Brazil, now undergoing serious recession, a wide-ranging corruption scandal and impeachment proceedings against President Dilma Rousseff. Compounding the problems are their effect on the Brazilian real, which contrasts with currently high gold prices. “But what that’s doing to our project is creating huge cost compression,” Harris says. “That benefits both capex and opex.” The company has already selected a nearly new gravity plant in the region for purchase. Its price has sunk to less than half of what he projected last year.

Exploration will focus on near-surface oxides, where Equitas sees the greatest potential for resource expansion and low-cost extraction.

Except for one property slightly north, the entire portfolio sits on the Juruena gold belt, which has historic estimates of seven to 10 million ounces of artisanal output. Straddling the border between Para and Mato Grosso states, the 39,053-hectare Cajueiro property’s near-term agenda could include bulk sampling and trenching, as well as diamond and rotary air blast drilling. Exploration will focus on near-surface oxides, where Equitas sees the greatest potential for resource expansion and low-cost extraction.

A just-filed 43-101 technical report recalculates data from a 2013 resource estimate to allow for different gold price and opex numbers. The new study bases a cutoff of 0.25 grams per tonne on a near-surface deposit that can be processed by cyanidation or gravity processing. The report provides separate numbers for four zones of sulphides and oxides.

Total sulphide zones:

  • indicated: 8.64 million tonnes averaging 0.771 g/t for 214,100 gold ounces

  • inferred: 9.53 million tonnes averaging 0.664 g/t for 203,500 ounces

Total oxide zones:

  • inferred: 1.37 million tonnes averaging 1.775 g/t for 78,400 ounces

All four zones show near-surface oxide expansion potential, Equitas states. Five other anomalies offer additional encouragement.

The project has road access to the city of Alta Floresta, 95 kilometres north. A hydro dam now under development should bring electricity within two years, if not sooner.

The arrangement combines talent from both companies. Harris casts a close eye on the accounts, having 30 years’ experience in energy, commodity trading and mining finance with companies like Ernst & Young, CIBC, Enron UK and BHP Billiton NYSE:BHP.

Hardy, through 16 years as a resource sector entrepreneur and executive, demonstrates a facility for operating remote, logistically complex exploration projects. Director Alan Carter, who also sits on the board of Eric Friedland’s Peregrine Diamonds TSX:PGD, brings 30 years’ exploration experience with the likes of Rio Tinto NYSE:RIO, BHP, and ECI Exploration and Mining, among others.

Equitas Resources closes acquisition of Brazilian gold operation

Cajueiro’s alluvial lure suggests
expansion potential to Equitas.

Co-director David Hodge also serves as president of Zimtu Capital TSXV:ZC, a project generator that supports several juniors with acquisitions and advisory services. VP of exploration Everett Makela began his career with Inco, eventually retiring as Vale’s (NYSE:VALE) principal geologist for North America. His international experience includes Brazil.

Mike Bennett, a local resident and director of Equitas subsidiary Alta Floresta Mineração, has spent 23 of his 30 exploration years in South America where he took part in three gold discoveries, Puquio North in Bolivia, as well as Coringa and Cajueiro in Brazil.

Also residing locally, Portuguese/English-fluent Richard Crew acts as operations consultant for Alta Floresta Mineração. His 30 years of experience includes positions as operations manager and COO for numerous companies worldwide. Another nearby resident, project manager and exploration geologist Elvis Alves knows the community as well as the minerology.

The deal has Equitas issuing 103.65 million shares to former Alta Floresta shareholders and 5.28 million options, exercisable at $0.15 for three years, to former Alta Floresta option holders. A 1.75% NSR applies to licences acquired two years ago from a former minority shareholder of Alta Floresta.‎

Earlier this month Equitas closed the final tranche of a private placement that totalled $1.5 million from 30 million units. Insiders bought 10.4 million units.

“We’ll be talking about implementing the gravity plant very shortly,” Harris says. “We’ll also be talking about starting our drilling plan, the drill results and possibly a revised 43-101. We’ll have a steady news flow.”

Diamondiferous territories

March 11th, 2016

Peregrine and Dominion weigh their optimism carat by carat

by Greg Klein

Peregrine and Dominion weigh their optimism carat by carat

Chidliak’s fly-in, fly-out camp overcomes challenges of climate and isolation.


Maybe this time this Friedland will get it right. His older brother Robert’s first foray into diamond exploration was, from the gemstone perspective, a monumental flop. Sure, the company stumbled on enough nickel, cobalt and copper to get a nice little $4.3-billion consolation prize for Voisey’s Bay. But as for finding and building a diamond mine, that might be up to younger brother Eric. He evidently sees an optimistic, fast-paced scenario for Peregrine Diamonds’ (TSX:PGD) Chidliak project in Nunavut.

Ironically, given the outcome of Friedland the elder’s search for Labrador diamonds, mineral exploration in the Chidliak area seems to have started with another company’s 1996-to-1997 search for a Voisey’s Bay-type deposit. But little else happened until 2005, when Peregrine and BHP Billiton Canada began regional reconnaissance.

Now 100% owner Peregrine continues to advance, announcing on March 8 a diamond valuation for Chidliak’s CH-7 kimberlite, which has a maiden resource slated for later this month. The project’s more advanced CH-6 pipe has an update underway for a resource that currently shows an inferred 3.32 million tonnes averaging 2.58 carats per tonne for 8.57 million carats.

Peregrine and Dominion weigh their optimism carat by carat

The CH-7 pipe’s first evaluation precedes
a maiden resource expected this month.

By June Peregrine expects to release a PEA looking at Phase I mining.

The evaluation for CH-7’s 735.75-carat parcel came to a current average price of $100 per carat but a base modelled average of $114 per carat. The Antwerp firm takes into consideration diamonds lost by breakage, using proprietary techniques to forecast average prices that could be achieved through actual production.

The sample’s top eight diamonds ranged from 1.35 to 5.33 carats, with current average prices ranging from $713 to $3,106 per carat. Last month analyst Paul Zimnisky forecast a 2016 global average of $92 per carat.

Most of the parcel came from a bulk sample of four CH-7 geological units that returned 0.88 carats per tonne, along with a mini-bulk sample previously taken from a surface trench.

Meanwhile Peregrine expresses expansive optimism in its “targets for further exploration,” the potential size of the CH-6 resource update and the June PEA. Of course the climate- and infrastructure-challenged Baffin Island location presents challenges. A roughly 150-kilometre flight connects Chidliak with the Nunavut capital of Iqaluit.

Other companies have passed up Chidliak. BHP sold Peregrine its 51% interest in 2011 for $9 million. De Beers dropped a JV option in 2013 after buying $2.5 million in shares, paying another $2.5 million and conducting its own summer exploration program. Even so, Peregrine’s largest shareholders include Ned Goodman’s Goodman Merchant Capital as well as Eric and Robert Friedland.

Peregrine holds three other projects in Nunavut, another in the Northwest Territories’ Lac de Gras region and four more in Botswana.

The same day Peregrine announced the CH-7 valuation, the world’s third-largest diamond producer by value released updated reserve and resource numbers for the NWT’s Diavik mine.

Dominion Diamond TSX:DDC reported 2015 output of 6.41 million carats from Diavik. Yet as of December 31, proven and probable reserves dipped only 500,000 carats to 52.8 million from the previous year. Indicated resources stayed even at one million carats, while the inferred category dropped from 8.3 million to five million.

Ten million of the proven carats come from Diavik’s A-21 pipe, which remains on schedule for open pit production in late 2018. Dominion holds 40% of Diavik and operates the mine, with Rio Tinto NYE:RIO holding the remainder.

At Dominion’s majority-held Ekati operation, the Sable pipe reached pre-feas last month and could begin open pit production in 2019.

The two NWT mines totalled over a billion dollars in sales last year. As of January 31, Ekati’s sales came to 2.38 million carats for $464.8 million, while Diavik sales reached 4.35 million carats for $639.25 million.

Read Chris Berry’s analysis of long-term diamond supply and demand.

Diversifying opportunity

January 15th, 2016

Equitas Resources looks to Brazil gold production as well as Labrador nickel exploration

by Greg Klein

“How do we add value in such a difficult resource market?” A problem vexing many ambitious explorers, for Equitas Resources TSXV:EQT “it kept coming back to cash flow, cash flow, cash flow,” says president Kyler Hardy. But another question followed: “How do we get that and not abandon our vision” of a Voisey’s Bay-type nickel discovery in Labrador?

The answer may lie in a small-scale gold producer with considerable expansion potential. Under a binding letter agreement announced January 15, Equitas would acquire Alta Floresta Gold, a privately traded British Columbia company with interests in six Brazilian gold properties, one already undergoing modest production. The parties see opportunity to ramp up output to complement an aggressive drill program 30 kilometres south of Voisey’s.

Equitas Resources looks to Brazil gold production as well as Labrador nickel exploration

The takeover target has an approximately 60% stake in Alta Floresta Gold Mineracao Ltd, which holds the six properties, five with production licences, covering over 184,410 hectares in western Brazil’s Mato Grosso state and Para state to the north. Straddling the border of both states is the 44,768-hectare flagship Cajueiro project.

Its Baldo zone now churns out about 100 gold ounces a month, Hardy says. Modest to be sure, but “you look at some of the legends of the business, they built massive companies off of small cash flows. Placer Dome was founded off a very similar project in Papua New Guinea.”

While not necessarily envisioning similar grandeur, the parties have a three-part plan for Cajueiro, where a 2013 resource estimate defined four zones as follows:

Crente zone, 0.5 grams per tonne cutoff

  • indicated: 4.53 million tonnes averaging 1.2 g/t for 168,000 gold-equivalent ounces

  • inferred: 3.02 million tonnes averaging 1 g/t for 100,300 ounces

Crente zone, 0.3 g/t cutoff

  • indicated: 7.4 million tonnes averaging 0.9 g/t for 203,000 ounces

  • inferred: 5.26 million tonnes averaging 0.8 g/t for 127,400 ounces

Baldo zone, 0.3 g/t cutoff

  • inferred: 1.41 million tonnes averaging 1.3 g/t for 61,100 ounces

Matrincha zone, 0.3 g/t cutoff

  • inferred: 1.56 million tonnes averaging 1.1 g/t for 52,900 ounces

Marines zone, 0.3 g/t cutoff

  • inferred: 1.17 million tonnes averaging 0.7 g/t for 27,200 ounces

All four zones have potential near-surface oxide expansion, Equitas stated, while five additional anomalies offer additional encouragement.

A three-phase plan for Cajueiro would begin with installing a small gravity plant to process Baldo’s saprolite mineralization. In production only since June, the alluvial operation currently languishes at about 35% recovery. Phase II would call for a carbon-in-leach plant between the Baldo and Crente zones, less than one kilometre apart. Initial metallurgical tests suggest gravity separation and cyanide leaching could push recovery above 85%. Phase III would use operating cash flow to ramp up Cajueiro into open pit production.

Hardy foresees a fast-paced timeline, with the CIL plant in place within six months and commissioning complete over another two months. The gear has already been sourced with “everything we need within 50 kilometres of us,” he says. The weak Brazilian real helps lighten costs.

Also on the agenda are 12 to 20 shallow drill holes for an updated resource. The 43-101 will also provide figures for production and costs. A PEA would follow within months.

Infrastructure’s good, Hardy points out, with road connections to nearby towns where staff live, rendering a camp unnecessary. The Juruena belt has a longstanding mining history and good community relations, he adds.

The deal would bring together a strong management team from both companies. Key Equitas figures would stay on—Hardy as chairperson, Zimtu Capital TSXC:ZC president Dave Hodge as director and Voisey’s veteran Everett Makela as VP of Exploration. Joining them would be president/CEO/director Chris Harris, with 29 years’ experience in mining finance, energy and commodities. New director Alan Carter’s 30-year career includes service with Rio Tinto NYE:RIO, BHP Billiton NYE:BHP and Peregrine Diamonds TSX:PGD. Technical adviser Michael Bennett’s CV shows 24 years’ experience in South America, where he’s credited with three gold discoveries.

While the new plan puts the Garland nickel project on hold pending revenue from Brazil, Equitas still has aggressive drilling in store for Labrador.

The share swap would leave Alta Floresta Gold as a wholly owned subsidiary of Equitas, with the latter being held approximately 50% by Alta’s former shareholders. Among other requirements, Equitas must raise $2.5 million. That could come at least partly through a private placement but possibly through a debenture or equipment financing as well, Hardy says. Prior to closing, Alta Floresta Gold “will use commercially reasonable efforts” to increase its stake in Alta Floresta Gold Mineracao from 60% to 100%.

The parties hope to sign a definitive agreement by January 31 and close by February 19 or soon afterwards.

“I’m excited,” enthuses Hardy. “It’s a cash-flow opportunity for the company and we’re gonna rock this.”

Peregrine welcomes Nunavut port proposal, but few other mineral projects would benefit

July 31st, 2015

by Greg Klein | July 31, 2015

With a Canadian federal election call anticipated any day now, cynics are calling the Conservative government spending announcements “Christmas in July.” But one potential miner welcomes the plan to build a deep water port in the Nunavut capital of Iqaluit. Following the July 30 announcement by Nunavut MP and Minister of the Environment Leona Aglukkaq, Peregrine Diamonds TSX:PGD noted the Baffin Island facility would “dramatically” improve efficiency and costs for its flagship Chidliak project, 120 kilometres north. The company has a preliminary economic assessment planned for next year.

Peregrine welcomes Nunavut’s new port, but few other mineral projects would benefit

Although a deep sea port at Iqaluit would serve Baffin Island, this map shows most of Nunavut’s advanced stage projects located on the mainland.
(Image: NWT and Nunavut Chamber of Mines)

While Baffin Island’s only operating mine already has its own port, most Nunavut projects are on the mainland. Baffinland Iron Mines trucks iron ore from its Mary River mine to Milne Inlet, 100 kilometres away. The Nunavut Impact Review Board is currently reviewing Baffinland’s application to expand shipping from three summer months to 10 months a year.

As is the case for most of the territory’s exploration and development projects, Nunavut’s other mine sits on the mainland. Agnico Eagle’s (TSX:AEM) largest gold producer, Meadowbank, links to the hamlet of Baker Lake via an all-weather, 110-kilometre road. The mine “depends on the annual, warm-weather sealift by barge from Hudson Bay to Baker Lake for transportation of bulk supplies and heavy equipment,” the company states.

The feds offer to pay 75% of the Iqaluit port’s estimated $84.9-million price tag. The deal depends on the territorial government funding the rest, environmental approvals and, judging by her remarks, Aglukkaq’s re-election.

“What I can say is that if I’m re-elected, I’m going to make sure that the funding remains here,” the CBC quoted her. “And I’ve committed to it, I’ve announced it today, and that it is my commitment to delivering on this project.”

Peregrine Diamonds’ inferred Chidliak resource grows 15%

January 26th, 2015

by Greg Klein | January 26, 2015

Peregrine Diamonds’ inferred Chidliak resource grows 15%

A Peregrine worker fuels tents in preparation
for Chidliak’s winter program.

Reporting from its Chidliak project on Nunavut’s Baffin Island, Peregrine Diamonds TSX:PGD announced a nearly 15% increase to the inferred resource that debuted in May. The January 26 update brings the CH-6 kimberlite’s inferred numbers to 3.32 million tonnes averaging 2.58 carats per tonne for 8.57 million carats. The update uses the same grade as the maiden resource. “All of the resource expansion at CH-6 was near surface, above 120 metres’ depth,” stated company president Brooke Clements. The kimberlite “has a surface expression of approximately one hectare and is open at depth,” Peregrine added.

An evaluation early last year of a 1,013.5-carat parcel of commercial-size rough diamonds from CH-6 brought an average $213 per carat. Various sources place the global average between about $100 and $120 per carat.

Peregrine also offered tonnage estimates that are “classified as targets for further exploration and are conceptual in nature.” In addition to the 43-101 resource, the CH-6 tonnage estimate now ranges between 3.2 and 4.38 million tonnes.

Additionally the CH-7 kimberlite, about 15 kilometres southeast of CH-6, gets an estimated 3.72 to 6.01 million tonnes, a 35% to 51% increase over last May’s numbers. About 17 kilometres southeast of CH-6, CH-44 gets an estimated 1.27 to 3.19 million tonnes, a 10% to 56% increase. “It is uncertain if further exploration will result in the tonnage estimates being delineated as a mineral resource,” Peregrine noted.

With large-diameter reverse circulation drilling expected to begin in early March, the three kimberlites will undergo about 1,000 tonnes of total sampling to determine grade and price estimates. Chidliak has a preliminary economic assessment slated for next year.

The company also holds a 72% stake in the WO project in the Northwest Territories’ Lac de Gras region. A 2008 indicated resource for the DO-27 kimberlite showed 19.5 million tonnes averaging 0.94 c/t for 18.2 million carats.

Read about diamond supply and demand.

Replenishing reserves

December 11th, 2014

With a decade of diamond demand outgrowing supply, Canada’s a target for new sources

by Greg Klein

Next Page 1 | 2

Diamonds: Global supply and demand

Miners of other commodities might welcome half of the diamond dilemma. Forecasts see continued market growth for another decade. But production will taper off. That’s the 10-year prognosis from Bain & Company and the Antwerp World Diamond Centre. Meanwhile another report from the NWT and Nunavut Chamber of Mines addresses the need to maintain production in the Northwest Territories, the world’s third-largest source of diamonds by value and home to a busy exploration scene.

The December 9 Bain study, which generally agrees with a September report from De Beers, expects an average 4% to 5% compound annual growth in rough diamond demand to 2024 driven largely by India, the U.S. and especially China. Supply growth, on the other hand, should lag behind at 3.5% to 4% up to 2019, then fall to somewhere between 1.5% and 2% for another five years.

With a decade of diamond demand outgrowing supply, Canada’s a target for new sources

The world’s largest source of new production would be Gahcho Kué, the De Beers/Mountain Province Diamonds TSX:MPV joint venture slated for 2016 production in the NWT’s Lac de Gras region. The mine’s expected to produce between five and six million carats annually to 2020.

Bain forecasts Lukoil’s Grib mine in Russia at four to 4.5 million carats a year when it begins operation in 2016. After that would come the Karpinsky-1 pipe at ALROSA’s Lomonosov project in Russia, expected to yield about three million carats annually after reaching commercial production in 2015. Stornoway Diamond’s (TSX:SWY) Renard project in Quebec, slated for 2016 commercial production, should be good for another 1.5 million carats a year. Looking farther ahead, Rio Tinto’s (NYSE:RIO) Bunder mine in India is projected to yield another three million carats annually on reaching full production in 2020 or 2021.

“Other new mines under development are relatively small; each is projected to produce one million or fewer carats annually,” the report states.

“Because it takes seven to 10 years to develop a mine, even if major new deposits were discovered within the next few years, there would not be enough time to bring them to full production by the end of the forecast period,” the study adds.

Diamond supply: The Canadian outlook

The supply/demand imbalance notwithstanding, jewelry retailers show increasing eagerness to trace diamonds to ethical sources, Bain points out.

Among those sources is Canada, renowned for high-quality, conflict-free stones. Diamond mining now takes place in Ontario and the NWT, with Quebec expected to join soon and Saskatchewan another possible contender. Output from just three mines in Lac de Gras ranks the NWT region third globally for diamond production by value.

Of those three, Dominion Diamond’s (TSX:DDC) majority-held Ekati is projected to run out of ore in 2019, according to the NWT and Nunavut Chamber of Mines. The chamber gives the Dominion/Rio Diavik operation a life expectancy to 2024 and De Beers’ Snap Lake until 2028.

Rio has since announced plans to bring Diavik’s A-21 deposit online. Yet the chamber maintains A-21’s expected to maintain current production, not extend mine life.

Ekati’s best chance for a stay of execution is the Jay project, “the largest diamondiferous resource in North America,” according to Dominion, and a potential extension of 10 or more years to the Ekati operation. Should environmental approval arrive by the end of 2015, Dominion hopes to begin operations by 2019.

Diamond exploration: The juniors move in

Not surprisingly, it’s up to the juniors to meet growing demand. Since Canadian diamonds are found in kimberlites and kimberlites tend to come in clusters, most exploration takes place near known deposits—with the hope that nearby kimberlites will also contain diamonds.

The hottest hotbed of activity is the NWT, especially around Gahcho Kué. Kennady Diamonds TSXV:KDI holds turf on three sides of the project. Last month the company mobilized for more exploration and delineation drilling on Kelvin, one of the Kennady North project’s four diamond-bearing kimberlites. Diamond recovery results are expected by year-end from two more mini-bulk samples.

Another Gahcho Kué neighbour, Prima Diamond TSXV:PMD holds the 42,000-hectare Godspeed Lake project immediately south of the mine-to-be. Forty kilometres northwest of Gahcho Kué and 35 kilometres east of Snap Lake, Prima holds the 14,000-hectare Munn Lake project. A 581-kilogram sample from one Munn Lake kimberlite gave up 226 diamonds while a 42-kilogram sample from another revealed 14 diamonds. Prima also optioned the Orion diamond property, 2,275 hectares in Quebec’s Otish Corridor, north of Stornoway’s upcoming operation.

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Kennady and Peregrine report from the Lac de Gras diamond region

July 25th, 2014

by Greg Klein | July 25, 2014

It’s Ekati in the language of the Dene and Lac de Gras in French. They both mean “Fat Lake” and, following the first diamond discovery there, the name extended to that area of the Slave geological province in the Northwest Territories. Roughly 300 kilometres northeast of Yellowknife, the region hosts three diamond mines and a fourth under development. On July 24 Kennady Diamonds TSXV:KDI and Peregrine Diamonds TSX:PGD updated their projects in the region.

Encouraging results from Kennady North—including the project’s longest-yet kimberlite intercept—have prompted Kennady to double its summer drill program to about 10,000 metres. A third rig will join the 61,000-hectare property, currently the site of delineation drilling and mini-bulk sampling, as well as exploration.

Kennady and Peregrine report from the Lac de Gras diamond region

A couple of rough stones recovered from Kennady’s 2013 program.

The Kelvin dyke’s star result was a 183-metre intersection (not true width) of kimberlite starting at a downhole depth of 151 metres outside the current geological model. Another delineation hole revealed 124 metres of kimberlite starting at 114.6 metres. Four mini-bulk samples at shallow depth showed kimberlite results of 102 metres, 110.3 metres, 102.4 metres and 72.6 metres.

The project hosts four known kimberlites, with Kelvin and Faraday undergoing both delineation drilling and mini-bulk sampling while MZ and Doyle get exploration drilling. In addition the company has identified at least four new geophysical targets.

A 25-tonne sample extracted from Kelvin last spring is now being processed, with results expected in early Q4. Diamond recovery from a one-tonne Faraday sample should be announced this quarter.

Last year’s recoveries “returned exceptional sample grades,” the company stated. A 4.3-tonne Kelvin sample showed 5.38 carats per tonne. A 116-kilogram Faraday sample graded 11.23 ct/t. The three largest Kelvin diamonds were a 2.48-carat off-white transparent octahedral, a 1.06-carat off-white broken aggregate and a 0.9-carat off-white transparent irregular. “The recovery of diamonds of this size and quality from a 4.3-tonne sample is very encouraging,” Kennady maintained.

The company has a maiden resource for the Kelvin-Faraday kimberlite corridor scheduled by year-end.

Kennady North lies adjacently north, west and south of Gahcho Kué, scheduled for production in 2016. Owners De Beers (51%) and Mountain Province Diamonds TSX:MPV (49%) like to call it “the world’s largest and richest new diamond development project.”

Immediately south of Gahcho Kué and neighbouring Kennady is Godspeed Lake, a 42,000-hectare property acquired by Prima Diamond TSXV:PMD earlier this month.

In other Lac de Gras news this month, Arctic Star Exploration TSXV:ADD and North Arrow Minerals TSXV:NAR announced their Redemption joint venture would undergo summer drilling of six to eight holes totalling about 1,000 metres.

Not to be ignored, Canada’s original diamond mine was the subject of a July Ekati update from Dominion Diamond TSX:DDC.

The same day Kennady released its drill results, Peregrine announced an updated technical report for its 15,810-hectare Lac de Gras project. The document summarizes work since 2008 on the project, where the DO-27 kimberlite hosts an indicated resource of 18.2 million carats. The company stated it’s “reviewing options, including commercial opportunities, to advance the project” which contains nine known kimberlites.

Ownership is somewhat fragmented, with the project divided into three areas. The DO-27 resource sits on the WO property, held 72.1% by Peregrine, 17.6% by Archon Minerals TSXV:ACS and 10.3% by DHK Diamonds Inc. The project also consists of the LDG Thelon property (70.5% Peregrine, 29.5% Thelon Capital TSXV:THC) and the LDG Peregrine property (100% Peregrine).

Last May Peregrine released an initial resource estimate for its flagship Chidliak project on Nunavut’s Baffin Island.

Disclaimer: Prima Diamond Corp is a client of OnPage Media Corp, the publisher of The principals of OnPage Media may hold shares in Prima Diamond.

Canada’s kimberlite delights

June 5th, 2014

Diamond supply, demand and preference for Canadian stones drives exploration

by Greg Klein

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Complex the diamond trade might be, but its fundamentals look clear enough—steadily rising prices along with forecasted demand outpacing supply. Those reasons alone will send explorers into action but Canadian projects offer additional advantages of favourable geology, high-quality stones and ethical practices. That explains the resurgence of diamond activity in the northern and not-so-northern reaches of the country.

Two years of rising prices have been attributed to new demand in China and India, as well as a return to pre-crisis demand levels in the U.S., still the world’s biggest diamond market, according to a May 27 report by Dundee Capital Markets.

Dundee cites figures from Bain & Company’s Global Diamond Report 2013, which calculated a decade of supply growing at 2% annually, outpaced by demand growth of 5.1% as “existing mines get depleted and no major new deposits come online.”

Diamond supply, demand and preference for Canadian stones drives exploration

A helicopter lifts off during a recently completed ground geophysical
survey at the Arctic Star/North Arrow Redemption project.

Among other implications, jewellers need to “secure an adequate and consistent supply of polished diamonds in the range of sizes, shapes and colours suited to their product lines,” Bain stated. “A number of premium retailers have already integrated backwards along the value chain by investing in mining assets and cutting and polishing operations and securing access to primary rough supply. This trend is expected to continue.”

Although Russia, Botswana and the Democratic Republic of Congo comprise the world’s top three suppliers by quantity, the quality of Canadian diamonds puts this country in third place for dollar value, Dundee points out.

Canada currently supplies the market from four mines, three of them in the Northwest Territories’ Lac de Gras region: Ekati (80% Dominion Diamond TSX:DDC, with 10% each held by diamond pioneers Chuck Fipke and Stewart Blusson), Diavik (40% Dominion, 60% Rio Tinto NYE:RIO) and Snap Lake (100% De Beers, which is held 85% by Anglo American). De Beers also produces diamonds at its Victor mine in Ontario’s James Bay region.

Most new near-term production would come from Stornoway Diamond’s (TSX:SWY) Renard project in Quebec, scheduled for commercial production in June 2016, the De Beers (51%)/Mountain Province Diamonds TSX:MPV (49%) Gahcho Kué mine in the NWT, slated for H2 2016 production, and probably Rio’s Bunder project in India, Dundee states.

Keeping in mind the 10 to 12 or more years needed to take an economic discovery into production, “they need to be looking now,” emphasizes Dave Hodge, president of Zimtu Capital TSXV:ZC. “So the world market is encouraging the exploration industry to keep that supply chain full.”

As head of a prospect generator, Hodge sees the action from the perspective of small-cap juniors integral to potential discoveries. “There’s no question that Canadian diamonds are going to be very strong in the future, and that’s why the exploration industry is getting turned on right now. This is the moment of opportunity. This is when the exploration companies can shine and find a discovery that’s going to provide the world with diamonds for the future.”

His company recently vended an 80% interest in a diamond prospect to Strike Graphite TSXV:SRK in the Pikoo area of Saskatchewan that’s grabbed a lot of attention. Meanwhile summer drilling is planned for the Lac de Gras region’s Redemption project, a joint venture that partners North Arrow Minerals TSXV:NAR with Arctic Star Exploration TSXV:ADD, a Zimtu core holding. Not surprisingly, Zimtu’s actively pursuing additional diamond transactions.

“People looking for something special want a Canadian diamond because they know it’s conflict-free,” Hodge adds. “It’s something you can give to your wife without wondering whether somebody died for it.”

Another impetus for exploration is exploration itself. When successful, it can create its own momentum. Jody Dahrouge, senior geologist/president of Dahrouge Geological Consulting, says Canada’s initial exploration boom, sparked by Fipke’s early 1990s Ekati discovery, “finally faded just like any exploration or commodity cycle.” But interest has revived, partly due to the Pikoo discovery announced last November by North Arrow, which is earning 80% of the project from Stornoway. Dahrouge credits Pikoo with “fantastic diamond counts, albeit at a very small sample size from a small kimberlite body.”

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