The acquisition by Peregrine Diamonds of a 100% stake in the Chidliak diamond exploration project in northern Canada will allow it to explore a number of growth opportunities once production starts, including becoming a vertically integrated diamond company.

In December, Peregrine announced a binding agreement with BHP Billiton to buy BHP Billiton’s 51% participating interest in the 8 580 km2 Chidliak diamond project on Baffin Island in Nunavut, Canada. The purchase gives Peregrine 100% ownership of Chidliak, exposing its shareholders to all the benefits from the diamond discoveries to date and the project’s exploration potential.

Peregrine Diamonds VP investor relations Mike Westerlund tells Mining Weekly following the purchase, the TSX-listed firm’s strategic goal continues to be to increase shareholder value and put Chidliak into production as quickly as is prudently possible.

However, he says control of the supply of diamonds that could one day come from Chidliak gives Peregrine a number of options to grow the company, including becoming a vertically integrated diamond company taking diamonds from the mine mouth to jewellery stores.

“BHP Billiton’s decision to review its diamonds business presented Peregrine with an excellent growth opportunity. We now have a 100% stake in Chidliak, one of the world’s leading diamond exploration projects, at a time when diamond supply shortfalls are on the horizon and worldwide demand for diamonds continues to grow,” says Westerlund.

“The acquisition offers us complete flexibility on how this project will be developed and an opportunity to increase shareholder value. We are reviewing our plans for 2012 in light of our 100% ownership basis to determine the best way forward.”

He explains that the Chidliak project is at the bulk sample stage and that the collection of bulk samples will provide it with the first glimpse of diamond value, and thus rock value, for the key kimberlites that have been discovered to date. Preparations for bulk sampling have already started with execution of a contract for a reverse circulation drill rig and mobilisation of key equipment to Iqaluit.

He says the company is undertaking a comprehensive analysis of the 2012 programme to determine how to most efficiently advance the project considering the best interests of Peregrine shareholders. The results of the review, including a schedule for the collection of the project’s first bulk samples, will be provided when it is complete.

Looking ahead, Westerlund says 2012 will be an exciting year for the company as it prepares for collection of the first bulk samples at Chidliak.

“We have discovered 59 kimberlites to date at Chidliak and are confident that additional kimberlites will be discovered there in 2012. And, very importantly, all discoveries and advancements made at Chidliak will accrue 100% to Peregrine shareholders.”

During the $17.7-million 2011 Chidliak programme, operated by Peregrine, nine kimberlites were discovered, bringing the total on the project to 59. Additionally, significant drilling and sampling was conducted on six kimberlites with economic potential in preparation for the 2012 bulk sampling programme.

Westerlund adds that now is a great time to be in the diamonds business.

“The supply and demand fundamentals look good, and the trend is excellent over the long term. Our Chidliak project is very promising, and could come to market at a time when diamond prices are predicted to be much higher than today. The world needs more diamond supply, as the growing middle classes around the world flex their economic muscles.

“There has been a lot of wealth created by junior exploration companies discovering diamond projects in Canada. We are confident that Chidliak has an excellent chance of delivering a diamond mine,” says Westerlund.

Peregrine primarily focused on diamond exploration and development in Canada. Since 2007, it has discovered two new Canadian diamond districts, Chidliak and Qilaq on southern Baffin Island and Nanuq in the eastern Arctic region. In addition, it has established an independent, NI 43-101 qualified, indicated mineral resource of 18.2-million carats in the DO-27 kimberlite in the Northwest Territories and has early stage exploration projects in the Northwest Territories, Nunavut and Manitoba.

In addition to its diamond potential, the Chidliak property hosts mineral anomalies indicative of platinum/palladium, lead-zinc and copper deposits. The primary goal in regard to these metals anomalies is to discover bedrock sources for the metals indicator minerals in one or more of the anomaly areas.

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.