Peregrine Diamonds: (Barely) buried treasure on Baffin Island

by James Kwantes, World of Mining

Peregrine Diamonds released its maiden resource estimate for Chidliak Wednesday, and it sparkled.

The diamond exploration company led by Eric Friedland reported an NI 43-101 compliant inferred resource of 7.47 million carats of diamonds in 2.89 million tonnes in its CH-6 kimberlite pipe, to a depth of 250 metres. The kimberlite is open at depth. More tonnage below 250 metres in CH-6 as well as in two other kimberlites, CH-7 and CH-44, has been targeted for exploration.

Diamonds recovered from the CH-6 400-tonne bulk sample. The largest is an 8.87-carat gem valued at $36,000. (Peregrine Diamonds photo)

At an average diamond value of $213/carat, that adds up to about $1.6 billion in value for just the first 250 metres of a single kimberlite, one of seven that have “economic potential,” according to Peregrine.

News of a resource estimate in the billions based on high-value diamonds in a rich kimberlite pipe just below surface – albeit in the middle of nowhere – resulted in a 6.5-cent (16%) gain for the stock. Peregrine shares can be volatile, as the chart below shows, and holding them frustrating, as I can attest. If past patterns hold, the stock will drift down until further news that moves the needle.

1-year chart for PGD (Yahoo Finance)

Here’s the new corporate presentation. One interesting nugget in the list of significant shareholders – below Robert Friedland at 18.6% and Eric at 16% – is De Beers at 2.3%. Given the history, I didn’t realize the former granddaddy of diamonds continued to hold any position.

In a conversation with John Kaiser at the Cambridge House resource show in January, the Peregrine fan told me he wouldn’t be surprised to see De Beers eventually take another run at Peregrine. However, the list of potential suitors is long, thanks in large part to the Canadian disruption of the De Beers cartel.

Disclosure: I own Peregrine Diamonds shares because I think Chidliak will become a diamond mine. However, I don’t know if or when that will occur, and financing a mine could be very dilutive to existing shareholders. The stock can be very volatile. Please read my disclaimer.

Related reading:

Chidliak grade gives Peregrine Diamonds an “A” | World of Mining

Diamond partners Peregrine, De Beers no longer dancing | World of Mining

Chasing the carat: The Friedlands go diamond-hunting | World of Mining

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