Lac de Gras

WO Project & DO-27 Kimberlite, Northwest Territories

• 5,700 hectares, located 27 km from the Diavik Diamond Mine.
• 18.2 million carat resource in 19.5 million tonnes of kimberlite.
• Peregrine owns 72% of the project, with 98% of the diamond marketing rights.

The WO project ("WO") comprises six mineral claims and three mineral leases, covering an area of 5,700 hectares, and is located approximately 300 kilometres NNE of Yellowknife in the Northwest Territories, Canada and 27 km. southeast of the Diavik Diamond Mine. WO is serviced by the main Tibbitt to Contwoyto winter ice road. The project hosts a number of diamondiferous kimberlites, including the nine hectare DO-27 pipe and the four hectare DO-18 pipe. (Click here to view the location map). Ownership interests in the WO project are as follows: Peregrine 72.0%, Archon Minerals Limited 17.5% and DHK Diamonds Inc. 10.5% (Dentonia Resources Ltd. 43.37%, Kettle River Resources Ltd. 43.37% and Cosigo Resources Ltd. 13.26%). Peregrine holds 97.92% of the diamond marketing rights. WO hosts the DO-27 kimberlite where a diamond resource of 18.2 million carat that is open for expansion was confirmed in 2008. The grade of the kimberlite was 0.94 carats per tonne.

The project occurs in the Slave Province, an Archean segment of the North American Craton, which is composed primarily of granites, gneisses and supracrustal rocks. The Slave Province is a classical setting for diamondiferous kimberlite emplacement as evidenced by the known occurrence of more than 400 kimberlite bodies. The Province is home to three diamond mines, EKATI, Diavik, and Snap Lake, and one project that is currently being developed into a diamond mine, Gaucho Kué.

2012 Program

Peregrine's 2012 exploration program included ground geophysical surveying and the drilling of two high-priority kimberlite targets leading to the discovery of the LD-2 kimberlite. A 187.1 kg sample from LD-2 was sent to the Saskatchewan Research Council Geoanalytical Laboratories for microdiamond analysis, the results are summarized in the following table:

 

Kimberlite	Sample Weight (kg)	Numbers of Diamonds According to Sieve Size Fraction (mm)									Total Diamonds	Carats (+0.850 mm size)
		+0.106 -0.150	+0.150 -0.212	+0.212 -0.300	+0.300 -0.425	+0.425 -0.600	+0.600 -0.850	+0.850 -1.180	+1.180 -1.700	+1.700 -2.360
LD-2	187.1	8	7	3	1	2	0	1	0	0	22	0.014

The Lac de Gras district is one of the most prolific diamond districts in the world, hosting the Diavik and EKATI diamond mines and Peregrine's 72.0%-owned, nine hectare DO-27 kimberlite, which currently has an 18.2 million carat resource that is open at depth. Peregrine is currently reassessing the potential economics of D0-27. As part of this program, the Company will consider obtaining a current market valuation for diamonds that were last valued in 2007.

DO-27 History

The DO-27 kimberlite comprises pyroclastic and volcaniclastic units and an earlier hypabyssal sheet system, in contrast to the DO-18 kimberlite which contains mainly volcaniclastic units.

The DO-27 kimberlite was discovered in 1993 by Kennecott Canada Exploration Inc. ("Kennecott") and partners, and returned promising microdiamond results through core drilling. These results encouraged Kennecott to move directly to an underground bulk sampling program in 1994. This bulk sample was collected by constructing an underground drift into the northeastern portion of the kimberlite. An average grade of 36 carats per hundred tonnes ("cpht") was obtained from this area of the kimberlite. Kennecott subsequently converted their working interest in the property to a 1% Gross Overriding Royalty. The interpreted Main Vent of DO-27, which yielded encouraging microdiamond results from the 1993 core drilling, remained untested.

BHP Billiton Inc. acquired a 39.4% interest in the WO property in 2001, with an option to increase this interest to 54.475% by funding the completion of a 200 tonne bulk sample of DO-27. In 2004, BHP Billiton sold its interest and associated marketing rights to Peregrine.

Because the 1993 underground bulk sample did not test the Main Vent of the DO-27 pipe, Peregrine and joint venture partners were convinced that the pipe might be higher grade than the previous test suggested. During early 2005, Peregrine completed six large diameter (35 cm) reverse circulation ("LDRC") drill holes in the DO-27 Main Vent, sampling the suspected higher-grade zone. This amounted to approximately 151 dry tonnes of kimberlite which was subsequently processed at the EKATI Diamond Mine and returned an average grade of 98 cpht, confirming Peregrine's hypothesis. Individual grades and specific diamond information for the six 2005 LDRC holes are summarized in Peregrine's June 14, 2005 press release. Three separate valuations on the diamonds recovered from the 2005 bulk sample were performed by BHP Billiton Diamonds Ltd., Rio Tinto Diamonds and Aber Diamond Corp. returning average values for the entire parcel of US$53 to US$67 per carat. Details of the valuation results are found in Peregrine's August 29, 2005 press release.

Following the encouraging 2005 results, Peregrine completed a second, larger bulk sampling program on the DO-27 kimberlite during the winter of 2006. This program involved the completion of twelve large diameter reverse circulation (" LDRC") drill holes (61 cm), totaling 2,424 metres of drilling and resulted in the extraction of 548 dry tonnes (566 wet tonnes) of kimberlite. These samples were processed at the EKATI Diamond Mine. This analysis revealed an average grade of 88 cpht from the Main Vent and a grade of 85 cpht from the northeastern portion of the kimberlite (the "North East Lobe"), which is geostatistically consistent with the 2005 bulk sample results. A total of 8,855 diamonds was recovered using a 1 mm sieve size cut-off. Of this total, 49 diamonds larger than one-half carat and 13 diamonds greater than one carat were recovered. The five largest stones recovered were: 7.11, 3.91, 2.34, 2.11 and 1.83 carats. The 2006 results are available in Peregrine's September 5, 2006 press release.

The company received an independent valuation report by WWW International Diamond Consultants Ltd. ("WWW"), an internationally recognized diamond valuation and consultancy company, on the combined 2005 and 2006 diamond parcels, comprising 508.9 carats from the Main Vent and the North East Lobe pyroclastic kimberlite. The average modelled diamond values ranged from US$45 to US$73 per carat using WWW's September 2005 diamond price book and from US$41 to US$62 per carat using WWW's September 2006 diamond price book. The price difference reflected the significant drop in certain world-wide rough diamond prices during this period. These results are included in Peregrine's press release of November 6, 2006.

On December 6, 2006, Peregrine began its third bulk sampling program.. A sample of approximately 2,651 wet tonnes of kimberlite was collected by LDRC drilling with the drill holes being 61 cm in diameter.

The 2007 bulk sample was processed at EKATI in their dedicated Sample Plant, under Peregrine's supervision. QA/QC was employed in the form of processing protocols, security protocols and several types of internal and external audits. Peregrine's qualified persons and supervisory staff performed all concentrate handling and diamond sorting. Approximately 1,725 carats of diamond was recovered (+1mm) from the composite sample. Due to varying bottom screen sizes used in the various years programs, a modelling and normalization exercise was performed on the results by M.M. Oosterveld, a Q.P. and recognized expert in diamond resource statistics and modelling. In addition, a 3-D density model was produced by AMEC Americas Ltd. ("AMEC") to calculate grades. The major main lobe pyroclastic kimberlite (PK) returned a 2006-2007 combined grade of 91 cpht, again demonstrating grade consistency in the deposit. The subsidiary NE lobe PK and other lithologies together produced a grade of 78 cpht, indicating the dilution by lower grade material.

As reported in a press release on December 17, 2007, modelled diamond values for 2,075 carats of diamonds recovered from the DO-27 kimberlite during 2005, 2006 and 2007 ranged from US$43 to US$70 per carat, with a "Base Case" average of US$51 per carat. The valuation was completed in Antwerp, Belgium under the supervision of WWW.

Metallurgical test work on kimberlite liberation including scrubbing and High Pressure Grinding Roll (HPGR) studies was performed on specific 2007 drill core. Environmental Acid Rock Drainage (ARD) tests were also performed. The DO-27 rock showed good disaggregation and liberation properties to aid processing, and tails proved to be acid net neutralizing. This work, and the delineation drilling, geological and density modelling, and bulk sample results including valuations were incorporated into an internal Preliminary Technical Assessment ("PTA") and Mineral Resource Estimation by AMEC.

As reported on June 24, 2008, DO-27 hosts an indicated mineral resource of 18.2 million carats in 19.5 million tonnes of kimberlite to a depth of 325 m below surface. The estimated grade of the resource is 94 cpht. The resource estimate was completed by AMEC. An additional 6.5-8.5 million tonnes of kimberlite below the indicated resource was classified as a potential mineral deposit and DO-27 remains open at depth.

Mineral Services Canada Inc. provided AMEC with a three dimensional model of DO-27. An external pipe shell was defined and the internal geology of the pipe was established; the dominant pipe infill, which comprises approximately 86 percent of the pipe volume, is primary pyroclastic kimberlite ("KIMB-1"). AMEC then produced a block model with 10 metre by 10 metre by 5 metre blocks. The tonnage for each block was calculated by multiplying the volume of each block by a density determined from a three dimensional density model developed by AMEC. The density model was based on 507 specific gravity measurements on drill core from throughout the body performed by Teck Cominco's Global Discovery Labs in Vancouver. There is a trend of increasing density with depth and towards the margins of DO-27 as the near-surface material and the kimberlite in the central part of the pipe is highly weathered, making this material very amenable to mechanical reduction to a high diamond grade kimberlite concentrate. The reported tonnage for the indicated resource and the potential mineral deposit is restricted to those blocks that fall within the KIMB-1 wireframe. The resource calculation is described in a 43-101 report by AMEC. (Click here for a copy of the report).

The three dimensional model of the DO-27 kimberlite and the tonnage and resource estimates are based on data from 66 core holes totalling 17,300 metres and 46 large diameter (35-61 cm) RC holes totalling 8,800 metres. A cumulative 3,200 dry tonnes of bulk sample material collected from the RC holes was processed for final diamond recovery at the bulk sample test facility at BHP Billiton's EKATI Diamond Mine. A geological model of DO-27 can be viewed at http://www.pdiam.com/i/pdf/DO27.pdf.

In addition to the resource calculation, AMEC completed an internal PTA study of DO-27 where a number of mining engineering parameters were examined in conjunction with the resource estimate, currency exchange rates, fuel and other consumable prices, diamond valuations and capital cost trends in the mining industry, to determine the current economic potential of DO-27. Both a "scrub-only" and "stand-alone" operation were investigated. For a "scrub-only" operation, a kimberlite concentrate with a grade up to ten times that of run of mine material would be produced at DO-27 by conventional open-pit mining, crushing and scrubbing techniques. The resulting concentrate would be transported elsewhere for final diamond recovery. For a "stand-alone" operation, rough diamonds would be recovered at the site by way of a conventional open-pit mining and diamond processing facility. The economics of a potential "scrub-only" project were determined by the PTA to be currently more favourable than a "stand-alone" operation.

AMEC investigated whether the DO-27 indicated mineral resource had the potential to pay back capital on an undiscounted cash flow basis. A preliminary financial analysis for a "scrub-only" mining operation was performed which achieved this objective, supporting the resource classification.

Although Peregrine management has concluded that the development of the DO-27 project is currently not economically justifiable, both the Company and AMEC believe that there is a reasonable chance that DO-27 could support a mining operation in the future. Factors that could enhance the economics of a mining operation at DO-27 include:

• Higher rough diamond prices.
• Possible underestimation of the average DO-27 diamond value because the current estimate is based on a parcel of only 2,075 carats.
• More favourable Canadian-US currency exchange rates.
• A diamond processing arrangement with one of the nearby diamond mines.
• Increased revenue potential from downstream cutting and polishing of DO-27 diamonds.
• Mining and processing technology advances.
• Regional infrastructure developments.
• An ultimate run of mine grade greater than the current grade estimated by reverse circulation ("RC") drill samples.

Data from the resource and engineering studies in combination with future diamond valuations will give Peregrine the ability to efficiently assess the economic potential of DO-27 on an ongoing basis. At a time of projected future shortfalls in diamond supply and expected increases in rough diamond prices, the diamond resource at DO-27, which is contained within one large kimberlite, close to existing diamond mining infrastructure, is well-positioned as a candidate for future development.

Jennifer Pell, (Ph.D., P.Geo.), Chief Geoscientist for Peregrine Diamonds Ltd., was the Qualified Person under NI 43-101, for work on the DO-27 kimberlite. Mr. Howard Coopersmith (B.Sc., P.Geo.), an internationally recognized consultant to the diamond industry, was Peregrine's external Qualified Person for the 2005, 2006 and 2007 bulk sampling programs.

Mr. Ken Brisebois (B.A.Sc., P.Eng.) and Mr. Ted Eggleston (PhD., P. Geo.) of AMEC are the independent Qualified Persons who supervised the preparation of the mineral resource estimate for the DO-27 kimberlite. Mr. Brisebois has 22 years of worldwide experience in mining resource and reserve assessments and related work and has worked on several diamond resource estimates in North America. His specialties include technical resource and reserve risk assessment, resource and reserve audits, geostatistical and geological modelling, ore and grade control and resource classification. Mr. Eggleston has more than 30 years of worldwide experience in exploration and development of mining properties including work on several diamond projects in North America.