Peregrine Closes Option Agreement and $2.5-Million Private Placement with De Beers

October 11, 2012 PDF version
Peregrine Diamonds Ltd. (“Peregrine” or “the Company”) (TSX:PGD) is pleased to announce the closing of the option and subscription agreement (“the Option”) between the Company and De Beers Canada Inc. (“De Beers”) as announced on September 5, 2012. As part of the closing, De Beers has completed the $2.5-million private placement with Peregrine priced at $0.75 per unit, for an aggregate of 3,333,333 units. Each unit consists of one common share and one-half share purchase warrant with each whole warrant entitling De Beers to buy a common share in Peregrine for $2.00 per share for a period of 24 months. In addition, De Beers is required to make the January 31, 2013, $2.5-million payment due to BHP Billiton Canada Inc. (“BHP Billiton”) pursuant to Peregrine’s agreement to purchase BHP Billiton’s 51 percent interest in the Chidliak diamond project (“Chidliak” or “the Project”) as announced on December 20, 2011.

De Beers now has the exclusive right until December 31, 2013 to enter into an earn-in and joint venture agreement (“the Joint Venture”) with Peregrine on a 50.1 percent De Beers / 49.9 percent Peregrine ownership basis, with De Beers being the operator of Chidliak, which is located on Baffin Island, Nunavut, Canada.

Under the terms of the Joint Venture, De Beers will be required to invest $58.5-million into Chidliak within five years of entering into the Joint Venture to earn its 50.1 percent interest in the Project (the “Earn in Point”), with a minimum expenditure requirement of $37-million. De Beers will also be required to sole finance all work at Chidliak from the Earn in Point until the completion of a National Instrument 43-101 compliant bankable feasibility study (“BFS”), inclusive of appropriate environmental impact studies necessary for evaluating the feasibility of commercial diamond production. Peregrine will reimburse De Beers 49.9 percent of all Chidliak costs in excess of $58.5-million, the point at which De Beers has earned its 50.1 percent interest, to completion of the BFS. Reimbursement will consist of an aggregate of $25-million payable in four escalating staged payments at certain milestones beginning with the approval by the participants of the completed BFS and ending with the completion of mine construction, with the balance payable from 66 percent of Peregrine’s attributable aftertax cash flow from a diamond mine at Chidliak.

Mr. Eric Friedland, Peregrine’s CEO, said “The closing of the Option with De Beers is an important step on the road to what we believe will be Baffin Island’s first diamond mine. We are confident that Chidliak is the world’s premier advanced stage diamond exploration project and De Beers’ commitment of $5-million for their Option is a serious expression of their belief in Chidliak and Peregrine’s management. De Beers has already completed technical due diligence on Chidliak and the current focus is on developing the strategy to advance the Project. The agreed material terms of the Joint Venture provide a clear financial and technical path that could lead to successfully proving up, financing, building and operating a diamond mine in Canada’s North. We are pleased to welcome De Beers as our new partner along with their 124 years of unrivaled diamond exploration, development, mining and marketing experience.”

Mr. Tom Peregoodoff, Peregrine’s Executive Vice President, Business Development, said “Within 24 hours of signing the Option, De Beers had a 5 member team of senior people visiting Chidliak, Iqaluit and Pagnirtung, a sign of their commitment to the Project. Our respective technical teams are engaged, and planning for future programs is underway. Under the potential Joint Venture we will ensure that the design and execution of all work programs take full advantage of the extensive diamond experience De Beers brings to the partnership and Peregrine’s many years of successful diamond exploration in Canada.”

About Peregrine Diamonds
Peregrine Diamonds is a diamond exploration and development company focussed on Canada’s North. Peregrine has discovered two new diamond districts in N