July 7, 2016
Phase One development envisages a 10 year mine life
at an annual average production rate of 1.2 million carats
After-tax Net Present Value of C$ 471 million, Internal Rate of Return of 29.8%
and a capital payback period of two years
Conference call and webcast on Tuesday, July 12, 2016
at 8:00AM Pacific Time
Vancouver, Canada - Peregrine Diamonds Ltd. (TSX:PGD) (“Peregrine” or “the Company”) is very pleased to announce the positive findings of an independent Preliminary Economic Assessment (PEA) for the Chidliak Phase One Diamond Development (“CP1D”) of the CH-6 and CH-7 kimberlite pipes on the Company’s 100%-owned, Chidliak Diamond Project on Baffin Island, Nunavut, Canada. The PEA highlights that the CP1D represents a robust, high margin, ten-year, open-pit mining project with very attractive economics. Peregrine owns 100% of the 564,396 hectare Chidliak Project, where 74 kimberlites have been discovered to date, with eight currently being identified as potentially economic. The Company also owns all of the diamond marketing and sales rights and there are no non-government royalties or other encumbrances on diamond production.
The CP1D envisages an open-pit diamond mine with a mining life of approximately ten years, producing initially from an open pit at the CH-6 kimberlite pipe with production from an open pit at the CH-7 kimberlite pipe to follow. The PEA utilizes the Chidliak resource estimate prepared by Mineral Services Canada Inc. with an effective date of June 3, 2016, that includes the 11.39 million carat Inferred Resource to a depth of 260 metres at CH-6 that was announced in an April 7, 2016 news release, plus the maiden 4.23 million carat Inferred Resource at CH-7 to a depth of 240 metres that was announced in a May 5, 2016 news release. The resources at both CH-6 and CH-7 remain open at depth and represent significant expansion opportunities which have not been included in the current economic study.
The PEA was prepared by JDS Energy & Mining Inc. (“JDS”), independent consulting engineers based in Vancouver, Canada. The JDS team has a long history of northern Canadian and diamond project experience, including the current construction of the Gahcho Kué diamond mine, in the Northwest Territories, Canada.
Highlights of the 2016 Chidliak Phase One Diamond Development PEA base case are:
- Pre-tax Net Present Value (NPV) of C$ 743.7 million, at a 7.5% discount rate and a pre-tax Internal Rate of Return (IRR) of 38.1%.
- After-tax NPV of C$ 471.2 million, at a 7.5% discount rate and an after-tax IRR of 29.8%.
- Total Life of Mine (LOM) pre-tax Free Cash Flow of C$ 1.31 billion.
- Pre-tax average annual Free Cash Flow of C$ 131 million per annum.
- After-tax payback period of two years, LOM of ten years.
- Operating margin of 72%.
- LOM average production rate of 1.2 million carats per annum, peaking at 1.8 million carats per year.
- LOM average mining head grade of 1.67 carats per tonne.
- Estimated pre-production capital requirement of approximately C$ 434.9 million, including C$ 56.7 million in contingency.
- Pre-production capital includes the construction of a 160 kilometre, all-weather road to connect to Iqaluit, the capital of Nunavut.
The Chidliak 2016 PEA is preliminary in nature and includes Inferred Mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves. There is no certainty that the PEA will be realized.
Eric Friedland, Peregrine’s founder and Executive Chairman, commented: “We are very pleased with the results of this Preliminary Economic Assessment, which clearly establishes Chidliak as one of the premier undeveloped diamond resources, located in one of the world’s safest, and most supportive jurisdictions for responsible mining development. With the support of all our stakeholders, including our shareholders, employees, local entrepreneurs, Nunavummiut, and the Nunavut and Federal governments, we are looking forward to advancing this outstanding diamond project to the next stage of development.”