Peregrine Diamonds is advancing its 100%-owned Chidliak project towards a Phase One diamond mine development. Chidliak, located 120 kilometres northeast of Iqaluit, the capital of Nunavut, on Canada’s Baffin Island, hosts 74 kimberlites in total, currently eight of which are believed to be potentially economic. Two of these kimberlites, the CH-6 and CH-7 bodies, form the foundation for Phase One Diamond Development at Chidliak (CP1D), as recently announced in the positive results of the independent Preliminary Economic Assessment (PEA), in July, 2016.
Preliminary Economic Assessment
The 2016 Inferred Mineral Resources for the CH-6 and CH-7 kimberlites form the foundation of the PEA for CP1D, which was announced in a July 7, 2016 news release.
Highlights of the Chidliak 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.
Between 2013 and 2015, the Company has completed a significant amount of work in order to develop the mineral resources at Chidliak, beginning in April 2013 with the bulk sampling program at the CH-6 kimberlite and culminating in the positive findings of the PEA, as reported in July 2016.
During the 2013 winter program at CH-6, a surface trench placed in the north of the body sampled weathered kimberlite from the KIM-L unit, and produced a 404.2 dry tonne sample containing 1,042 carats of diamonds larger than the 1.18 mm square mesh sieve, for a grade of 2.58 carats per tonne, as reported January 12, 2014. Photos of the diamonds can be viewed here.
In February 2014, an independent diamond valuation of a 1,013.5 carat parcel (for +3 DTC sieve size diamonds) collected via the bulk sample, was completed by WWW International Diamond Consultants Ltd. in Antwerp, Belgium. The entire parcel was valued at US$215,605, for an average price of US$213 per carat. Production-simulated modelled prices ranged from a minimum of US$162 per carat to a high of US$236 per carat, with a base case model price of US$188 per carat. The CH-6 diamonds were re-priced in February, 2016 by WWW, to reflect current market conditions. Production-simulated modelled prices ranged from a minimum of US$128 per carat to a high of US$189 per carat, with a base case model price of US$149 per carat.
In April 2016, the Company announced an updated independent Inferred Mineral Resource estimate for the CH-6 kimberlite pipe of 11.39 million carats of diamonds in 4.64 million tonnes of kimberlite at a grade of 2.45 carats per tonne to a depth of 260 metres. This represents a 40% tonnage increase and a 33% carat increase from the Inferred Mineral Resource reported in January 2015. Included in the Inferred Resource at CH-6 is a newly identified zone, with high estimated grades of 4.16 carats per tonne. The CH-6 kimberlite has a surface expression of approximately one hectare and is open at depth.
The CH-7 kimberlite was bulk sampled during the winter 2015 program, whereby six large-diameter reverse circulation drill holes were completed, totaling 1,212 metres. This resulted in the collection of 809.5 dry tonnes processed and a sample grade of 0.88 cpt, as announced in January 2016. Photos of the diamonds can be viewed here.
Results of an independent diamond valuation of a 737.75 carat parcel of CH-7 diamonds completed by WWW International Diamond Consultants Ltd. in Antwerp, Belgium was announced in March 2016. The entire parcel was valued at US$73,223, for an average price of US$100 per carat. Production-simulated modelled prices ranged from a minimum of US$94 per carat to a high of US$155 per carat, with a base case model price of US$114 per carat.
In May 2016, the Company announced the maiden independent Inferred Mineral Resource estimate for the CH-7 kimberlite pipe of 4.23 million carats of diamonds in 4.99 million tonnes of kimberlite to a depth of 240 metres. Grades varied between the modelled geologic domains, but the average grade for the pipe as a whole was 0.85 carats per tonne. The CH-7 kimberlite has a surface expression of approximately one hectare and is open at depth.
Resource Expansion Potential
Significant resource expansion potential exists at Chidliak, in the form of:
- Potential to upgrade conceptual Targets for Further Exploration (TFFE) currently defined at the CH-6, CH-7 and CH-44 kimberlites.
- Both the CH-6 and CH-7 kimberlites are open at depth.
- Completing further definition work on the other six kimberlites currently believed to be potentially economic (CH-1, CH-28, CH-31, CH-44, CH-45, CH-46).
- Re-evaluate other diamondiferous kimberlites on the property for brownfield expansion potential.
As part of the most recent NI 43-101 technical report, TFFE has been defined in the CH-6, CH-7 and CH-44 kimberlites. The additional tonnage potential ranges from 4.51 to 9.30 million tonnes total.
The potential quantity and grade of the TFFE estimates are conceptual in nature as there has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the remainder of CH-6 or CH-7 being delineated as a Mineral Resource.
First Kimberlite Discovery: July, 2008
Total Kimberlite Discoveries: Since 2008, 71 kimberlites have been discovered at Chidliak and three at Qilaq.
Diamondiferous Bodies: Of the 74 kimberlites, 51 have been tested by industry-standard microdiamond assay at the Saskatchewan Research Council in Saskatoon. Peregrine’s news releases record the diamond-positive results obtained for 45 kimberlites and barren results for 6 kimberlites. Diamond testing of the remaining 24 kimberlites has been deferred based on low diamond and/or low tonnage potential assessments by the experienced Peregrine technical team.
Other Kimberlites of Interest: The CH-1, CH-28, CH-31, CH-45, and CH-46 kimberlites have tonnage potential and coarse diamond size distributions that may be economic, particularly in a brownfields setting. Mini-bulk sampling programs at Chidliak has established that 82% of Chidliak diamonds recovered on 0.85 mm or larger sieves have white or off-white colours and that 36% have octahedral or related high-yield geometries. These commercially desirable characteristics suggest that larger, representative parcels of Chidliak diamonds could command valuations well above the average US$108 per carat price-point for rough diamonds produced globally in 2013.