Peregrine looks ahead at Chidliak

2009-02-13 18:19 ET - Street Wire

by Will Purcell

Eric Friedland's Peregrine Diamonds Ltd. has just laid out a big-spending exploration program for Chidliak on Baffin Island this year, and that effort will "set the stage for spectacular 2010 and 2011 programs," says the company's president, Brooke Clements.

Peregrine and BHP will not set budgets for 2010 until at least the end of this year but the cash outlay could easily top the 2009 budget, although Mr. Clements said that "spectacular is not always based on money."

The large budgets are the result of BHP Billiton Inc. exercising its earn-in right to the project, but Peregrine had been a big spender the last few years on its own and that work led to the discovery of three kimberlites on Chidliak, including one with some sparkling diamond counts. The results from the 2008 program and BHP's thick wallet have Peregrine already musing about what will be needed over the next few years.

The plan

For 2009, Peregrine and BHP plan a start on their core drilling, with about $2-million budgeted for drilling several new priority targets and completing delineation drilling on the existing three finds, CH-1, CH-2 and CH-3. The company will also spend a few hundred thousand dollars collecting a 50-tonne mini-bulk test of the best find so far, CH-1.

Peregrine and BHP will be spending a few million dollars hunting new targets, with much of the money going to a busy surface sampling program. Processing well over 1,000 till samples and the kimberlite core samples will run up a big lab bill, which is likely to top $1-million, based on the scale of the program. A significant portion of the planned expenditure will go to setting up and maintaining two camps on the property, which is roughly 100 kilometres northeast of Iqaluit.

Based on what Peregrine already knows, Mr. Clements believes the sampling and ground geophysics to be completed this summer will lead to a major drill program in 2010. He said the partners could easily have two or three drills running on the property next year and it was possible they could bring in a small reverse circulation drill to collect some mini-bulk tests.

The larger samples in 2010 would likely not be the big tests that would be needed to acquire the diamond parcels large enough for valuation purposes, Mr. Clements said. Instead, a bulk test weighing 1,000 tonnes or more would likely occur the following year, if CH-1 or some new find progresses as expected.

For this year, Peregrine expects to start getting its camps organized in April, and once set up, work will continue until mid-September. Weather and the length of the days are two key factors in setting the length of the work season on Baffin Island, but Mr. Clements said there was ample time given the scale of the program.

The encouragement

Peregrine wowed investors last summer with word that a 95-kilogram batch of rock form CH-1 produced 112 gems, including six larger than a 0.85-millimetre mesh. The numbers pointed to a possible diamond content topping one carat per tonne, and a subsequent 2.28-tonne test offered further support. That sample produced 34 stones larger than a 0.85-millimetre mesh. Those gems weighed 3.55 carats, for a diamond content of 1.56 carats per tonne.

Diamond counts from CH-2 and CH-3 were not as high, but the former body was significantly diamondiferous. CH-2 produced 372 gems in 357 kilograms of kimberlite and one stone that weighed 0.03 carat, and the numbers augur well for any new finds in the area.

The size of the first three pipes is also encouraging. CH-1 spans about six hectares and CH-2 roughly three hectares, and the smallest, CH-3, covers about two hectares. As a result, Peregrine already appears to have both size and grade on it side after its first year of target testing at Chidliak.

Peregrine closed up one cent to 57 cents Thursday on 161,800 shares.

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