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CANADIAN STOCK EXCHANGES – OCTOBER
2009
YES, DIAMONDS
ARE AN INVESTORS BEST FRIEND
- E. A. SCHILLER
Stock markets in October started out with a down turn on
both sides of the border. Gold and oil traded erratically, bouncing up
and down around $1000 and $70 respectively, on a daily basis. It was tough
on resource stock investors trying to get a better handle on the direction
the market was headed. The 64 dollar question as to economic conditions
remained uncertain causing the market to move in either direction (i.e.
up or down) with the slightest bit of favourable or unfavouable news.
So who came forward with some meaningful news that excited
the market for more than a few hours.
The situation I like that has a lot of meat and potatoes is what is happening
on Baffin Island, Nunavut in Canada’s Arctic. We all know the Canadian
diamond story back from 1991 when Dia Met Minerals discovered diamonds
at Lac de Gras, north of Yellowknife in the Northwest Territories. From
that initial discovery of Ekati now operated by BHP Billiton, came Diavik
operated by Rio Tinto, Snap Lake operated by DeBeers and a fourth mine,
no longer in operation. We have now have unfolding another Lac de Gras
diamond camp at about the same latitude but about 3,000 kms to the east
on Baffin Island. Peregrine Diamonds Ltd (PGD-TSX-V) on their Chidliak
Project has discovered diamond-bearing kimberlites with all the characteristics
pointing to a potentially economic deposit.
The 9,800 square kilometer project is 120 kilometers northeast
of Iqaluit, the capital of Nunavut where daily air service is available
from Montreal and Ottawa. Tide water on Davis strait is about 100 kilometers
to the east of Chidliak. For starters the kimberlites are diamondiferous
as determined from drill cores but more importantly contain very favourable
indicator mineral chemistries. Throughout the world lots of kimberlites
are diamond-bearing but few are economic due to a number of deficiencies
in their lithological makeup (too few diamonds). The Chidliak kimberlites
were discovered using geochemical studies in conjunction with geophysical
surveys that identified kimberlite targets. Some 16 kimberlites have been
identified by way of drilling and/or surface sampling and others are inferred
from preliminary sampling. What is most encouraging are the diamond counts
and the initial sampling of drill hole into CH-5 kimberlite. A 398.8 kilogram
sample yielded 2,730 diamonds larger than the 0.075 millimeter sieve size,
including 131 diamonds larger than the 0.6 millimeter sieve size.
The largest diamond recovered from the sample was a 0.62
carat white, transparent aggregate. A second kimberlite CH-5 contained
49 diamonds larger than the 0.075 sieve size from a 423.7 kilogram sample.
More encouraging news was released on October 5 in which a 0.64 carat
diamond was recovered from a 220.9 kilogram sample from a surface outcrop
of kimberlite CH-7. In addition, this sample yielded 664 diamonds larger
than the 0.075 millimeter sieve size, including 11 diamonds larger than
the 0.600 mm sieve size. To date, eight out of the 16 kimberlites discovered
are proven diamond-bearing with three of these, CH-1, CH-6 and CH-7 have
diamond contents and coarse diamond size distributions that are consistent
with economic potential. (This is a statistical study that predicts the
viability of a sampled population – of micro diamonds- based on many
case studies of economic diamond deposits).
For purposes of comparison the first kimberlite found at
Lac de Gras in the fall of 1991 at Pointe Lake by Dia Met Minerals yielded
81 micro diamonds less than 2 mm in diameter from a 59 kilogram core drill
hole sample. This discovery was part of the Ekati project which eventually
led to the discovery of 156 individual kimberlites of which four kimberlites
are now being mined for diamonds and others in the permitting stages.
In the years 2004-2007 annual production was three million carats of diamonds.
The field portion of the 2009 Chidliak exploration program is now complete.
Results forthcoming this fall include 1) diamond counts from a 50 tonne
mini-bulk sample from an outcrop of CH-1 kimberlite, 2) chemical analyses
of 1,273 indicator mineral samples, 3) assessment of 58 geophysical anomalies
discovered by prospecting and geochemical sampling and 4) interpretation
of 1,100 line kilometers of ground geophysical surveys and 5) completion
of an initial environmental baseline study.
Peregrine is operator of the Chidliak exploration program
with financing provided by BHP Billiton. BHP has elected to exercise its
earn-in rights for Chiliak by committing to incur expenditures of $22.3
million in exploration in order to earn a 51% interest in the project.
Peregrine stock trades at shy of $3.00 in early October, up from 70 cents
in September. Where is the stock going to go? If positive news continues
to flow from studies underway PGD has lots of upside. Dia Met stock went
from pennies to over $60.00 back in 1991-92. Is Chidliak another Dia Met,
maybe yes but these discoveries take a lot of time to execute, develop
and put into production. It took seven years from discovery in 1991 to
operation for Etaki in 1998. At this stage in the program Peregrine is
destined to fly like a falcon.
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