Peregrine Diamonds (TSX:PGD) (“Peregrine” or “the Company”) is pleased to announce that it has completed an internal concept study of a potential open-pit plus underground mining development at its 100% owned CH-6 kimberlite pipe at the Chidliak Diamond Project near Iqaluit, Nunavut, Canada. The study was completed in consultation with JDS Energy & Mining Inc. (“JDS”). The study has concluded there is the potential to substantially enhance the economics of the Chidliak Project by incorporating an underground mining operation below 260 metres of depth at CH-6, the current bottom of the open pit Inferred Resource defined in the August 2016 Preliminary Economic Assessment (“PEA”) (see below). As a result of this conceptual study, a drill program targeting this deeper kimberlite is planned to commence in June 2017 to expand the resource to depths up to 500 metres below surface. In addition to the resource expansion drilling, geotechnical work and environmental studies in the Chidliak Project area and proposed transportation corridor will continue.
As quoted in the press release:
JDS completed a positive preliminary economic assessment titled “Preliminary Economic Assessment Technical Report of the Chidliak Project, Nunavut, Canada” dated August 19, 2016 on a Phase-One open-pit only mining operation of the CH-6 and CH-7 kimberlite pipes.
The economics of a development at Chidliak are robust. Highlights of the 2016 Chidliak Phase-One, Open-Pit, 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.
- 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 year, peaking at 1.8 million carats per year.
- Estimated pre-production capital requirement of approximately C$434.9 million, including C$56.7 million in contingency.
The PEA is preliminary in nature and includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them to be categorized as Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. There is no certainty that the PEA will be realized. All mine plan tonnes in the PEA are Inferred Mineral Resources.