Peregrine Diamonds’ New PEA Increases Chidliak NPV to C$679 Million

Peregrine Diamonds (TSX:PGD) has increased the expected after-tax NPV of its Chidliak diamond project to C$679 million with the release of an updated preliminary economic assessment (PEA).

The new total represents a C$208-million increase from the company’s 2016 PEA, which pegged the asset’s NPV at C$471 million. The PEA also increases Chidliak’s estimated life-of-mine diamond production target by 44 percent to 16.7 million carats and boosts its after-tax IRR to 31.1 percent.

The announcement follows the release of an expanded inferred resource report in February of this year. The gains projected in the PEA are a direct result of the expanded diamond resource for the CH-6 and CH-7 kimberlite pipes at Nunavut-based Chidliak.

Peregrine purchased the remaining 51 percent of Chidliak from BHP Billiton (LSE:BLT,ASX:BHP,NYSE:BHP) in 2011, and since then has discovered 74 kimberlites at the site. Eight have been identified as potentially economic through drilling and microdiamond analysis. The other kimberlite pipes require additional work to determine their economic potential.

In addition to owning 100 percent of the Chidliak project, the company also owns all of the diamond marketing and sales rights to the diamonds discovered at the property. There are no non-government royalties or other encumbrances on diamond production at Chidliak.

“The updated PEA clearly establishes Chidliak as Canada’s next economic diamond development opportunity. This latest assessment validates the decision we took in 2016 when we recognized the resource expansion opportunities at the high grade CH-6 kimberlite,” said Tom Peregoodoff, president and CEO of Peregrine in Wednesday’s (May 23) release.

“For a marginal increase in capital, we have materially increased the total carats in the resource and significantly enhanced the economic potential of this robust project,” he continued.

The PEA, which was prepared by JDS Energy & Mining, puts Chidliak’s estimated mine life at 13 years and its after-tax payback period at 2.2 years. Pre-production CAPEX stands at $455 million, which includes $95 million for an access road and a $55-million contingency.

The plan is for production to occur at an open pit at the CH-6 kimberlite pipe for nine years, followed by production via an open pit at the CH-7 kimberlite. Both CH-6 and CH-7 remain open at depth, and could represent expansion opportunities that have not been incorporated into the current study.

“There remains significant phase one resource expansion opportunities below 300 mbs, the current bottom of the CH-6 open pit, with 2.64 million carats in inferred resource and between 1.09 million tonnes and 2.35 million tonnes of kimberlite classified as a target for further exploration down to 525 mbs,” Peregoodoff added.

He also noted, “[t]his opens up the possibility for underground development as we further define the CH-6 resource beneath the current bottom of the expanded open pit.”

Peregrine’s share price was up 13.8 percent for the week at close of day Thursday (May 24) at C$0.17.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.