Saturday, July 29, 2017

Hole DD33

Hole DD33

The 33rd diamond drillhole into CH-6 at Chidliak was completed recently.
The news release is located here -- 2017-07-26

It was the first successful hole of the summer program and was completed at a drillhole size of HQ. HQ is larger then the usual NQ hole and was picked to establish some geotechnical data in the country rock near CH-6 pipe. In addition to the geotechnical aspect of this hole, it was also used to find deeper pierce points on the West and East wall of the pipe.

Here is an image from Peregrine Diamonds news release:



The targeted depth point on the West side (first entry into the kimberlite) was not as expected. The drillhole ran into kimberlite much earlier then expected and therefore as a higher (elevation) pierce point then it was trying to achieve. However, finding more kimberlite at slightly high elevations and expanding out the west wall of the pipe will have a significant influence on the number of carats contained and that will directly influence the economics in a positive nature.

The targeted depth point on the East side (exit from the kimberlite) was as expected and maintained a steeply dipping pipe wall.

Beyond this, the drill team decided to extend the hole further into the country rock...probably to gain some additional geotechnical data and maybe just a hunch to go as far as the hole could go.

This turned into some great news as the drilling intersected some new kimberlite material that did not adhere immediately to any signature or properties related to existing kimberlite within the pipe.

Here is the excerpt from the news release:

"Hole DD33 was lost at 433 metre down hole length, at 360.6 mbs and terminated in kimberlite. A 32-centimetre intersection of slightly altered olivine-macrocrystic kimberlite was logged at the end of the last core barrel retrieved. The nature and relationship with CH-6, if any, of this deeper kimberlite intersection is unknown at this time. Future deep drilling from the eastern side of CH-6 will attempt to establish the nature, extent and continuity of this deeper kimberlite intersection."

The drilling finished with this open ended intersection at about 360 metres below surface and to the east of the current pipe wall. The extent of this new kimberlite intersection will be known later.

What does olivine-macrocystic mean?

Macrocystic simple means the size of the 'cysts' or in this case olivine cysts.
The size being -- macrocrystic (0.5–10 mm)

The intersection that Peregrine Diamonds has found has olivine cysts in the order of 0.5 to 10 mm in shapes.

Here is an example from CH-7 (KIM 1) showing some highlighted olivine cysts in the photo.
This is taken from the Chidliak Resource Technical update in 2016.



On the left image, the yellow or highlighted 'OL' are olivine cysts.

Peregrine Diamonds should be looking very closely at that current core intersection and will hopefully be able to get more core from drilling in the very new future.

The next step for that new kimberlite will be to send a reasonable sample to the SRC to determine if and how many diamonds it contains. That sample will probably need to be larger then the current core intersection they have.


Thursday, July 27, 2017

Drilling at Chidliak

Drilling at Chidliak

Peregrine Diamonds is bringing a 3rd drilling rig to Chidliak for an August 1st start date. This is to add an additional 2,000 to 4,000 metres of drilling capacity to the summer program. The original target for drilling during the summer was 4,500 to 5,000 metres (with 1 drill) and that was subsequently bumped up to 7,500 metres with 2 full drills onsite. A third one should add more capacity, but they have had some issues early on in the program. Once resolved, the possibility of hitting past 7,500 metres is realistic.

The last time Peregrine Diamonds had 2 core drill rigs on the site was in 2010 and the drill rigs were used on multiple anomalies in addition to the CH-6 mini bulk program (15 tonne).

History should give an indication of what the current program is capable of. Below are the details of what was accomplished by each drill rig in 2010.

Drill rig #1:



Drill rig #2:


When adding up the metres for July/August/September of that timeframe, one of the rigs did just under 3,000 metres and the other rig just did over 3,000 metres.
The advantage that Peregrine Diamonds has this year is that the 3 core drill rigs are all within a very limited vicinity. All at CH-6. These are not getting transported to other anomalies via helicopters.

With a quick look at the numbers, a very productive program could yield up to 10,000 metres. Considering July is almost over, a final target of 7,500 to 8,500 metres is probably a reasonable goal.

Results of the first successful drillhole of the season DD33 (2017-07-26 news) has been eye opening. Peregrine Diamonds just needs to focus on executing more successful holes at site to bring even more knowledge to the project. These exercises are about finding information...not just diamonds.

Monday, June 19, 2017

2017 Summer Program Announced

Peregrine Diamonds have given final details for the 2017 summer program and announced a commencement of June 27th, 2017.

Details of the program can be found on the Peregrine Diamond website -- 2017-06-19

There has been a significant increase in planned drill metres from an original ~5,000 metres to now an approximate ~7,500. There is a chance that they will add a second core drill rig to site to  achieve this upgraded target. The current drilling permit allows for 2 core drill rigs and also an RC helicopter rig if needed.

An updated event timeline is located here -- Upcoming events


Wednesday, April 19, 2017

Synthetic Diamonds

The irony of synthetic diamonds

Producing mines or developing projects in the diamond industry are always having a close eye on the synthetic diamond market and where it is headed. This does include projects like Chidliak when determining what value the diamonds being extracted from Chidliak could be valued and sold at.

A single rough diamond carat produced at a mine site will have quite a variable range of costs across the many producing mines. A single rough synthetic diamond produced in a lab will have a cost based on the amount of energy and time and materials that are needed to produce that single stone. From that point on, the costs of polishing, marketing, selling are relatively all the same.

A single rough diamond carat will be extracted from a very old volcano emplaced in a kimberlite pipe. A single rough synthetic diamond carat will be produced in a lab. The question that needs to be asked is where that lab get its energy from to create the stone.

The answer to the energy question is basically where is energy is the cheapest. Synthetic diamonds are small and very portable, there is virtually no cost to transporting these stones...so they can basically be produced anywhere in the world. So, to answer the energy question, one only needs to look at digital currency with the likes of bitcoin and other players. Digital currencies are produced via computer algorithms and these computers need cheap electricity to get the most profit out of producing a digital coin. They also generate a lot of heat....so dispersal of heat is also a direct input to the cost.  A simple google search will reveal that iceland has bit currency farms for very good reasons.

Iceland - A very geothermal friendly, active volcanoes, and a very young (geologically) country. A mere 18 million years old. This geothermal energy generates consistent and renewable energy that is very environmental sound. Sounds like a perfect home for a synthetic diamond manufacturer.

Synthetic diamonds are still mostly in the research phase. A lot of the companies that are producing synthetic diamonds for the jewellery market are not actually making money...especially when one takes into account the capital cost. These labs are in different parts of the world where the scientists are...not necessarily where it is the cheapest to produce.

One day, there may be a shift to move these into full production in a place like iceland.

The true irony of synthetic diamonds is that they will one day be made by  current volcanoes (the energy from) versus real diamonds that are made by ancient volcanoes (kimberlite pipes).

Monday, April 3, 2017

Video - Drilling and PEA

Video blog discussing drilling and PEA.

Here is a short video (~17 minutes) that discusses the proposed drilling program for the summer of 2017 and takes a quick analysis as to what may be expected with an updated PEA as the end result of the drilling.




Here are the calculations mentioned in the video:




 The end result is a discounted NPV that could reach CAD$1.2 billion depending on the results of the drilling. An increase in close to CAD$500 million in value add from the original PEA.

Thursday, March 30, 2017

Proposed Summer Drilling

Summer Drill Program - 2017

The timeline is set to start the summer program in about 2 to 3 months from now once the spring melt occurs in and around June.

There is more detail on the planned program. The proposed drillholes are listed in the recent AGM presentation -- AGM Update PDF

On Page 17, the planned drillholes are shown on the image.

This program will try and use the benefits of horizontal drilling to gain more information for less $$'s. On the diagram on page 17, one can see the 'parent' drillhole and the associated wedging off that hole to enter kimberlite pipe at various depths.

The final quantity of drilling footage is still a work in progress and there is a possibility of utilizing 2 core drill rigs instead of just the one already onsite. The equipment listed in the permit to work at Chidliak does list and allow for 2 core drill rigs, so it is just a question of procuring and mobilizing a second rig to site.

All work from the summer program will feed into a second or updated PEA that should include a new underground portion of the CH-6 kimberlite pipe on the assumption the resource continues to a depth of around 500 metres. They will know if it does in a few months from now when the drilling occurs.

Monday, March 13, 2017

2017 summer program

The focus for the development of the Chidliak resource will be carefully selected work to be done during the summer season.

It will be three fold.

1 - Deep core drilling to extend the resource to a target of 500 metres below surface.
2 - Drilling through the adjacent country rock to core log geotechnical data.
3 - Continued environmental/permitting studies (baseline and others) for both the project area and the all weather road corridor.

Starting with #3 - environmental studies are necessary in the permitting process.
Here is a history and some information on permitting -- Permitting details

One of the snippets of information from that link is this:

"The emphasis of a lengthy environmental baseline is very important in the permitting process. Ranging from 6 years to 9 years in a couple of the projects above. Chidliak started independent environmental baseline studies in 2009 and continue each and every year. 2016 will be year 7."

Chidliak did have a baseline study in 2016 and will have another one in 2017. That would put it in the 8 years of studies category that can be included in any advanced permitting applications. The key is the continual studies and it just takes time to collect that information. Meadowbank mine had 9 years of studies going into its final environmental impact assesssment. Chidliak is well on its way in this part of the requirement.

#1 and #2 will be obtained from the same core drilling by utilizing slightly angled holes in the country rock that will pierce the lower part of the kimberlite pipe (300 to 500 metres below surface).

More geotechnical drilling means a more realistic approach as opposed to very conservative approach when deciding what pit wall angles to use. This effects the strip ratio and how much waste one needs to extract or leave in the ground. Geotechnical core drilling will also be used within the kimberlite pipe to help define the size of the stopes that can be extracted underground safely. Bigger stopes means bigger cost savings. Bigger stopes also can lead to more risk to failures.

Deeper kimberlite expansion means expansion of the inferred resource at CH-6 and the concept of bringing in an underground portion to an updated PEA.

In the latest presentation -- 2017-03-01 Presentation
On page 19, there is a big drop off in positive cash flow starting in year 6 and beyond.
The goal will be to prevent that drop off from happening and keep the strong cash flow going for a few more years. The rock value of CH-6 is very lucrative and an underground concept can add substantially to the cash flow in the years 6 to 10. The drilling needs to be done to confirm this and this is a huge part of why the program was selected.

Ch-7 tonnage will be still be included in the PEA. It will be pushed back as far as possible until further work on CH-7 can increase the rock value in light of the diamond breakage issue. If the mine life extends to 15 years, the size of the mill will be put in question and may be increased. This will help bring higher value material further into the present.

Tuesday, November 29, 2016

2017 Field Program

2017 field program (winter/spring - early 2017)

A lot of details have been coming out for the upcoming field program.

The two questions that need to be asked are:

1 - What are the details?

2 - What will this accomplish?

The answer to question 2 is the most important..but that cannot be answered without delving into question 1.

So, what are the details?

CH-6 will be the focus for this program.

Tasks?

1 - Bulk trench sample x 500 tonnes (1000 to 2000 carat parcel). Small number of limited blasts and hauling of material into 1 tonne bags to send down to the SRC for processing and recovery of rough diamonds.

2 - LDD - RC - The Large Diameter Drill will drill deep into CH-6. Probably a few holes. Maybe up to 500 tonnes of material that will be screened to above 1.13 mm. Minor adjustments will be made to hopefully reduce the expected breakage to occur. This should create another 1000 to 2000 carats of rough diamonds that will be shipped in 1 tonne bags down to the SRC for processing.

3 - Geotechnical drilling - Core drilling in the country rock to establish conservative, yet reasonable pit slopes for an open pit mine.

4 - Core drilling at depth. The geotechnical holes in #3 will be aimed toward the kimberlite at 300 metres or lower to establish an extension of the known resource.

5 - Core drilling in kimberlite -- Twin the LDD holes for validation, drill deep to extend depth, drilling around the high grade zone (4cpt+) to better define the zone.

6 - Related surface tasks - 2 airstrips on frozen lakes - 1 long strip (10+ km's away) and 1 small strip (5+ km's away) to bring in people, equipment, etc. Establish winter trail to bring in equipment and supplies and to be used to ship out the bulk sample material to Iqaluit.

This an estimated list of tasks (above) and may differ when a final and detailed program is released. Some of the items above have been taken from permit applications and news articles.

So, what will this accomplish?

Increase the economics and continual de-risk of the project.

In the PEA (preliminary economic assessment), the majority of the NPV was front end loaded with CH-6 and CH-7 provided an extension to the life of mine with positive cash flow.
Heading toward the next step is the PFS (Prelminary Feasibility study). With the focus of CH-6, the indicated resources that can be used in the PFS will only come from CH-6.

Not all carats in the PEA were used in the PEA. Why?  The biggest reason was the strip ratio used in the study due to lack of geotechnical information.
Here is a link that talks about strip ratio -- Strip Ratio
The end result for CH-6 in the PEA was an average of 10 to 1 (waste to ore) and that is just the average. Reality is the upper tonnage is a lot smaller than 10 to 1 and the tonnage near the bottom of the pit is much higher than 10 to 1. Once further geotechnical information is obtained, the pit wall angle can be steepened up to something more reasonable based on real data instead of just defaulting to the most conservative angle. Will this decrease the strip ratio from 10 to 1 to something lower?
Not necessarily. With steeper pit walls, you can go deeper into the ground, so those tonnages even lower will still have larger strip ratios. The aim of the project is also to deepen the existing resource even further as well.

On a resource side, the main goal will be to convert inferred and add even more tonnage to the indicated category to be used in a PFS study.

End result? With the significant rock value of CH-6, adding more tonnage has a very significant effect to the project and NPV. The valuation timeframe for the PEA (february 2016) was done at a dip in the rough diamond price market. The valuation is up over 10% since then and there is a reasonable chance to say that the PFS will be done at a time where rough diamond prices are higher then the PEA timeframe.

What is the end result?

Coming up with a PFS that has a pre-tax NPV (@7.5%) of CAD$1 billion is probably a very reasonable goal. It would be a great accomplishment and outcome from this upcoming winter/spring program.

Other possible tasks?

1 - There is a sub-domain that doesn't have a valuation assigned to it and is considered waste with 0 value now. Possibility of putting an LDD RC drillhole into this to obtain more data.
2- There is a string of pearl (kimberlite pipe) north of CH-6 that the open pit will break into. If they can deepen CH-6, it will grab even more tonnage from this pipe. Possibility of putting an LDD RC drillhole into this to obtain more data.

Monday, November 14, 2016

2017 Trench

Trench sample - 2017 - CH-6

Some detail from the trench bulk sample for early 2017 has slowly trickled out.
There has been some mention of a plan in the 2016 technical report, but only a figure of 400 tonnes and a budget of $2.5 million was mentioned.

As part of the water permit Peregrine Diamonds has in hand, it requires them to get approval for any trench bulk sample program and have at least 90 days before asking for approval and executing the bulk sample.

The target date for the program is March 1st, 2017 during the winter cold when the ground is frozen including all water in the vicinity.

Details: 30m x 15 m trench at depths from 3 metres to 8 metres.
Tonnage expected - 500 tonnes.

What can be expected of those 500 tonnes? How many carats?

The material will be extracted from the wKim-L phase. This basically means the kimberlite 'L' that makes up the majority of CH-6 and the 'w' means weathered. This usually is the material near surface that has had some exposure to the environment over the millions and millions of years.

The question is whether the material will be from the HG or the LG version of Kim-L. HG means the higher grade area whereas LG is the normal grade. It isn't really low grade as the deposit is very high grade for any diamond deposit.  What difference does this make?

LG - 2.12 cpt (carat per tonne) and the wLG has a density of 2.19 m^3 per tonne
vs.
HG - 4.16 cpt (carat per tonne) and the wHG has a density of 2.29 m^3 per tonne

HG, being more dense, means that you can blast a bit less (5% less) of material to get the same 500 tonnes of kimberlite.

HG, being much higher grade, means that you can get a lot more carats out of that same area.

At 500 tonnes - LG would produce 1060 carats and the HG would produce 2080 carats.

There is an obvious benefit to targeting the HG zone...if it is accessible.

Is Peregrine Diamonds targeting the HG zone?

Here is an image of the bulk sample area in plan view:

The bulk sample is near the dark blue circle. It is near the far West and toward the south part of the surface expression.

Here is an image showing the HG versus LG zone:

There is no specific co-ordinates on this image, other then the 'looking East', so an estimate of where that same bulk sample area for 2017 has been highlighted in dark blue.

One can see that hitting some tonnage from the HG zone is a possibility and it would make sense for Peregrine Diamonds to target this area to get as many carats as cheaply as possible.
More carats, means the resulting valuation model will be more robust.

Looks like the journey of 500 tonnes for 2017 has started its first chapter. This may be joined by LDD (larger diameter drill) tonnage as well along the way. (TBD)

Thursday, September 8, 2016

post PEA

It has been a couple of months since the PEA (preliminary economic assessment) results have been out.

A lot has changed over the last 2 months....but in reality, a lot has changed over the last 6 months.
Why 6 months? If you read the PEA in detail, you will find out what point in time they used for the valuation of the diamond parcels. That valuation was obtained in late February or early March.

The front cover of the technical report states:

EFFECTIVE DATE: JULY 7, 2016
REPORT DATE: AUGUST 19, 2016

NI-43101 guidelines create the obligation to put an effective date and a report date.
The effective date is a bit like a snapshot in time of what values and assumptions are used.

If a mining truck on July 7th was worth this amount and then 6 months later, the price of that truck goes up 1000%, a person reading this report in 12 months can understand in what context the PEA was created and whether the PEA is still valid based on the events over the last 12 months.

Diamonds are a bit peculiar in the pricing side of the equation. They are very specific to the parcel of diamonds and studies tend to use a point in time of the latest valuation...unless there is a material difference and then maybe the parcel gets a valuation update. Because the valuation is a key input in designing the optimum pit, it does need to be firmed up early on in the PEA process and not changed.

This scenario clearly is laid out with Chidliak's PEA.

With the knowledge that the valuation was obtained in early March, the reader can now go out to the market and see what the current conditions are. Looking at the various sources of information, one can find that the average rough diamond price since early March to end of August has changed roughly 10 to 11% to the upside.

With the PEA in hand and that knowledge, one can now adjust the numbers (if they want) to see what it really means for the economics.

Here is a pre-tax cash flow analysis  that shows the original PEA results, an 11% adjustment in revenue and a third section where the 15% contingency is taken out.


Anyone can and should look at the numbers in the PEA and adjust as they see fit. The equations to calculate NPV or IRR in any spreadsheet software are quite easy to use.

In this analysis, one can clearly see a significant improvement in pre-tax IRR (40 to 46%) and a change in pre-tax NPV (7.5%) of an additional CAD$160 million (to CAD$870 million).

Peregrine Diamonds sits at roughly CAD$75 million. Since the PEA was released, the company has done no field work, nothing material and yet the pre-tax valuation of Chidliak has gone up more then 2 x Market cap of the company.

Taking out the contingency just to see what the raw economics would be and you see the NPV goes up to CAD$922 million and the IRR hits 51%.

These are two obvious area's (revenue and contingency) that are easy to adjust and see what the picture looks like). These do not include the significant area's of improvement that could occur on the revenue side because of more parcels and more refined modelling. These do not include the significant area's of improvement on the operating cost side that could occur because of more realistic pit stope angles and possible annual production increase (reduction in most costs) as more resources get brought into the plan.