Monday, December 7, 2015

CH7 Countdown clock

COUNTDOWN  

The clock has struck midnight and the results are now out.

News release -- January 12th news

Here is a photo of some of the diamonds:



Next up will be valuation report that coincides with a very, very important diamond breakage report.
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The clock is still running down for the ch-7 bulk sample results and will need to wait until next week to see if the news will be unravelled.

Next target will  probably be Monday (Jan 11th) at market's close. Beyond that, check each morning before trading and any sign of news after market close.

The next key event is January 15th - The day US right holders have to declare that they are still eligible to exercise in the current right's offering..otherwise the holders of the rights will try and liquidate them on a best efforts basis.

January 26th is the last day to exercise rights. News is expected before this date comes to pass.
 
Several key events have passed (tax loss selling deadline, xmas, etc.) and now it is looking forward to each and every business day that goes by and any one of those business days has the potential to include a news release on the CH-7 bulk sample. Time is ticking....

The second most material event for the Chidliak project (next to CH-6 diamond valuations and grades) is the CH-7 bulk sample program.

The last of the Concentrate from Domain 2 is in the midst of final diamond recovery (x-ray/grease table/sorting/etc.). This should be complete by the end of 2015. There is a bit of an XMAS break, so it more likely a significant news release will occur sometime in the first full week of January....possibly second week. Diamond photos and grade will be the deliverable in this case.

The risk/reward opportunity here is very significant -- Risk Reward

What other macro events happen during this time?

Dec. 24th - Last day for tax loss selling in Canada. Markets close early at 1 pm Eastern.  This sometimes leads to an XMAS rally on the following business days.

Annuals are now out. Confirmation that the DMS (dense media seperation) of the material has been completed for all domains (domain 2 was the last one to go). Everything has been moved to the diamond recovery phase and that is to be completed sometime in December. Results will follow. 

For a history of CH7 and the bulk sample program:

Journey of 558 Tonnes

CH7 Details

Domain 5 details

CH7 Nodules

The time is getting very near for the SRC (Saskatchwan Research Council) to deliver these big results to Peregrine Diamonds. 

In addition to the CH-7 results, the biggest part of the upcoming PEA is the high margin CH-6 pipe -- Value Matrix

Sunday, December 6, 2015

Top 10 Chidliak Assets

It is a bit early to quantify a full 10 assets at Chidliak and come up with a valuation.
However, this will change dramatically once the bulk sample results (grade, valuation) come out of the various domains of CH-7. In the meantime, highlighted in the table below is some conceptual values and these will change over the next 3 to 6 months as real results come in.


The table is split into two sections.

The first contains the open pit for CH-6 and the small open pit at CH-7 (Domain 5). These are the highest grade values in all of Chidliak to date and will be mined first and foremost to get the most out of the NPV of the project. Included is also tax benefits from huge amounts of expenses to date. This will have significant impact on tax relief over the first few years of the Chidliak mine and cannot be discounted in the economics.

The second one contains the rest of CH-7 open pit that will be used to extend the mine life. This is all conceptual as real values and grades are still to come and those results will also determine how deep an economic pit is possible at CH-7. Also included in this section is the CH-6 - other. This is the minor kimberlite phase from CH-6 that composes 20% of the body. This has never been quantified for carat value or grade and can only go on micro grades to come up with a conceptual value. CH-6 - other will be blasted in the pit walls of CH-6 kimL, so the material will be milled eventually, but will not be as important as far as NPV as compared to the other material.

Comments:
The top asset (CH-6 kimL) is getting a resource update very soon and all those values could increase 30%. Also, on the same asset, the PEA (preliminary economic assessment) could show a 20 to 30% downward adjustment in value based on the decline in the diamond resource market since the original valuation model was done.

Both CH-6 and CH-7 kimberlites are open at depth and to date have only been considered for open pit. This should change in the future.

Thursday, November 26, 2015

Chidliak Royalty Part V

There has been another update on the BC Legal site for November 6th.

To see the previous details on the court case, you can go to the last blog post -- Previous Royalty Post

Now, what is new?

There is a new Filing by the Defendant.

The filing is a Notice of Appointment or Change of Lawyer/Solicitor.

Here is a link to a sample template for the BC change of lawyer form -- Change of Lawyer

For some reason this document is only available via fax or mail for a cost of $10. The previous documents were available for instant download (for a cost).

The details of who and what changed is probably not too relevant. The why would be interesting to know.

Here are the details from the site:

Details for Document: 11 - Notice of Appointment or Change of Lawyer/Solicitor
Date Filed:     06Nov2015
Filing Parties
Defendant:     BHP BILLITON CANADA INC.
Defendant:     BHP BILLITON ROYALTY INVESTMENT PTY LTD.
Defendant:     SOUTH32 LIMITED

Nothing confirmed, nothing finalized...the royalty and lawyer fees are still in the courts hands.


Saturday, November 21, 2015

commercial sieve

Heading to the CH-7 bulk sample results, one can look at earlier micro caustic results and focus on the commercial sieves as a precursor to the upcoming results.

That would be the 0.85 mm sieve and more importantly the 1.18 mm sieve that Peregrine has chosen to go with for this bulk sample.

Here are some results of both caustic analysis and bulk sample analysis:

Highlighted the 0.85 mm sieve and a cumulative stone count for anything above 1.18 mm sieve. Also included is a one of the lower sieves 0.3 to 0.425 mm for reference.

Those results above are at various samples weights.
The data below shows the same data normalized to a 200 kg sample. This is the approximate weight of a standard caustic sample that Peregrine uses.





What does this tell us?

For one, it clearly shows how superior domain 5 is for ch-7. It has the highest stone count in the 3 sieves indicated. Clearly beats ch-6 micro information.

For two, it is interesting that the ch6 bulk (done at surface) comes in at 5.1 stones per 200 kg...yet the mini bulk that involved thick core drilling deeper underground came up with 5.6 stones per 200 kg on that commercial sieve. On top of that, the normal core drilling throughout the body came in at an average of 10.5 stones per 200 kg. This could mean that a 404 tonne scrap at surface may be under estimated the overall grade of ch-6. They had planned a large LDD RC drill hole this past winter, but weather conditions did not allow for this extra hole. The hole might have justified the theory that the data is showing.

For three, domain 4 is head to head with domain 3 in the early sieves and then doubles in the commercial sieve. It has a remarkable coarse distribution and could have some nice big stones in the bulk sample.

Bulk sample grade results for domain 2 through 5 will be coming out over the next 3 to 6 weeks.



Friday, November 20, 2015

Infrastructure Part II

Part I discussed the Deep water port in Iqaluit.

This part II is the second leg in infrastructure -- POWER

How will Chidliak power the construction and production of a minesite?

#1 - Diesel fuel - tried and trued, is a fossil fuel, and very expensive to ship and consume in the North. Cheaper if the deep water port get's constructed. Standard power for northern projects.

#2a - Hydro power - There have been many studies and projects undertaken to get build a hydro power plant in and around Iqaluit. This is very political and a very expensive project that has been put on the back burner many times. With an all season road from Iqaluit to Chidliak, it would make sense to put and maintain power lines to the site. This works very well if there is a hydro power plant to tap into. The government economics may work better once Chidliak has defined concrete and robust economics as Chidliak would be a steady customer of this power for a decade or more.

#2b - Hydro power from Greenland - Apparently Greenland already has 5 hydroelectric projects supplying 6 local towns. This article -- Greenland to Iqaluit shows the possibility of an underwater power cable linking greenland to Iqaluit. If an all-season road is built to Chidliak, it might make sense to route the power to the coast near Chidliak and then feed the power over road to Iqaluit. This is just another option to get Iqaluit power, but it could have significant usefulness for Chidliak as well. Here is a link to a PDF document with more details -- Greenland_2016

#3 - Alternatives

A - Solar Panels -- The Nunavut College in Iqaluit tested solar panels 20 years ago and the panels are still working at 75% capacity..which apparently is baffling to some of the scientists who work in this technology. There is a brand new test study happening in 2016 by the actual power corporation. It is using much more modern technology in this small test. The good news is that it is the power corporation doing the study, so if the results come out positively, there could be a reason to scale up and do a more enhanced pilot project.

Article on the test project -- Solar Panel Project

B - There has been an article in CIM and other magazines talking about a portable submarine that just dock at a small ocean port and the submarine generates nuclear power for where ever you put the power lines to.

C - Wind power generation - This has been engineered, tested and set up at Diavik for the last few years with success, but also major challenges. This is a fairly capital project to get going, so do you need a long term commitment to proceed with it.

Of the 3 alternatives, the one that probably has staying power for today's technology is C - Wind power. It will work in the summer and winter (not solar dependent) and is a proven technology..just not as proven at -40+ degree Celcius temperature.

The next major infrastructure hurdle for Chidliak is the road from Iqaluit to Chidliak.

Tuesday, November 10, 2015

Thesis Work

Chidliak has been involved with academic research help in the past.  A student from the University of Alberta did a nice paper on certain aspects of Chidliak.

This year, a new student from UBC (University of British Columbia), has started work on a thesis paper for Chidliak. Update -  a second student has also started.

Here are the details:

Student 1:

Link -- Research projects - UBC
Erica Tso
MSc Student (started January 2015)

Project Title: Chidliak peridotite xenoliths
Project Description: The project investigates petrography, mineral chemistry, modal mineralogy and geochemistry of peridite and pyroxenites xenoliths in the Chidliak kimberlite province, South Baffin Island

Student 2:

Link -- Research projects - UBC
Vedran Pobric
MSc Student (started September 2015)

Project Title: Eclogites of the Chidliak kimberlites
Project Description: Chidliak kimberlites (South Baffin Island) entrain fresh eclogite xenoliths . The project explores petrology, mineralogy and geochemistry of these rocks and finds the depth position of eclogites in the peridotitic lithological column of the Chidliak mantle.

UBC has a significant diamond exploration laboratory and associated equipment.
Chidliak material will get some good use out of that equipment as it has in the past with the University of Alberta equipment.

Saturday, November 7, 2015

CH7 - Nodules

We are fast approaching the bulk sample results for CH-7.

CH-7 is known to contain mantle nodules throughout.
The distribution is not known and confirmation that the nodules contain diamonds is unknown.



Chidliak does have known nodules throughout various kimberlites and CH-6 actually has tested diamonds in a few samples containing 10X the amount of diamonds.

Check out this page for mantle nodules at Chidliak -- Chidliak Mantle Nodules

Wednesday, October 28, 2015

Risk Reward Part IV

Oct 28th.

A rally incurred in the stock of Peregrine Diamonds (owner of Chidliak) a week or two ago that drove the market cap up to CAD$70 million before Anonymous started selling more stock to have the rally break and retreat.

There was also an update on Botswana...but no real results yet.

The stock is now trading at 17 Canadian pennies for a market cap of CAD$48 million
or $US36 million.

There is a significant amount of news in the pipeline.
The most significant being the CH-7 bulk sample from the 4 domains (2,3,4,5)

Macro Results to date:
Domain 1 -  1.04 cpt (representing a small portion of the body) from a 50 carat sample
(including a 6.53 carat stone - second largest stone at Chidliak)

Expectations:
Domain 2*- 0.5 to 1.0 cpt
Domain 3 - 1+ cpt
Domain 4* - 1 to 2 cpt
Domain 5 - 3 to 4 cpt

* Both Domain 2 and 4 represent significant tonnage at lower depths.

If multiple larger stones (>5 carat) are found, this will not only increase the grade, but also have profound influence in the valuation model.

There is also a chance that a mantle nodule is intersected. These are known to contain high amounts of diamonds in a very small area. CH-7 is confirmed to have mantle nodules throughout. Whether they contain a significant amount of diamonds or not is to be determined.

A kimberlite deposit (eg. Renard in Quebec) could go down and still be accessible up to 1 km's in depth.

At Chidliak, the focus has been on the top 1/4 of that (250 metres to surface) and strictly focused on open pit.

The insitu value of this top 25% is in the billions of $$'s for both CH-6 and CH-7.
Including material that still needs some deep drilling to confirm could be in the order of $10+ billion and could hit the target of 50 million carats.

These are just 2 pipes out of 71 confirmed kimberlite finds on the property and hundreds of undrilled anomalies.

This is an image of a 2.01 very high quality diamond from CH-1:






Here is another one, a 1.15 carat from CH-31:




So, it is by no means just CH-6 and CH-7 as the ultimate goal.

When you have billions of dollars in value in CH-6 and CH-7 and all these other opportunities, one must question the US$36 million value for this entire project.

The rewards here are phenomenal and the downside risk is minimal.


Friday, October 23, 2015

Chidliak Royalty Part IV

It has been a bit of time since the last Royalty post.

For those who have missed the previous post:

--> Chidliak Royalty Post I

--> Chidliak Royalty Post II

-- Chidliak Royalty Post III

Since that, there have been 2 further documents submitted to the courts.

The first one on July 9th from Peregrine to the courts.

BHP has indicated that have reversed the royalty, but Peregrine indicated it hasn't seen any reversal literature.

Peregrine mentions that any such reversal doesn't preclude that the first right of refusal had been triggered.

Talks about the Novation deed clearly indicating that regardless if Peregrine signs it or not, it will happen and the BHP royalty Ltd.

Peregrine specifically mentions that BHP has acknowledge in previous legal speak that it admitted to transferring the royalty to BHP Royalty Ltd. As in, the transaction did officially happen. The reversal is a separate point.

It took Peregrine 7 days to respond to the July 2nd BHP response.

Sept. 8th - an amendment to the July 2nd document from BHP was submitted by BHP.
Talks about facts being admitted by BHP and facts being denied and facts being outside the defendants' knowledge. I guess the key points are the denied ones.
Comparing the changes from the July 2nd and sept 8th documents.

Additional comment on the March 16th shareholder circular being issued and the rationale behind the S32 demerger.

Confirms that BHP royalty and south32 were affiliates...but not after May 25th, 2015

Removed a comment that originally said the Chidliak royalty was not material to the S32 demerger.
Interesting as that comment possibly implies a low value for the Chidliak royalty.

Talks about an April 27th novation deed was enclosed whereas before it talked about a draft novation deed was prepared.

Talks about BHP royalty and South32 not being affiliates from 25 May, 2015.

Removes a whole line from the document that talked about 'good faith that the first right of refusal would not be triggered under the inclusion of the Chidliak Royalty'
Sounds to me like that 'good faith' implies that there was some doubt and they want that removed from the record.

Removed a whole line talking about when Peregrine took it's first position, to avoid doubt, it agree to reverse the first transfer.
Again, this casts doubt and sounds like it admitted the transfer did occur. Removing that and can assume the reverse was independent of Peregrine's cause?

-----------------------------------------------------------------
At the end of these last 2 documents, it talks about:

Within 35 days of the end of the pleading period,  each party must provide...list of documents....all documents...all the relevant legal items that each group has basically.

There hasn't been an update since Sept 8th...so one would assume that the 'pleading period' is still on, but at some point, we should see this list of items submitted to the website relatively at the same time for both parties. I think this is unless a settlement is made out of courts.

It looks to me like BHP has tried to remove any reference that they made earlier that a transfer actually occurred and Peregrine is indicating that previous documents confirm that BHP said that a transfer did occur.

Peregrine's front is a transfer did occur and the courts have to decide if a transfer to BHP royalty that was destined for South 32 did trigger a first right of refusal.

The first part of that seems fairly concrete, the second part has to be a judgement decision and I don't think it is clear either way.

Outcome?

If the judge agrees with BHP on both issues...that a transfer didn't 'really occur' and no right of refusal, Peregrine will be ponying up for the courts costs for BHP and lawyer fees.

If the judge agrees with Peregrine on both the transfer did officially happen and it triggered the first right of refusal...then Peregrine may get it's lawyer fees covered plus potentially get the 2% royalty back as well...I guess the court would have to put a nominal value on it (another tough decision).

If the judge agrees with peregrine that the transfer did occur, but did not really trigger a first right of refusal...then I suspect that each party would have to cover their own lawyer's costs and the royalty stays with BHP Canada and the court is dismissed.

More to come. Maybe soon.






Wednesday, October 7, 2015

Quotes

Here is a list of CH-6, CH-7, and other Chidliak quotes
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Rick Rule -- BNN interview - August 2017 - Commodities
Rick Rule is participating in a standby agreement for the 2017 July to August Rights offering.
"So, while this is a high risk endeavour, this is also one that if it ends happily, will be a high reward endeavour. This is not for the faint of heart. This is exploring in very difficult terrain for a notoriously difficult commodity..but you are doing so in partnership with... the greatest exploration team of this generation."
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Robert Friedland - Insider +10% holder and brother of Eric Friedland
At the Sprott investment conference in Vancouver in 2017, Robert had this to say about CH-6:
"I am extremely bullish on depths of the kimberlite. This deposit will be wildly profitable in Canada. For your kids or your pet dog or cat, buy a few shares."*
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CH-6 - Quote #1: (Independent)
Mr. Richard Wake-Walker, co-founder of WWW stated "The shape, colour and size distribution profiles of this parcel compare very well with current Canadian diamond production. It is very encouraging to see such high quality goods from a relatively small parcel and at such an early stage in the project."
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CH-6 - Quote #2: (Independent)
Mr. Neil Buxton, responsible for geostatistical modelling at WWW stated "Based on our analysis of the parcel, WWW believes that if CH-6 were in production in the current diamond market, it is highly unlikely that the average price would be lower than the minimum modelled price. It is also important to understand that the high modelled price does not represent a maximum price and that the ultimate average diamond price in a mine production scenario could be higher than US$236 per carat. Given the number of large stones in this parcel, and their relatively high value, even the high modelled price may be considered conservative."
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CH-6 - Quote #3: (Independent)
Mr. Howard Coopersmith, Peregrine's Independent Qualified Person for dense media separation ("DMS") processing and diamond recovery stated, "These latest bulk sample results from the CH-6 kimberlite, along with the results from the first 222 tonne portion of the sample, confirm a trend towards high quality diamonds in the larger size classes and an overall consistency in the diamond population, size distribution and grade.
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CH-6 - Quote #4: (Peregrine Diamonds)
Mr. Eric Friedland, CEO of Peregrine stated "The results of the first diamond valuation from Chidliak are spectacular. The average price per carat and grade of this bulk sample clearly show that CH-6 could have rock value that is comparable with the richest kimberlites currently being mined.
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CH-7 Quotes
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CH-7 - Quote #1: (Independent)
Mr. Neil Buxton, responsible for geostatistical modelling at WWW stated "based on our analysis of the parcel, WWW believes that if CH-7 were in production in the current diamond market, it is unlikely that the average price would be lower than the low average modelled price. It is equally important to understand that the high average modelled price does not represent a maximum price and that the ultimate diamond price could be higher than US$155 per carat. These results need to be confirmed with a larger sample."
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CH-7 - Quote #2: (Independent)
Mr. Howard Coopersmith, Peregrine's Independent Qualified Person for dense media separation ("DMS") processing and diamond recovery stated, "A mix of diamonds are seen in the current CH-7 diamond assortment, from pristine gems to industrial qualities. White/colourless to off-white clean octahedra are common, often somewhat distorted or modified. Resorption is minor, giving the parcel a significant proportion of high value sawables extending into the largest sizes. A small population of clean gem yellow octahedra may prove important."
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CH-7 - Quote #3: (Independent)
Dr. Tom McCandless stated, "While a certain amount of diamond breakage is to be expected in any large-diameter RC drilling program, the level of breakage observed in this bulk sample is abnormally high. Through the work completed I can conclude that the reported grade of 0.88 carats per tonne is conservative, and a higher grade is to be expected in a mining scenario. Further, it is my belief that a number of gem quality diamonds two carats or larger have been shattered, which will have a negative impact on the valuation of this parcel. However, diamond price modelling that takes this into account should result in an increased model price valuation that would be more realistic in a mining scenario."
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CH-7 - Quote #4: (Independent)
Mr. Howard Coopersmith, further stated "It is not unusual to see diamond breakage due to sample collection by reverse-circulation drilling. In this bulk sample many freshly broken diamonds are present; this issue should be eliminated in a mining scenario."
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CH-7 - Quote #5: (Peregrine Diamonds)
Dr. Herman Grütter, Peregrine's Vice President Technical Services said, "I am delighted that CH-7 displays reasonably consistent diamond grades close to 1 carat per tonne that would make for predicable resource extraction scenarios. The superb correlation between previously reported microdiamond results and bulk sample grades reported for KIM-2, KIM-3 and KIM-4 is especially significant because these three units occupy approximately 90%-94% by volume of the known 3.72 to 6.01 million tonne Target for Further Exploration ("TFFE") for the CH-7 kimberlite pipe."
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CH-7 - Quote #6: (Peregrine Diamonds)
Mr. Tom Peregoodoff, Peregrine's President and CEO said "Once again the Peregrine team has delivered an excellent outcome. We are very excited with the results of the 2015 bulk sample from CH-7. These results continue to confirm the outstanding diamond resource potential of the Chidliak project. Transportation of the parcel to Antwerp is underway, and we look forward to the receipt of the diamond valuations, expected later this quarter. Preparation of the maiden CH-7 resource statement and revised CH-6 resource statement has commenced and we expect to complete this work in late March."
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Chidliak - Other quotes
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 John Kaiser - March 6th, 2017 - BNN Video -- MarketCall
 John Kaiser mentions -- "One of the best diamond discoveries in the last 6 years"
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Peregrine press release - underground inclusion - March 6th, 2017 -- 2017-03-06 News
"The results of this study are excellent and have significantly changed the specifics for the 2017 work program. The study clearly demonstrates the benefit of focusing the 2017 program on proving the resource potential at CH-6 below 260 metres, the current bottom of the inferred resource in the preliminary economic assessment. "
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* Quote was obtained from an attendee and placed on a public social chat site.

Friday, September 25, 2015

To spend or not to spend

To spend or not to spend?

When is this good for the shareholder?
When is this bad for the shareholder?

or could it be both good and bad?

The classic case is whether a company should spend $$'s at a significant depth to increase resources to a project. The deeper the drill-holes, the more costly to firm up those resources.
Most companies may just leave it as 'open at depth' and leave it for once the mine is in production and the area is more accessible from lower development.

Having finite numbers can be a lot easier to promote to the marketplace than just the generic 'open at depth' . You cannot put a $ figure on 'open at depth'...or at least the company cannot...analysts or investors are free to extrapolate as they like.


Should regulations stop companies from promoting part's of their projects or force them to spend unwise $$'s to get solid and expensive numbers.

What you end up with are companies with unrealized asset's that the public and investors do not get to hear about unless they have a casual voice to voice conversion with opinions (and not fact's) being shared.

At Chidliak, the flagship open pit deposit (CH-6) could contribute close to $2.5 billion plus in revenue to the project. The company is spending core exploration $$'s in firming up this deposit.

On the flipside, there is a string of pearls kimberlite that is about a 1/4 hectare in size (CH-20) that the open pit of CH-6 will naturally break into one the one side.

The cost to firm up any resources in CH-20 will be expensive....yet the contribution to the project in a production environment could be close to or above $100 million.

$100 million sounds like a lot of money and it is. Spending $10 million to firm up $100 million down the road is also a lot of money to spend. The company is wise not to spend that money and firm up the additional mill feed when they actually open pit CH-6 and expose CH-20 for no additional $$'s.

This is material that probably will not get into a mine study and not be included in the resource, but is a very significant addition to the cashflow.

The company knows the kimberlite pearl is there, they know it will have some value, they do have a drillhole sample...yet it is more wise to spend exploration $$'s expanding the flagship CH-6 to the maximum resource as possible as they will get the most bang for the buck.

A $100 million cash flow item hidden within the project for a company that is worth only US$35 million is not right.

Wednesday, September 23, 2015

Margin Squeeze

The margin squeeze in the diamond industry has become very transparent in 2015.

This recent article talking about Russian production clearly shows a squeeze is on.

Article -- Russia - Exports - Diamonds

Excerpt 1:

"The ministry reported that the average price of production increased 13 per cent to US$109.13 per carat."

That is the cost to produce a carat in Russia. A portion of this and the whole industry is the transition to underground mining at many operations. All underground mines are not alike and different problems need different solutions at each operation.

Excerpt 2:

"Recently, mining giant Alrosa issued its half-year report, announcing it has sold 18 million carats of rough diamonds for US$2.1 billion in the first half of 2015 - a 22 per cent drop compared to the same period last year (US$2.7 billion). Alrosa’s mines now generate 25 per cent of the world's diamond output."

A Russian diamond generates -- US$2.1 billion over 18 million carats or US$116 per carat

Problem:

You now have a quarter of the industry producing carats at a very small margin of US$7 per carat.

What do you do when your margins are being squeezed.

Pull back production? Change your long term outlook and adjust production strategically?

How about:

You end up with this quote: --> Article

"According to Reuters, ALROSA’s CFO, Igor Kulichik, said the company was increasing its stockpile of goods rather than reducing production.

"Cutting production leads to a (relative) rise in costs, so we better grow the stock," Kulichik told a conference call, as reported by Reuters."

Sounds somewhat similar to the iron ore industry. Revenue is being pressured...so crank up the production to reduce overall operating and fixed costs.

Recently it has been reported that Alrosa is considering cutting diamond prices in the second half of 2015. If they cut 6%, they are basically breaking even....according to the above information.

Reducing production might be a solution, temporarily closing down a low or negative margin mine might be a better solution...however, closing an operating mine in a Russian town might be a bit harder to stomach with the government overseeing you.

In times like this, profit margin is KING!

Chidliak has a huge margin built into it's project. A carat adjustment of $10 or $20 per carat does not squeeze the margin very much at all.

Profit Margin #1 -- Chidliak profit margin

Profit Margin #2 -  Chidliak Profit Margin 2






Wednesday, September 9, 2015

CH7 Rediscovered Domain 5

Sometimes you get a chance to go back over old data and re-discover significant results.

Something that was labelled 'marginal' for some reason exceeds all expectations.

There is a good chance that this has happened for Domain 5 - Kimberlite CH-7.

Please read about it here -- Domain 5 - CH7

This would confirm a third stellar result for Domain 5 with another one to come over the next couple months and a whopping 22 filtered tonnes over the next 6 months.

This may be the biggest new diamond tonnage in Canada.

Sunday, August 30, 2015

Bulk sample Comparison

Updated - Sept 19th, 2016

KDI just released its second bulk sample results from Kelvin.
Here is an updated summary table:


The numbers from Kelvin are similar to the 2015 bulk sample. It might be a little less coarse compared to the first sample, but that also could determine on the ratio of tonnages between the 4 different subsets with Kelvin.

The subset themselves look quite interesting. Here is a chart that includes both 2015 and 2016 results broken up by subset for Kelvin:


Looking at the normalized to 10000 stones category, it is pretty clear that the 4 subsets are very, very similar when it comes to the coarse distribution. They do have confirmed different grades (quite variable), but once 10,000 stones is achieved in a sample, they all produce roughly the same ratio of stones in the same sieves.

The additional line item at the bottom is Faraday 2. This clearly shows that it does show a different distribution compared to Kelvin and actually looks to have a better coarse distribution then any of the Kelvin results.

Chidliak still shows a higher percentage in the upper sieves compared to the lower sieves. There is potential for one or two other Chidliak kimberlite's to get bulk sampling done in 2017.

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Updated  - July 25th, 2016

KDI just released a new 21.1 tonne sample from Faraday 2. A different kimberlite from the main Kelvin kimberlite. These results can now be put into the bulk sample comparison table.


Faraday 2 as a high stone count in the early sieves and drops off significantly in the later sieves. This is similar to Kelvin pipe. However, it does actually show a stronger showing in the upper sieves as compared to Kelvin. Faraday 2 might create a coarser distribution over Kelvin. CH6 and CH7 are still much stronger in the upper sieves as compared to both Faraday 2 and Kelvin.

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January 2016 - Bulk sample from CH-7 did come out, but there was significant diamond breakage. Bigger stones turned into many smaller stones. It does not make sense to try and compare it in any of these tables as the # stones, etc. are flawed.

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Updated - Oct 5th, 2015

KDI just released a 2+ tonne sample from one of their kimberlite's.
The table below compares it to a historic 2+ tonne sample from CH-6 to compare the population of diamonds and sizes.

 The trend is the same as the original post below. KDI has a lot more diamonds on the earlier sieves than PGD's kimberlites...but when you move up to the higher sieves, PGD's kimberlites bring more stones.

This is again related to the fact that PGD's kimberlites are bringing in a higher than world average size portion and this directly inputs into the valuation model as a key parameter.
 
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The CH-7 bulk sample results will be coming out over the next few months. However, another project with Kennady Diamonds just released some new bulk sample results very recently.
This is a quick snapshot of the results for a bit of comparison analysis.


Included is the Kennady Kelvin recent results (KK-2015) and the CH-6 2013 bulk sample results and also the CH-7 2010 results from a smaller 50 tonne sample that was limited to just domain 1 of that kimberlite.

There have been certain circumstances that have made direct comparison difficult. This does not bold well for the investor who likes to make easy comparisons. Numbers to numbers. The true comparison will be when carat value comes out for Kennady Kelvin and that should be made available in a couple of months.

Comparing grades? (cpt?) on these bulk samples. First off CH-6 bulk sample dropped everything below 1 mm at the DeBeers Sudbury plant...so the 0.85mm+ grade is not accurate. The 1.18 mm+ grade is more accurate. The KK-2015 bulk sample chose to just release a 0.85 mm+ grade and not a 1.18 mm+ grade. The market is lacking information on a direct comparison.

The table above, has been normalized to both tonnage (however, that is reflective of grade).
It has also been normalized to 10,000 stones..and this should help when trying to compare a population with an expected value. The more stones weighted to the top (right of chart), the higher the valuation.

As you can see, the the KK2015 does become the winner in the lower part of the population curve...yet ch-6 does take the winner as the sieves get larger. So from a pure macro population curve, CH-6 does win and if that were the only input into a valuation model, CH-6 stones would be worth more. That is not the only category. It strongly depends on what quality (gem?), and type and colour are the larger macro sizes. CH-6 ended up with a large clear and off white octahedron population and the valuation model has already been released. KK2015 has come out with a couple of tinted brown's and a reasonable clear macle. It looks like CH-6 might have the better shapes and colour as well. KK2015 still has a significantly high grade, so it can still come out with a reasonable value $$/tonne even with a lower valuation per carat as compared to CH-6.

CH-7 mini bulk has been added to the chart just as a potential glimpse in to the larger bulk sample results coming up. The mini bulk was limited to Domain 1, but should equate reasonable well to Domain 3 and 4 for Grade. Domain 5 has significantly higher grade than Domain 1 and Domain 2 has a lower grade than Domain 1. The question is whether the population curve (normalized to 10,000 stones) is reflective in all 5 domains. If it is, and the curve holds above, there is a good chance that CH-7 $/carat value could topple KK-2015 and actually compete with CH-6 for the title. Again, there is little information on the type and colour expected out of the big bulk sample. Based on the mini bulk, CH-7 looks to have a more variety of types as compared to CH-6. Photos should be coming out over the next 2 or 3 months on the CH-7 bulk sample diamonds. Type (octahedran vs. macle vs. aggregate) will be a good driver for final valuation results. These photos should be analyzed and used as a good indicator of potential valuation results.

Wednesday, August 19, 2015

Turning 100K into 1K

How to turn $100K into $1K and be ecstatic about it?

In the frigid North of Canada, there exists rock that is very old. 100 to 200 million years old...or even older. This rock called kimberlite came from old volcanoes and many of them contain diamonds.

How does one evaluate this kimberlite to determine if it can support a diamond mine?
Once it is determined that the kimberlite body does contain diamonds and there is a good estimate on total tonnage of material and total amount of diamonds, the missing piece is the valuation of those diamonds. Valuations of diamonds is more of an art as there is so many permutations that can occur in a diamond population.

To determine the value, a bulk sample of the kimberlite must be taken to extract enough diamonds to evaluate.

The end result is get close to 1000 carats of diamonds. 1 carat = 0.2 grams of mass.
So, the end result is to get 200 grams of diamonds.

The cost of a big bulk sample program from site to lab could reach into the $10 to 20 million range.

@$20 million and 200 grams....that works out a cost of $100K per gram of material

For a bulk sample program to be successful, a good valuation is needed that will be used in conjunction with grade and tonnage to determine how feasible a mine is.

In the case of CH-7 (kimberlite at Chidliak), a value of $200 per carat would be excellent and contribute very positively toward a positive mine decision.

1 carat = 0.2 grams of mass. $200 per carat equates to $1000 per gram or $1K per gram.

A positive result in this case would be...however counter-intuitive....spend $100K for $1K of value.

That would be a success story.

Specific to CH-7, the end result will be coming up in the next 6 months as the ~200 grams of diamonds is on it's way to a lab to be extracted out and then it will be forwarded for valuation.

Friday, August 14, 2015

Low Cost Gold Mine?

A lot of Gold mines and projects equate the costs of the mine to an equivalent cost per ounce of Gold.
This way, the reader can compare it to the price of Gold and see if the company is in trouble or is generating a lot of cash. Sometimes you just see cash cost and sometimes you see all in sustaining costs. If Any of these values are close to $1000 per ounce, there is not much profit generation for those projects....but what if a project had a US$100 per ounce operation. Would this be a good investment?

Since these are all about pricing costs in $ per ounce, here is an assessment of a deposit called CH-6.

There was a price adjustment for the commodity in January, 2015 and that is what has been used in this analysis.

The resulting cost per ounce model for this project is:

 "The average cost per oz is $121. The modelled cost range goes from a maximum of $141 per oz to a low of $111 per oz with a base case modelled cost of $139 per oz."

" It is also important to understand that the low modelled cost per ounce does not represent a minimum cost and that the ultimate cost in a production scenario could be lower than US$111 per ounce."

Thus, one can extrapolate that US$100/oz cash cost equivalent is in the realm of possibilities.

Does the gold investor think that an operation like this would be a good investment?

It gets even better as there is another deposit called CH-7 that has an even higher grade portion of the deposit...and more information on the valuation is forthcoming. That portion may even be lower than US$100/oz cash cost.

Should a Gold investor be investing in projects that have $500, $600 or $700 per ounce cash costs. How about projects that have $1000, $1100 or $1200 per ounce cash costs? Now bring in a $100 per ounce project and should the gold investor ignore it?

Alas, the problem is not in the economics for they do speak the truth. The problem is that this is a diamond project that the math has been converted for the reader into Gold Speak.

Ignorance does not make one rich...so please go ahead and check out the site and the details on this blog. Educate oneself and look at a good investment opportunity here.


For those interested...here is the math on how I got the numbers above:
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"The average price was US$200 per carat. The modelled price ranged from a minimum of US$152 per carat to a high of US$222 per carat with a base case modelled price of US$176 per carat." As of January, 2015 with the 6% adjustment from the 2014 technical report.
@ 2.58 cpt (carat per tonne) convert to tonnage:

"The average price was US$516 per tonne. The modelled price ranged from a minimum of US$433 per tonne to a high of US$573 per carat with a base case modelled price of US$454 per tonne."

Convert to Gold ounces:

"The average oz was 0.47 per tonne. The modelled price ranged from a minimum of oz 0.4 per tonne to a high of 0.51 oz per tonne with a base case modelled price of 0.41 oz per tonne."

Cost per tonne = CAD$75 or US$57 per tonne.

Convert to cost per ounce:

"The average cost per oz was $121. The modelled price ranged from a minimum of $141 per oz to a high of $111 per oz with a base case modelled price of $139 per oz."
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Chidliak and Peregrine Diamonds are trading at approximately 5% enterprise value to Net present value.  Significant discount.









Sunday, August 2, 2015

Infrastructure Part I

Infrastructure Part I - Deep water Port

A couple of new articles/presentations

--> March 25th, 2016 - approval

--> April 5th Symposium PDF

Update January 25th, 2016

A new article -- iqaluit-port-moving-forward confirms the Liberal governments commitment to it's share of the funding.

Excerpts:

"Now Jim Stevens, assistant deputy minister for Nunavut's department of Economic Development and Transportation, says federal funding for the project is in place and it's going to move forward."

"The next step will be for MLAs to approve Nunavut's $21.2 million contribution to the project. "

"If all goes according to plan, officials say the port could be open by 2020."
This is great news for Chidliak as one key part of the infrastructure for a mine.

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Update January 2016.

A recent article -- Eye on the arctic talks about a deep water port based in Iqaluit would also be able to support the Canadian Navy in the north in addition to the commercial and civil tasks that it can handle.

Excerpt:

"Byers also said he’d like the Liberals to review another Conservative promise to build a deep water port for the Canadian Coast Guard and the Royal Canadian Navy in Nanisivik, a shuttered lead-zinc mine on Baffin Island in Nunavut.

“I think there is a real case to be made for actually locating that port at Iqaluit, the capital of Nunavut, where 8,000 people live, where the port could actually serve an important civilian function in addition to supporting the navy,” Byers said."
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Update November 2015.

This online article just came out talking about the new liberal government and the Nunavut Member of Parliament. --> Liberals and the North

Of very important to note is the reference to the a new port in Iqaluit:

Excerpt:

"But two Nunavut projects — promised by the Conservatives — are likely to go ahead. One is a deep-sea port at Iqaluit, to be financed with $63.7 million from Ottawa and $22.1 million from the Government of Nunavut. The other is a $40-million small-craft harbor at Pond Inlet.

Tootoo and his Liberal party promised this past August they’ll move ahead on those two projects — and you can count on it. It’s inconceivable they would now go back on their word."

With the new government, it does look like the planned new port is going to go ahead. It will just be a question of when.

Chidliak will have it's first PEA (preliminary economic assessment) out in the first half of 2016. Showing a robust project will be a win-win for Chidliak and Nunavut. A robust project that can show the community and the country the many benefits it will create can only strengthen the position to construct a deep water port in Iqaluit. Constructing a deep water port in Iqaluit only strengthens the robustness of the Chidliak project. That is what is called synergies at it's base level.

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This past week a couple of infrastructure related items came into the news front that effects Peregrine Diamonds.

The first one is talk of an all season road out of yellowknife up to the Lac De Gras district.

Here is the article -- Lac De Gras Road

It is significant (if it ever happens), in that it helps the economics of DO27, especially if they bring up cheaper HYDRO power to the district. They even have a Wind turbine up at Diavik (Presentation - Diavik that could be linked into the electrical grid as well. That would be a benefit south as well as north. It may bring the economics of wind turbines more into play if there is a connection to a demand source for the electricity beyond a simple mine life.

How does this effect Chidliak? At some point, DO27 may be liquidiated or spun out to raise some cash for Chidliak development. Any positives on the economic front for DO27 will be most welcome for Chidliak. Exploration costs to the lac de gras region will be cheaper as well. That could lead to further exploration in the region by Peregrine Diamonds...or in this case, Peregrine Exploration (subsidary to Peregrine Diamonds).

Now onto the second item that came out and significantly more important for Chidliak.

The federal government of Canada has approved funding for a deep water port at Iqaluit.

Peregrine Diamonds liked the idea so much, they issued a news release on it.
Here is a link -- Iqaluit Port News

Excerpt:
"The estimated budget for the project is $84.9 million with the federal government funding up to $63.7 million and the Government of Nunavut the remainder. The new facility will significantly reduce the time required to offload cargo,"

 "A modern deep water port would dramatically improve the efficiency of and lower the cost of shipping and supply."

In 2014, at the Nunavut Mining Symposium, Peregrine Diamonds had a presentation specifically on infrastructure. -- Infrastructure: The key to realizing mineral wealth

Excerpt:

Page 24 lists the 4 key infrastructure requirements:

1 - Port
2 - Power
3 - Road
4 - People

Page 25 specifically talks about a port and some of the quotes on that page:

"The economics of an future mine would be improved by a port."

This port will have significant impacts, not only on CH-6/CH-7 mine development..but also on the many other dozens of kimberlites (found and not found yet) that will benefit from lower capital and operating costs and extend the mine life.

It looks like the federal government has commissioned an engineering study to start in the fall of 2015. Considering there have been 5 studies on the port in the last 40 years...they will already have a lot of data at hand.

There has been no timeline on port construction and the federal election will be announced in very short order. This port is a need for Iqaluit, a want for Chidliak and a political issue for the federal government. Hopefully the elected government continues with this port development and sees not only the need for Iqaluit itself...but the potential for a diamond mine and revenue/employment/taxes for 2 or 3 decades.

Power and Road are the next 2 major hurdles for Chidliak.



Monday, July 27, 2015

All iced up

The shipping season of Iqlauit should already be in its 3rd week.

Ice has gotten in the way and isn't quickly going away.

Here is a more recent image from July 28th (evening).
You can see the ice is clearing...but there is still a chunk of thick ice blocking the path.
It is breaking down on the edges bit by bit.



Here is an image from July 26th of the ice conditions. Look at the bottom left where where the ocean feeds into Iqaluit.



The above image is from the Canadian Ice Services website -- Canadian Ice Services

This has directly effected the 558 tonnes Chidliak needs to get to the SRC (Saskatchewan Research Centre) for processing. The delay has been about a week and a half...but the ships getting into Iqaluit are still having problems. --> Journey of 558 tonnes

The delay hasn't had a significant effect as the SRC is fully utilized right now processing other kimberlite from other companies.

It is irregular seasons like this that should go directly into contingency planning for the development, construction and production of Chidliak as the use of the sealift will be crucial in all three of those stages.

Friday, July 24, 2015

Risk Reward Part III

Update February 12th, 2016

Peregrine Diamonds have just released earnings and as of Feb. 11th has CAD$7.2 million in working capital.  CAD 9 cents - Enterprise value is CAD$22.7 or US$16 million.

With potential (after tax) cash flow of US$120 million for 10 years the Price to (future) Earnings ratio is an unheard of 0.135. Price to (future) earnings ratios should be multiples of...not fractions of.
 
Update February 11th, 2016

The stock has now traded at CAD 9 cents.

That again would equate to an enterprise value of about US$18 million.
With potential (after tax) cash flow of US$120 million for 10 years the Price to (future) Earnings ratio is an unheard of 0.15. Price to (future) earnings ratios should be multiples of...not fractions of.

This is a huge opportunity for any new investors looking at big returns in the future.

How to invest in Peregrine Diamonds? -- Number of ways to invest in Peregrine Diamonds.

Update February 10th, 2016

Peregrine Diamond's (owner of Chidliak) is now at an all time low share price at CAD 10 cents.



There are currently 339 million shares outstanding and the company just raised CAD5.6 million in the bank.

Market valuation currently sits at CAD$33.9 million. Take away about CAD$5 million (cash on hand) and you end up with an equity value of CAD$28.9 million.

Convert to US currency and you end up with
US$20.8 million

This is the lowest valuation of Chidliak and Peregrine Diamonds in a very long time.
Anticipation of new valuations for CH-7 and more importantly a maiden PEA (preliminary economic study) will be coming up.

What are the assets/costs going into the PEA study?

CH-6 = 3.323 million tonnes @ 2.58 cpt
plus  - 1 to 1.2 million tonnes added before the PEA gets started.
You end up with about 4.5 million tonnes @ 2.58 cpt.
The carat price is around US$200 per carat.
So, you are clearly walking into a PEA with around US$2.3 billion worth of value from CH-6.

On top of that, you will also have the maiden CH-7 inferred resource and valuation (TBD).
That could add anywhere from US$250 million to US$1 billion depending on the valuations, the tonnage and how deep an economic pit would go in a PEA study.

Total assets values would be around US$3 billion.

Capital Cost? Anywhere from CAD$400 million to CAD$800 million depending on trade-off studies, mill size, road type, etc.  Let's assume CAD$600 million. That leaves US$430 million in capital cost.

Operating Cost? Open pit (very little overbruden, no lake on top)...the strip ratio should be good. It should easily be under CAD$100 per tonne and probably closer to CAD$75 per tonne. That leaves about US$55 per tonne. Assume CH-7 comes in at 4.5 million tonnes like CH-6. That leaves a cumulative operating cost of US$495 million.

Total cumulative operating cost and capital cost = US$925 million. Let's round up to US$1 billion.

into this PEA, you get an asset of US$3 billion and a cost of US$1 billion.

Potential cash flow is US$2 billion spread out over a 10 year mine life.

Gives you an annual positive cash flow of US$200 million for 10 years.

You have to pay taxes/government royalties. Crank that up to 40% (which is probably quite high).

You end up with a positive cash flow after tax of US$120 million.

A project that can generate over US$100 million (after tax) of free cash flow each year for 10 years is currently worth US$20 million.

The stock is basically trading at 0.2 x future earnings.

All this will come out of the PEA when it gets released before the end of the first half of 2016.

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Update January 7th.

With 2 circuit breaker's in China happening in one week, there is plenty of opportunity to revisit hte risk/reward for Chidliak.

The news for CH-7 bulk sample will literally be out any day now and the pressure has been mostly negative on the stock..which creates a very huge opportunity.

CAD$ is down to $US 0.71.

The stock hit CAD$0.115 per share which equates to a market cap of US$23 million.
The additional 1 to 1.2 million tonnes added to ch-6 will already add  US half billion to the asset and that doesn't include the impending CH-7 data.


13:01:18T0.115-0.01550,0007 TD Sec7 TD Sec
13:01:18T0.115-0.01530,0007 TD Sec7 TD Sec

The risk/reward is at a huge opportunity right now.


Update Dec 15th.

Pretty close to the eve of CH-7 bulk sample results....some of domain 2 material is still making its way down the diamond recovery process.

15:24:09T0.12-0.024,0002 RBC79 CIBC
15:24:09T0.12-0.021,0001 Anonymous79 CIBC

CAD$ is down to $US 0.7278.

Without the rights being exercised, the market cap sits at  $US24.5 million...with the rights being fully exercised, the market sits at $US30.5 million.

No speculation as the market heads to some significant material news from Chidliak.
 
Update Nov 23th

This now trades at a market cap of $US 29 million.


12:46:10T0.14-0.015007 TD Sec2 RBC
12:46:10T0.14-0.015007 TD Sec36 Latimer
12:30:34T0.14-0.011007 TD Sec36 Latimer
12:30:34T0.14-0.011,00039 Merrill Lynch2 RBC
12:30:34T0.14-0.013,5007 TD Sec2 RBC
12:30:34T0.14-0.0123,0002 RBC2 RBC
12:30:34T0.14-0.0110,0002 RBC2 RBC

With the news flow over the next 3 to 6 weeks being of a material nature, there should be significant speculative investors interested. The company has announced a smaller rights offering and that has put pressure on the stock and in turn the market cap.

Domain 5 from ch-7 has more caustic results confirming its significant grade.
That one pocket of kimberlite near surface in 1 quarter of production could generate US$200 million of revenue. 250,000 tonnes @ 4 cpt @ US$200/carat. The last 2 parameters are exactly what we are going to be confirming in the next little while.

That US$200 million could pay for close to half the capital required for the project before CH-6 takes over and generates US$130 million per quarter for 5+ years.  These are quarterly revenue numbers, not yearly.


Update - August 20th

This trade below represents a market cap of $US 33 million.
Taking out working capital and you end up with an enterprise value of about $US 28 million



13:44:12
T
0.155
-0.015
200
36 Latimer
7 TD Sec


For a project that is heading toward a $US 500 million NPV in the next 6 months and with a very fast payback period..and this will just be the base case with more resources and $$'s added as the project heads toward being a mine.

Pay less than a quarter now and potentially get a quarter in dividend per year for the next 10 years of the project? --> Dividend Scenario

That alone represents huge opportunity.


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Update - August 14.

Current market cap is now $US 36 million. The company has CAD$7.1 million in working capital, leaving an enterprise value of  about $US 31 million.
 Approaching CH-7 bulk sample results and a PEA leads a significant risk/reward opportunity.
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The $CAD has decreased recently along with the price gold and the strength of the US Dollar.

Current market capitlization of Peregrine Diamonds is sitting at $US 38 million.

Chidliak is getting closer to a PEA and the NPV calculations can be done with a bit more refinement.

The latest NPV calculation -- NPV # 4 shows a present day NPV of around US$400 million.

That is in today's prices and assumes production in 2020 and is discounted at 7%.

You could add 7% each year as the project progresses toward production.

That gives a NPV of:
2016 - US$425 million
2017 - US$455 million
2018 - US$490 million
2019 - US$525 million

The project is progressing toward a half billion US $$ NPV as you get closer to production.

Not bad for a stock valued at a total US$38 million.

The risk/reward is at a very opportunistic level for not only foreign investors..but especially for American investors.