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.