Risk Reward Part VI

Risk Reward Part VI

*Information in this current blog is based on information obtained up to mid 2018 and should be considered legacy at this time and should no longer be relied upon.*

It is that time again where the market capitalization of Peregrine Diamonds is dipping to a level where the risk to enter the stock versus the potential reward is at very lucrative levels.

Current shares outstanding is around 440 million.
The current price is around CAD$0.12.

That equates to a market value of CAD$52.8 million or about US$43 million.

The company recently raised about $10 million for the current drill program.
If one assumes the drill program never existed, then that $10 million would come off the value of Childiak and Chidliak would have an Enterprise Value of CAD$42.8 million or US$36 million.

What is the value of Chidliak from an economic point of view pre and post drilling?

pre-drilling, one could look at the existing PEA (prelminary economic assessment) where it indicates that the  NPV after tax (7.5% discount) sits at CAD$471.2 million.

pre-drilling the EV sits at CAD$42.8 million versus NPV of CAD$471.2 million.

Drilling?

The drill program has shown to deepen the CH-6 pipe to at least 500 metres in depth. This will basically double the carats in the ground and will have a dramatic impact on the NPV with an updated PEA. The drill program also will slim up the stope walls for CH-6 as they will be using actual data for country rock stability in this update as opposed to the most conservative assumptions with little to no data available.  The updated PEA could push to an NPV between CAD$700 million to CAD$1 billion+ pending final results and grade at depth.

If one assumes CAD$850 million after tax and discount...then one could compare today's EV with that value and you get a CAD$52.8 million vs CAD$850 million comparision.

Risk?
Market continues to have a negative sentiment in the diamond space from an investment point of view. A decrease in EV/Market cap makes the EV/NPV ratio even that much more appealing.

Reward?
Market decides that Chidliak has enough potential, profit and margin to realize a paradigm shift in deserved value.
Potential stakeholders with deep pockets move into Chidliak because of the potential and share those deep pockets to advance Chidliak even further.

Downside risk is minimal and the upside reward is multiples of current Enterprise Value of Chidliak.

That makes the risk/reward ratio very appealing at this time in the development of Chidliak.