Peregrine to test new Wager Bay targets

2008-12-30 17:51 ET - Street Wire

by Will Purcell

With BHP Billiton Inc. now paying the bills at Chidliak on Baffin Island, Peregrine Diamonds Ltd. will have enough cash to drill targets on its Nanuq and Nanuq North properties at the northwestern end of Hudson Bay in Nunavut. Peregrine found three diamondiferous pipes on Nanuq in 2007 and it found another on Nanuq North, which the company shares with Indicator Minerals Inc. Exploration in central Nunavut is an expensive proposition and Peregrine deferred its drilling plans for Nanuq last year, rather than waste money on a limited program.

The plan

Peregrine's Nanuq project was a refreshing story late in 2007 and news of three big kimberlite discoveries briefly pushed the company's stock from 75 cents to above $1.40. Despite the initial enthusiasm from Peregrine's geologists and the company's shareholders, Mr. Friedland elected not to complete a planned 2008 drill program. He chose instead to focus on Chidliak, at the southeastern end of Baffin Island.

The move paid off this fall, when Peregrine discovered three big pipes on Chidliak, recovering promising numbers of diamonds from each, but especially CH-1. The company's president, Brooke Clements, still touted the likelihood of a 2009 drill program at Nanuq, but Peregrine was down to its last $2-million and was also making multimillion-dollar plans for drilling at Chidliak next year.

With BHP now paying the cost of that program, Peregrine will be able to put a greater effort into Nanuq. This year, the company completed ground geophysics over some priority areas and added some new claims. Meanwhile, a new find just across the border on Nanuq North expands the potential size of the Nanuq kimberlite field considerably.

As a result, Peregrine is now planning another quick round of ground geophysics and indicator mineral sampling, leading to drilling of several new anomalies next year. A budget is not yet set, but anything under $1-million would be a waste of time in the remote area. As a result, Peregrine will likely spend at least as much as it did this year, about $1.6-million.

More work is likely on Nanuq North, where Peregrine and Indicator discovered the NQN-001 pipe during a brief drill effort in late August. Combining work on that property with the main Nanuq program would be an effective move, but Indicator Minerals is down to its last few dollars and Peregrine's partner will need some promotable diamond counts to revive interest in its lowly two-cent stock.

The encouragement

The gem hunt southwest of Wager Bay began about 10 years ago with BHP, but it flipped the project over to Dr. Art Ettlinger when he briefly tried running his own diamond explorer, Dunsmuir Ventures Ltd. Dunsmuir ran out of money about the time Mr. Friedland was looking to take his own company public, with plans for a new look at the old Tli Kwi Cho pipe. The result was Peregrine, but Dr. Ettlinger's Nanuq play was left to collect dust.

A new look at the Nanuq data in 2007 yielded three quick finds, and the Naturalik, Kayuu and Tudlik pipes all yielded moderate diamond counts. About 1.5 tonnes of rock produced just five stones larger than a 0.85-millimetre sieve and their likely weights suggest a cumulative grade of less than 0.1 carat per tonne. Still, the results proved the area was diamond country as predicted by BHP and Dr. Ettlinger.

The NQN-001 find increases the odds of drill success on both Nanuq and Nanuq North, and good diamond counts would add further sparkle to the two projects. Peregrine and Indicator have about 150 kilograms of material at the lab for microdiamond recovery, but barring some exceptional numbers, the focus will be the testing of new targets.

Peregrine gained 19 cents to close at 64 cents Monday on 208,600 shares. The company has not issued any news since Nov. 26, 2008.

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