Chidliak is a joint venture between the Company (49%) and BHP Billiton (51%). The project is located 120 kilometres from Iqaliut, the capital of Nunavut, Canada and consists of 852 claims covering approximately 858,000 hectares (8,580 square kilometres).

To date, 50 kimberlites have been discovered on the project. Samples from 36 of these kimberlites have been sent to the Saskatchewan Research Council Geoanalytical Laboratories ("the SRC") for diamond testing, the remaining 14 kimberlites were assigned a lower priority based on their interpreted size potential and visual characteristics and diamond testing of these bodies has been deferred. From these 36 kimberlite samples sent to the SRC, results have been received for 27 kimberlites of which 26 have been reported as diamondiferous. Seven of the kimberlites, CH-1, 6, 7, 28, 31, 44 and 45 have coarse diamond populations and are considered to have economic potential in Arctic settings.

During 2005, 2006 and 2007 the Company conducted prospecting and heavy mineral sampling programmes at Chidliak. In 2008 the Company completed an 11,700 line kilometre heli-borne magnetic/electromagnetic survey with 100 metre line spacing over priority areas of the property.

3 diamondiferous kimberlites, CH-1, CH-2 and CH-3, were discovered in 2008 at surface while field checking priority targets selected from the airborne geophysical data. Caustic fusion diamond test results were received for 289 kg, 357 kg and 254 kg samples from the CH-1, CH-2 and CH-3 kimberlites, respectively, and for a 2.28 tonne mini bulk sample from CH-1. Results for CH-1, CH-2 and CH-3 indicated that all three kimberlites were diamondiferous.

On November 24, 2008, the Company announced that BHP Billiton had elected to exercise its earn-in rights for Chidliak. The agreement called for BHP Billiton to incur a total of $22.3 million in future exploration expenditures at Chidliak in order to earn a 51 percent interest. These amounts were spent during 2009 and 2010 and BHP Billiton earned a 51% interest in Chidliak in September 2010.

In 2009, the Company and BHP Billiton undertook a $9.2 million exploration programme at Chidliak which focused on further evaluation of the known kimberlites, exploration to discover additional diamondiferous kimberlites, and validation of over 170 known kimberlite-type geophysical anomalies.

During the 2009 programme, over 1,100 line kilometres of ground geophysical surveys were completed over 37 geophysical anomalies, 1,273 heavy mineral samples were collected, approximately 4,000 metres of core drilling was completed, a 49.6 tonne mini-bulk sample was taken from the CH-1 kimberlite, 58 geophysical anomalies were assessed by prospecting and geochemical sampling, and an environmental baseline study was initiated.

As a result of the 2009 Chidliak exploration programme, thirteen new kimberlites were discovered, seven by drilling and six by prospecting and mapping bringing the total discovered at Chidliak to sixteen. Fifteen of the total of sixteen kimberlites tested proved to be diamondiferous and four of these, CH-1, CH-2, CH-6 and CH-7 produced commercial-size, +0.85 mm diamonds from small kimberlite samples. Results for the 49.6 tonne sample collected from the CH-1A phase of the CH-1 kimberlite returned 20.26 carats of commercial-sized diamonds larger than 0.85 mm for a diamond content of 0.41 cpt, including a total of 15 diamonds larger than 0.30 carats in size.

The 2010 field operations commenced in mid-March and continued through early September. In June 2010, a helicopter-borne magnetic/electromagnetic geophysical survey of 20,500 line kilometres at 100 metre line spacing was completed. This survey was flown to complement the 11,700 line kilometre airborne geophysical survey that was completed in 2008 and was designed to investigate at least ten kimberlite indicator mineral anomalies that were not covered by the 2008 survey. Ground magnetic geophysical survey crews have evaluated in excess of 90 anomalies selected from the 2008 and 2010 airborne surveys and the highest priority targets were drilled this year.

An additional 34 new kimberlites were discovered during the 2010 summer exploration programme at Chidliak. These 34 new discoveries bring the total number of kimberlites discovered to date on the project to 50. Eight of the new kimberlites were discovered by reverse circulation ("RC") drilling, 11 by core drilling and 15 by prospecting. In addition, 19 core holes and ten RC holes were drilled into six previously identified kimberlites to increase the understanding of their size and diamond potential.

Highlighting the probability for large kimberlites and associated tonnage at Chidliak is CH-31, where interpretation of the geophysical and drill data and the distribution of kimberlite float indicate that this kimberlite is over five hectares in size. A 410 metre kimberlite intersection was drilled at CH-31 in a core hole inclined at a 45 degree angle, which equates to an estimated horizontal width of at least 290 metres. Of the seven kimberlites that are considered to have economic potential in arctic settings, four are considered to be at least one hectare in size: CH-1, CH-7, CH-28 and CH-31.

The Qilaq project consists of 33 prospecting permits covering approximately 437,000 hectares (4,370 square kilometres) which were acquired bordering Chidliak to the north, east and south. A one-kilometre area around the outer perimeter of Chidliak falls within the Chidliak joint venture with BHP Billiton. The remainder of Qilaq is 100% owned by the Company.

In the summer of 2009, 516 samples were collected to evaluate the Qilaq permit area for its diamond potential. Seven of the 516 samples collected at Qilaq returned at least one probe-confirmed KIM. The 516 Qilaq samples were also examined for the presence of minerals that may be indicative of base or precious metals mineralization with 213 of the samples containing at least one gold grain and 31 samples containing one or more grains of sperrylite. Sperrylite is a platinum-bearing mineral that is often associated with rocks that contain significant amounts of platinum, palladium and nickel.

The Company completed a 2010 exploration programme at Qilaq which included the collection of an additional 387 till samples, and the evaluation by prospecting and mapping of 23 metals anomalies discovered in 2009, including the collection of 476 soil samples and 120 rock samples. The Company also completed a 670 line kilometre helicopter-borne magnetic/electromagnetic geophysical survey. The geophysical anomalies that were found from this survey were systematically prospected and prioritized for planned ground geophysics and drilling in 2011. A larger airborne geophysical survey will also be undertaken in the spring of 2011.

On August 5, 2010, the Company announced the discovery of two kimberlites, named Q1 and Q2. Both Q1 and Q2 are located within the 100%-owned area of Qilaq and are not subject to the Chidliak joint venture with BHP Billiton.

The 2010 helicopter-borne magnetic/electromagnetic geophysical survey revealed a magnetic high anomaly with an estimated diameter of 150 metres associated with a topographic depression that measures approximately 60 metres by 50 metres. Subsequent prospecting led to the discovery of the Q1 kimberlite, represented by large concentrations of coarse-grained KIMs, and kimberlite cobbles and boulders on the surface. Both magmatic kimberlite and probable weathered kimberlite breccia boulders were identified. Pyrope garnet, picroilmenite and chrome diopside grains over 10 millimetres in size were observed on the surface. Clasts of limestone, shale and sandstone, interpreted to have weathered from the kimberlite are also present on the surface.

Aggregate exploration expenditures on the Qilaq 2010 exploration programme were $776,000. The Company is considering a budget of approximately $1.0 million for 2011 work at Qilaq.

This information is available in the Company’s news releases which are available on the Company’s website (www.peregrinediamonds.com) and SEDAR.

Cumberland Property

A total of $896,000 was spent on the Cumberland project 2010 exploration programme. The Company anticipates a programme of further sampling, mapping and prospecting in 2011 with an approximate budget of $300,000.

The Nanuq property ("Nanuq") consists of 242 mineral claims covering approximately 236,000 hectares (2,360 square kilometres) in Nunavut, Canada. The property is held 100% by the Company; subject to a 2% gross production royalty in favour of BHP Billiton on 62% of the area of the property. BHP Billiton also retains all marketing rights in respect of all rough diamonds extracted from such 62% area of Nanuq for a period of three years from the commencement of commercial production.

In 2007 the Company discovered three kimberlites at Nanuq. All three of these kimberlites returned encouraging diamond results. Two of them, Kayuu and Natuarlik, have estimated surface areas of five and six hectares respectively, while Tudlik has an estimated surface area of one hectare. The best diamond counts were from the Tudlik kimberlite where an 89 kilogram sample yielded 112 diamonds larger than the 0.075 mm sieve size, including two diamonds larger than the 0.6 mm sieve size. Microdiamond analyses were carried out at SRC. All three of these kimberlites are subject to the 2% gross production royalty and three-year marketing rights granted to BHP Billiton.

During the summer of 2009, the Company worked toward further evaluation of Nanuq’s diamond potential by collecting approximately 1,300 till samples and analysing them for kimberlite indicator minerals. These sample results contributed to the design of the 2010 drill programme.

The 2010 exploration programme commenced in mid-May with ground geophysics. A total of 1,503 line kilometres of ground magnetic and electromagnetic surveys were conducted over priority geophysical anomalies that were selected from previously completed airborne surveys. Kimberlite-type geophysical anomalies were then prioritized for drilling. Three holes were drilled into three targets, for a total of 429 metres, without intersecting kimberlite. In addition, 493 KIM samples were collected as a follow-up to KIM anomalies identified from previous exploration work and to further assess additional geophysical anomalies.

Upon receipt of results from the KIM sampling programme, geophysical anomalies will be assessed and prioritized for drilling in 2011. The core rig used for the 2010 programme is being stored at the Nanuq camp and will be utilized in 2011.

Exploration expenditures on the 2010 Nanuq programme total $2.5 million. The Company is anticipating a budget of approximately $2.0 million in exploration expenditures at Nanuq for 2011.

This information is available in the Company’s news releases which are available on the Company’s website (www.peregrinediamonds.com) and SEDAR.

Nanuq North Property, Nunavut

In 2005, the Company entered into an agreement with Indicator Minerals Inc. ("Indicator") and Hunter Exploration Group (‘Hunter’) on Nanuq North which consists of 51 claims covering an area of approximately 33,000 hectares (330 square kilometres) immediately north of the Nanuq property. Under the terms of the agreement, an exploration joint venture was formed with Indicator as the operator and the Company and Indicator sharing the costs of exploration on a 50/50 basis. Hunter retains a 20% property interest carried through the completion of scoping study and a gross overriding royalty of 2% from a core group of 16 claims with an area of 13,864 hectares. Indicator and the Company each hold a 50% undivided interest in the remaining 19,226 hectares.

On September 3, 2008, the Company and Indicator announced the discovery of a new kimberlite, NQN-001. The NQN-001 kimberlite, estimated at 1.8 hectares in size, is located approximately 275 kilometres north of the community of Rankin Inlet. In June 2010, drilling of the diamond-bearing NQN-001 kimberlite was concluded and a 1,008 kilogram sample was submitted to the SRC for diamond analysis. The sample yielded 612 diamonds larger than the 0.075 mm sieve size. The following table summarizes dense media separation diamond results for the NQN-001 kimberlite:

A total of 762 metres in six holes was drilled into the NQN-001 kimberlite during this programme. Five of the holes were drilled at a -50º angle and intersected the edge of the kimberlite at depths between 60 and 126 metres below the surface, allowing for an estimated surface expression of 1.8 hectares.

Exploration expenditures on the 2010 Nanuq North programme total $1.7 million of which $842,000 was incurred by the Company as its 50% share. Anticipated expenditures for the 2011 Nanuq North exploration programme are $250,000 of which the Company’s share is $125,000

Three Months Ended December 31, 2010 and 2009

The Company incurred a net loss for the three months ended December 31, 2010 of $940,000 as compared to a net loss of $2.0 million for the three months ended December 31, 2009.

This change is due primarily to the renunciation of $1.5 million of expenses associated with flow through shares in December 2010 which resulted in future income tax expense recoveries recorded in the three month period ended December 31, 2010.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2010, the Company had a working capital balance of $13.4 million and cash resources of $14.5 million. Accounts receivable at December 31, 2010 consist primarily of amounts receivable from BHP Billiton in respect of expenditures on the Chidliak property, amounts receivable from IME in respect of expenditures on the Nanuq North property, refundable HST and amounts due from Peregrine Metals Ltd. in respect of shared office costs and salaries. All amounts are current and either have been or are expected to be received during the forthcoming quarterly period.

On November 4, 2010, the Company completed a brokered private placement consisting of a total of 4,800,000 units ("Units") at a price of $2.50 per Unit for gross proceeds of $12 million. Each Unit consists of one common share of the Company and one-half of one non-transferable common share purchase warrant of the Company, with each whole common share purchase warrant entitling the holder thereof to purchase one common share at a price of $3.00 until November 3, 2011.

During the three months ended December 31, 2010, the Company spent $2.7 million on operations and $49,000 on the purchase of capital assets. An aggregate of $11.6 million was received from the issuance of shares, $11.3 million from the Unit financing, and $300,000 from the exercise of warrants and options. There were no other significant cash inflows or expenditures during this period.

At February 10, 2011, the Company had a working capital balance of approximately $12.9 million. Budgeted expenditures for 2011 are estimated to be $15.7 million, consisting of exploration expenditures of $13.9 million and general and administrative and capital expenditures of $1.8 million.

OUTSTANDING SHARE DATA