VANCOUVER, BRITISH COLUMBIA, Jun 24 (MARKET WIRE) --
Mr. Eric Friedland, Chief Executive Officer, and Mr. Brooke Clements,
President of Peregrine Diamonds Ltd. ("Peregrine" or "the Company") (TSX:
PGD) are pleased to report a Canadian NI-43-101-compliant indicated
mineral resource of 18.2 million carats in 19.5 million tonnes of
kimberlite for the nine hectare DO-27 kimberlite. The estimated grade of
the indicated resource is 94 carats per hundred tonnes ("cpht"). The
resource estimate was prepared by AMEC Americas Ltd. ("AMEC"), an
internationally recognized engineering firm with extensive experience in
evaluating advanced diamond projects. An additional 6.5-8.5 million
tonnes of kimberlite below the indicated resource was classified as a
potential mineral deposit and DO-27 remains open at depth.
DO-27 is situated on the 15,000 hectare WO property in the Northwest
Territories, Canada, approximately 27 kilometres southeast of the
Diavik(TM) Diamond Mine and 11 kilometres east of the Tibbitt to
Contwoyto Ice Road used to supply the two diamond mines in the area.
Ownership interests in the WO property are as follows: Peregrine 71.74%,
Archon Minerals Limited 17.48% and DHK Diamonds Inc. 10.78%. Peregrine
holds 97.92% of the diamond marketing rights.
In addition to the resource calculation, AMEC completed an internal
preliminary technical assessment ("PTA") study of DO-27 where a number of
mining engineering parameters were examined in conjunction with the
resource estimate, currency exchange rates, fuel and other consumable
prices, diamond valuations and capital cost trends in the mining
industry, to determine the current economic potential of DO-27. Both a
"scrub-only" and "stand-alone" operation were investigated. For a
"scrub-only" operation, a kimberlite concentrate with a grade up to ten
times that of run of mine material would be produced at DO-27 by
conventional open-pit mining, crushing and scrubbing techniques. The
resulting concentrate would be transported elsewhere for final diamond
recovery. For a "stand-alone" operation, rough diamonds would be
recovered at the site by way of a conventional open-pit mining and
diamond processing facility. The economics of a potential "scrub-only"
project were determined by the PTA to be currently more favourable than a
"stand-alone" operation.
AMEC investigated whether the DO-27 indicated mineral resource had the
potential to pay back capital on an undiscounted cash flow basis. A
preliminary financial analysis for a "scrub-only" mining operation was
performed which achieved this objective, supporting the resource
classification.
Although Peregrine management has concluded that the development of the
DO-27 project is currently not economically justifiable, both the Company
and AMEC believe that there is a reasonable chance that DO-27 could
support a mining operation in the future. Factors that could enhance the
economics of a mining operation at DO-27 include:
- Higher rough diamond prices.
- Possible underestimation of the average DO-27 diamond value because the
current estimate is based on a parcel of only 2,075 carats.
- More favourable Canadian-US currency exchange rates.
- A diamond processing arrangement with one of the nearby diamond mines.
- Increased revenue potential from downstream cutting and polishing of
DO-27 diamonds.
- Mining and processing technology advances.
- Regional infrastructure developments.
- An ultimate run of mine grade greater than the current grade estimated
by reverse circulation ("RC") drill samples.
Eric Friedland, CEO of Peregrine, stated, "This independent resource
calculation and associated PTA is the result of over three years of hard
work by many people, much of it under harsh conditions with difficult
technical challenges. We were successful in proving that the diamond
grade of DO-27 is almost three times higher than previously estimated and
the work was to a standard and quality that allows for the formal
classification of a resource. Data from the resource and engineering
studies in combination with future diamond valuations will give Peregrine
the ability to efficiently assess the economic potential of DO-27 on an
ongoing basis. At a time of projected future shortfalls in diamond supply
and expected increases in rough diamond prices, the diamond resource at
DO-27, which is contained within one large kimberlite, close to existing
diamond mining infrastructure, is well-positioned as a candidate for
future development."
DO-27 Resource Statement
The reported mineral resource for the DO-27 kimberlite extends to a depth
of approximately 325 metres below surface. Canadian Institute of Mining
and Metallurgy ("CIM") standards and securities commission disclosure
requirements require that a resource can only be declared on a mineral
deposit that has "reasonable prospects of economic extraction". AMEC
determined that DO-27 met these criteria by generating a Lerches-Grossman
("LG") economic pit shell for a "scrub-only" operation, using the Whittle
software package. Following are the assumptions used by AMEC in their
analysis:
- Diamond Prices: On December 17, 2007, Peregrine reported that the
modelled diamond value for a 2,075 carat parcel ranged from US $43-70 per
carat, with a base case of US $51 per carat. The valuation is summarized
in Table 1. The valuation was completed in Antwerp Belgium in late 2007
under the supervision of WWW International Diamond Consultants Ltd.
("WWW"), an internationally recognized diamond valuation and consultancy
company. The "High" diamond price of US $70 per carat was used for pit
shell generation. There is a high degree of uncertainty in the modelled
value of the larger stones that would be expected in a production
scenario in a parcel of only 2,075 carats. The values of large stones
typically have the most significant impact on overall average diamond
value. WWW has stated that it is highly unlikely that the ultimate
average price of DO-27 goods will be lower than the "Low" values and that
the "High" values should not be considered maximum values.
Table 1: DO-27 Diamond Valuation Results
-------------------------------------------------------------------------
Weight Of "Base Case" "High"
Valuation Largest Diamond Diamond "Low" Diamond
Sample Diamonds Price Model Price Model Price Model
(Carats)(1) (Carats) (US$/Carat)(2) (US$/Carat)(2) (US$/Carat)(2)
-------------------------------------------------------------------------
2,075(1) 9.45, 7.03, $51 $70 $43
7.11, 6.03,
5.17, 4.84,
4.35, 4.19
-------------------------------------------------------------------------
(1) Sample weight represents the total carat weight of diamonds larger
than the 1 DTC sieve size (approx. 0.85 mm) presented for valuation
following the combination of individual sub-samples from the 2005,
2006 and 2007 bulk sampling programs and after acid cleaning.
(2) As determined by WWW International Diamond Consultants Ltd. from
their October 31, 2007 price book.
- Grade: The average estimated diamond grade within the LG pit shell
is 94 cpht. At DO-27, there is a lack of sample data from actual mined
material or drill core with which to compare the RC results. AMEC stated
that in their experience, RC drilling commonly underestimates the diamond
content of kimberlites being sampled and grade increase factors as high
as 150 to 200 percent have been encountered. For the purposes of this
resource estimate however, no adjustment has been made to the estimated
grade.
- Confidence Category: AMEC has treated the DO-27 resource as a bulk
mining scenario with a consistent grade of 94 cpht and no internal waste.
Local variations in block grades may not be fully reflected in the
resource block estimates. The indicated mineral resource can only be
converted to a mineral reserve using no cut-offs or selectivity
assumptions.
- Metallurgical Recovery: 100 percent.
- Mining Costs: US $2.05 per tonne of ore or waste incremented by US$0.02
per per tonne per ten metre depth.
- Operating Costs: US $19.96 per tonne, for a "scrub-only" operation
including an estimate for trucking to and processing by a third party
diamond recovery facility in the area and general and administrative
costs.
- Stripping Ratio: Life of mine 6.3:1
- Capital Costs: US $400-500 million for a "scrub-only" operation.
- Pit Slopes: Granite pit slope inter-ramp angles ranging from 45 degrees
to 53 degrees.
Mineral Services Canada Inc. provided AMEC with a three dimensional model
of DO-27. An external pipe shell was defined and the internal geology of
the pipe was established; the dominant pipe infill, which comprises
approximately 86 percent of the pipe volume, is primary pyroclastic
kimberlite ("KIMB 1"). AMEC then produced a block model with 10 metre by
10 metre by 5 metre blocks. The tonnage for each block was calculated by
multiplying the volume of each block by a density determined from a three
dimensional density model developed by AMEC. The density model was based
on 507 specific gravity measurements on drill core from throughout the
body performed by Teck Cominco's Global Discovery Labs in Vancouver.
There is a trend of increasing density with depth and towards the margins
of DO-27 as the near-surface material and the kimberlite in the central
part of the pipe is highly weathered, making this material very amenable
to mechanical reduction to a high diamond grade kimberlite concentrate.
The reported tonnage for the indicated resource and the potential mineral
deposit is restricted to those blocks that fall within the KIMB-1
wireframe.
The three dimensional model of the DO-27 kimberlite and the tonnage and
resource estimates are based on data from 66 core holes totalling 17,300
metres and 46 large diameter (35-61 cm) RC holes totalling 8,800 metres.
A cumulative 3,200 dry tonnes of bulk sample material collected from the
RC holes was processed for final diamond recovery at the bulk sample test
facility at BHP Billiton's Ekati(TM) Diamond Mine. A geological model of
DO-27 can be viewed at http://www.pdiam.com/i/pdf/DO27.pdf. A NI
43-101-compliant Technical Report on the DO-27 project that contains the
details of the resource estimate is in preparation by AMEC and will be
posted on SEDAR and Peregrine's website within 45 days.
DO-27 Potential Mineral Deposit
AMEC considers an additional 6.5-8.5 million tonnes of kimberlite for
DO-27 to be a potential mineral deposit based on an analysis of the drill
hole data and the three dimensional model. This potential mineral deposit
consists of the continuation of the diamondiferous kimberlite at depth
below the limits of the indicated resource, from approximately 325 to 425
metres below surface, and it is currently delineated by eight core holes
and two RC holes. DO-27 remains open at depth and additional tonnage
could be defined with subsequent drilling. A grade of 90-100 cpht was
assigned to the 6.5-8.5 million tonnes by extending the approximate grade
of the indicated resource. The potential quantity and grade of this
potential mineral deposit is conceptual in nature and there has been
insufficient exploration to define the potential mineral deposit as a
mineral resource. It is uncertain whether further exploration will result
in this potential mineral deposit being delineated as a mineral resource.
Preliminary Technical Assessment Study
In early 2007, AMEC was awarded the contract to assist with Peregrine's
internal PTA of the DO-27 project. The PTA included a conceptual model of
a potential diamond mine based on the preliminary geological model
available in 2007. The study examined several operating scenarios and
development concepts, focusing on kimberlite processing, waste rock and
processed kimberlite disposal, water management and overall project
footprint. AMEC provided some order-of-magnitude capital and operating
cost estimates that might be realized for different project development
scenarios. These studies were conceptual in nature and not prepared to a
standard of detail that would allow disclosure under Canadian NI 43-101
guidelines. Following is a summary of the engineering work that has been
completed to date.
In 2006 Peregrine retained EBA Engineering Consultants Limited ("EBA") to
undertake a geotechnical assessment of potential DO-27 pit slopes to
assist with the design of the conceptual open pit mine scenarios. Using
the geotechnical data provided by EBA, a preliminary Whittle open pit
optimization study was undertaken by AMEC in 2007 as part of the PTA in
order to establish the potential size of a conceptual one million tonne
per year and two million tonne per year mining operation and associated
waste dump and site layout. An optimal pit shell was selected, conceptual
mine production schedules were developed and an equipment fleet was
selected to match the proposed mine output.
Processing test work was completed at SGS Lakefield for both the
"stand-alone" and a "scrub-only" operation. The "stand-alone" plant would
be a typical open pit kimberlite mining and diamond processing operation
where rough diamonds are recovered at the site. For a "scrub-only"
operation, a kimberlite concentrate, with grades as high as 940 cpht,
would be produced and trucked elsewhere for diamond recovery. The
Diavik(TM) and Ekati(TM) Diamond Mines are located 27 kilometres
northwest and 57 km north of DO-27 respectively. Scrubbing tests were
completed and 890 kg and 270 kg of core were subjected to low pressure
and high pressure scrub tests respectively. As the DO-27 kimberlite is
relatively soft and highly weathered, especially in the upper portions of
the pipe, a large amount of the kimberlite was washed away as -1.00 mm
fines after only three to four minutes of scrubbing at normal water
pressures. Kimberlite collected from 61-121 metres depth had a scrubbing
concentration factor of 10:1 from run of mine material. More competent
material collected from depths of 121-181 metres and 181-275 metres depth
had concentration factors of approximately 3.3:1 and 2.3:1 respectively.
Therefore, under these conditions, kimberlite with a grade of 94 cpht in
the upper 121 metres of the pit could be upgraded to a concentrate with a
grade of 940 cpht. Tests showed that the addition of a tertiary crushing
circuit and high pressure washing would achieve even higher concentration
ratios. Pre-concentrating the kimberlite has the benefit of reducing the
amount of material that would need to be transported to and processed by
a third party diamond recovery facility. In addition, the capital and
operating costs for a "scrub-only" processing plant would be
significantly less than for a full diamond recovery circuit. A summary of
the scrubbing test was reported by Peregrine in a news release dated July
24, 2007.
AMEC examined the infrastructure requirements for a conceptual project at
DO-27 based on analogous diamond mine configurations consistent for a
remote site in the Arctic. Using the conceptual mine plan, processing
plant and infrastructure layouts, AMEC calculated order-of-magnitude
ranges of capital and operating costs.
Future Work
Peregrine will, on an on-going basis, continue to evaluate the economics
of DO-27 in the context of changes to rough diamond prices, mining and
processing technology developments, the state of nearby diamond mines,
US-Canadian currency exchange rates and factors affecting capital and
operating costs. The existing 2,075 carat diamond parcel is available for
valuation in the future should diamond prices increase. The wealth of
engineering and geological data that was generated from the bulk sampling
programs, the PTA and the resource estimation, provides an excellent
foundation from which a future decision to advance the project to the
feasibility stage can be made.
Diamond prices continue to rise and industry experts predict that without
significant new discoveries in the coming years, the global demand for
diamonds could outstrip supply as early as next year with associated
accelerated increases in rough diamond prices.
DO-27 is situated within three mining leases totalling 1,500 hectares on
the WO property that are in good standing until 2023. The leases are
renewable for multiple additional 21 year terms after 2023. Peregrine is
committed to keeping local First Nations groups informed on project
developments and the Company has an excellent record of employing
individuals from the local communities.
In addition to the WO property, which also hosts the four hectare,
diamondiferous DO-18 kimberlite, 700 metres north of DO-27, Peregrine
holds an additional 165,000 hectares of highly prospective mineral claims
in the region. Concurrent with ongoing evaluation of DO-27, Peregrine
will continue to systematically explore its mineral claims in the area in
an effort to make a diamondiferous kimberlite discovery that could
complement a potential mining operation at DO-27.
Qualified Person Statement
Jennifer Pell, (Ph.D., P.Geo.), Chief Geoscientist for Peregrine Diamonds
Ltd., is the Qualified Person under NI 43-101, for work on the DO-27
kimberlite. Mr. Howard Coopersmith (B. Sc.,P.Geo.), an internationally
recognized consultant to the diamond industry, was Peregrine's external
Qualified Person for the 2005, 2006 and 2007 bulk sampling programs. Dr.
Pell and Mr. Coopersmith have reviewed this press release and approve of
its contents.
Mr. Ken Brisebois (B.A.Sc., P.Eng.) and Mr. Ted Eggleston (PhD., P. Geo.)
of AMEC are the independent Qualified Persons who supervised the
preparation of the mineral resource estimate for the DO-27 kimberlite.
Mr. Brisebois has 22 years of worldwide experience in mining resource and
reserve assessments and related work and has worked on several diamond
resource estimates in North America. His specialties include technical
resource and reserve risk assessment, resource and reserve audits,
geostatistical and geological modelling, ore and grade control and
resource classification. Mr. Eggleston has more than 30 years of
worldwide experience in exploration and development of mining properties
including work on several diamond projects in North America. Messrs.
Brisebois and Eggleston have reviewed the statements regarding the
mineral resource estimate in this press release and approve of its
disclosure.
Forward-Looking Statements: This document includes forward-looking
statements. Forward-looking statements include, but are not limited to
statements concerning Peregrine's projects and other statements that are
not historical facts. When used in this document, the words such as
"could", "commonly", "confident", "plan", "encouraging", "estimate",
"expect", "anticipated", "intend", "imply", "likely", "may", "potential",
"should", "scheduled", "significant", "suggest", and similar expressions
are forward-looking statements. Although Peregrine Diamonds Ltd. believes
that its expectations reflected in these forward-looking statements are
reasonable, such statements involve risk and uncertainties and no
assurance can be given that actual results will be consistent with these
forward-looking statements. Important factors that could cause actual
results to differ from these forward-looking statements are disclosed in
the corporation's periodic filings with Canadian regulators.
Contacts:
Peregrine Diamonds Ltd.
Brooke Clements
President
(604) 408-8880
Peregrine Diamonds Ltd.
Eric Friedland
CEO
(604) 408-8880
Peregrine Diamonds Ltd.
Investor Relations
(604) 408-8880
(604) 408-8881 (FAX)
Email: investorrelations@pdiam.com
Website: www.peregrinediamonds.com
Copyright 2008, Market Wire, All rights reserved.
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