Peregrine Diamonds Ltd has completed an internal concept study of a potential open-pit plus underground mining development at its 100% owned CH-6 kimberlite pipe at the Chidliak diamond project near Iqaluit, Nunavut, Canada. The study was completed in consultation with JDS Energy & Mining Inc. The study has concluded there is the potential to substantially enhance the economics of the Chidliak project by incorporating an underground mining operation below 260 m of depth at CH-6, the current bottom of the open pit Inferred Resource defined in the August 2016 PEA (see below). As a result of this conceptual study, a drill program targeting this deeper kimberlite is planned to commence in June 2017 to expand the resource to depths up to 500 m below surface. In addition to the resource expansion drilling, geotechnical work and environmental studies in the Chidliak Project area and proposed transportation corridor will continue.
JDS completed a positive PEA dated August 19, 2016 on a Phase-One open-pit only mining operation of the CH-6 and CH-7 kimberlite pipes. The economics of a development at Chidliak are robust. Highlights of that 2016 PEA base case are:
- NPV of C$743.7 million, at a 7.5% discount rate and a pre-tax IRR of 38.1%
- After-tax NPV of C$471.2 million, at a 7.5% discount rate and an after-tax IRR of 29.8%
- Total Life of Mine (LOM) pre-tax free cash flow of C$1.31 billion
- After-tax payback period of two years, LOM of ten years
- Operating margin of 72%
- LOM average production rate of 1.2 Mct/y, peaking at 1.8 Mct/y
- Estimated pre-production capital requirement of approximately C$434.9 million, including C$56.7 million in contingency.
The PEA concluded that the project was of sufficient merit to proceed to the PFS stage. The key components of the recommended work program include:
- Core drilling at CH-6 to better quantify the target for further exploration (TFFE) and possibly convert that material to a Mineral Resource
- Bulk sampling of CH-6 to advance the resource to the Indicated level
- Engineering and geotechnical programs to better quantify process requirements and refine pit design
- Continued environmental monitoring and development of permitting management plans.
In December 2016, the company engaged JDS to complete an internal, concept-level study on the project economic uplift that could be realized by developing the CH-6 kimberlite to a depth of 500 m as a combined open-pit plus underground mining operation. The results of this study are excellent and have significantly changed the specifics for the 2017 work program. The study clearly demonstrates the benefit of focusing the 2017 program on proving the resource potential at CH-6 below 260 m, the current bottom of the Inferred Resource in the PEA. The 2017 work program at Chidliak will now focus on three main objectives:
- Expansion of the current Inferred Resource at CH-6 – through diamond core drilling of approximately 4,000-5,000 m to further demonstrate geological continuity, establish pipe margin pierce-points and obtain spatially representative kimberlite samples for caustic fusion diamond assay. The main objective will be to increase the depth of a categorized resource from 260 m to 500 m. Caustic fusion results will be used to model diamond grade and grade distribution of the kimberlite to 500 m
- Refine open pit geotechnical design parameters – as part of the 2017 drilling program, oriented HQ diameter core and other geotechnical data required to refine the open-pit parameters, particularly the pit slope angles, will be acquired. This data will enable assumptions regarding open pit design to be tested and further refined
- Advancing permitting – through continued environmental monitoring programs of the Chidliak project area and the proposed transportation corridor.
The company is currently working with Mineral Services Canada to finalize parameters for the 2017 drill program that would support robust future resource estimates. All necessary preparations to initiate this program, including equipment acquisition and camp preparation, were completed in 2016 and all permits have been obtained. The company expects the microdiamond analyses to be completed in the third quarter of 2017 and anticipates an updated resource for CH-6 to be declared in the fourth quarter. If the resource at depths below 260 m is of sufficient size and diamond grade, a new PEA outlining an underground mining operation for this material, in addition to the existing open-pit operation, could be completed in the first quarter of 2018. Total cost for the 2017 work program is estimated at C$7.5 million.
Peregrine Diamonds is a TSX-listed diamond exploration and development company with assets located in northern Canada and Botswana. The core asset is its’ 100%-owned, 513,000-ha Chidliak project, located 120 kilometres from Iqaluit, the capital of Nunavut where 71 kimberlites have been discovered to date with eight being potentially economic. A PEA of a Phase 1 Diamond Development (CP1D) has been completed. An Inferred Mineral Resource of 11.39 Mct in 4.64 Mt of kimberlite at an average grade of 2.45 ct/t has been defined for a portion of the CH-6 kimberlite. In addition, a TFFE of 2.34 to 3.75 Mt of kimberlite to a depth of 380 m below surface has been identified at CH-6.