Thursday, November 2, 2017

Caustic Results

Caustic Results

Chidliak is only a couple of weeks away from learning the micro analysis results from the SRC (Saskatchewan Research Council) Laboratory.

How does one interpret the results?

The first number to hit the reader will be the grade. The number of carats per tonne. This will come straight from the lab results, but is not the most important aspect of the results.

An example of why this number is not the most important is to go back to the CH-6 mini-bulk.
14 tonnes of material was collected and processed to show results from the 0.85 mm and above sieve (commercial sizes). An associated 465.3 kg sample was also taken and was processed to collect some micro information from the 0.425 mm sieve and above.  The results show the larger sample (14 tonnes) came across at 2.71 cpt (on the 1.18 mm sieve) and the smaller sample (465.3 kg) came across at 1.98 cpt (on the 1.18 mm sieve).

The larger sample will include a statistically amount of macro diamonds whereas a smaller sample will get lucky and hit a good macro stone that will skew the results up or get unlucky and not hit a good macro stone and that will skew the results down.

The real interpretation is to extrapolate a modeled grade based on the coarse distribution curve of the lab results. One would need a reference map on how to do that. That is where the 404.24 tonne bulk sample comes in. The sample has given the best knowledge of a macro grade to date at Chidliak. In conjunction with the 404.24 tonne bulk sample, there was also a 350 kg sample taken that went through micro analysis (caustic sampling) and that is where the map has been created. The macro coarse distribution curve is known for that 404.24 tonne bulk sample and that curve is associated with a micro coarse distribution curve for the 350 kg sample. The curve is more of a confirmation that things just line up with alternate caustic results. The number of stones from in an alternate coarse distribution curve will push the modeled grade up above the 404.24 tonne grade if the number of stones is higher...and it will be lower if the number of stones is lower.

One can look at the lab results and look at the grade (cpt) and can get out an excel spreadsheet and spend some time plotting a coarse distribution curve and all that detail.....but is there something easier that can be done? 

Thanks to a fancy chart in the 2016 Chidliak PEA, the answer is yes. (Page 14-4 of the 2016 PEA)

Here is the chart in question:

This is nice colour coded chart with a very important legend.
It does a stone count per kg, but looks specifically at the stones that fall on and above the 0.212 mm sieve. A higher sieve then has been looked at the early exploration phases at Chidliak.

On the left chart, there is a lot of blue. That is the regular grade kimberlite at CH-6 (2 cpt+) and the blue equates to between 0.6 to 1.4 stones per kg on the 0.212 mm sieve.

On the right chart, there is a lot of different colours. This shows the inner Higher grade zone ( 4 cpt+) and the multiple colours there indicates between 1.4 to 5.15 stones per kg on the 0.212 mm sieve.

The samples taken from the core during the summer program were at fixed intervals.  Something like every 10 metres, a sample was taken (20 kg is needed for a sample) and sent to the SRC. Peregrine Diamonds (owner of Chidliak) may just release a combined result to the world or it may be more discrete.

The key item to watch for is not specifically the grade, but the carat stone count. Look at the sieves at 0.212 and above. Anything above 2 stones per kg will be very valuable and high margin tonnage. Anything around 1 stone per kg and that will be  the standard kimberlite for CH-6.

The difference between standard and very valuable is between is CAD$400 per tonne and CAD$1000 per tonne material. Anything in that range will have a big, positive impact to the NPV going into the PEA update.



Thursday, September 7, 2017

Risk Reward

Risk Reward

There have been many times in the life of the market value of Peregrine Diamonds where the risk/reward is very lucrative.

The latest in this installment is version VI --> Risk Reward part VI

For comparison -- the previous installment is here --> Risk Reward part V

Using the search feature of this blog will allow you to access previous installments as well. 

Wednesday, August 30, 2017

Rights offerings

Rights offerings

The Canadian government has made doing discounted rights offerings easier then ever and yet only a few companies have utilized this feature.

There are websites that describe these types of offerings. If a person is eligible to participate, there will be circular's and documents that also describe how they work and what to do.

The core logic and concept behind these offerings can be lost quite quick without a simple understanding of them.

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Robert Friedland, a billionaire tycoon, has struggled to convince Canadians as to why they are good product and that more companies probably should use them.

Here is an article from 2013 with some nice quotes from Robert Friedland -- Article

Quotes:

"Idiots in Canada do not understand rights offerings are not dilution.. Everyone participates equally.. Rights offerings are the fairest form of equity finance ever developed by the human mind."

"Consider picking up a few shares [of Turquoise Hill] as a speculation… Pack them away for your favourite nephew."

"People should buy the rights and exercise them hand over fist"
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Rather then explain in detail how and what these offerings are, a simple story will probably be of more use...so here is the story:

Three kids show up one day. The names of the children are Charlie, Morgan, and Taylor.

Charlie comes up with a concept to start a lemonade stand service. Each of the three children invest $1 into the business or a total of $3. They in turn, get 1/3rd of the business in ownership and they each create 1 share certificate for each one of them.

They do a lot of research, a lot of planning and end up buying all the materials needed for the lemonade stand. This would include pieces of wood, nails, cups, etc.

The day of launch has come and each of the children are very excited....but Morgan has some bad news....all the money is spent and the lemonade stand has no lemons.

They all get together and comb through pockets, etc. and each come up with a single dime. They each give the company 10 cents and they each get 1 more share each in the company. At this point, they each own 1/3rd of the company and they all have 2 shares each. This is a fair transaction and all shareholders maintain ownership and the company can now buy some lemons and sugar to launch the business.

A 4th child arrives at the scene. That child's name is Tatum and Tatum wants to get involved in the business as Tatum sees it as a great business opportunity.

Tatum goes up to both Charlie and Morgan and neither one of them want to sell any shares in the company.

Taylor on the other hand has decided that a good deal is a good deal is a good deal. Taylor offers the most recent share to Tatum for 15 cents. Tatum immediately pays Taylor 15 cents and knows it is a great deal.  Taylor is super, super happy to have just made a 50% gain on that single dime investment.

Where are the shares now?

Charlie - 2 shares (1/3rd of company)
Morgan- 2 shares (1/3rd of company)
Taylor - 1 share (1/6th of company)
Tatum - 1 share (1/6th of company)

The company has a great first week, so much so...that an entity has offered to buy the whole company for $9 or $1.50 per share. All 4 children are very, very happy.

They get together and vote yes to the deal.

Charlie walks away with $3 and makes an excellent 170% off the original $1.10 investment.
Morgan does the same.
Taylor walks away with $1.65 ($1.50 plus $0.15 from Tatum) and makes 36% off the original $1.10 investment.
Tatum walks away with $1.50 and makes a  whopping 6600% off the original $0.15 investment.

Why did Taylor make only 36%? What did Taylor do wrong?

Taylor made a mistake of assuming the strike price of the discounted rights offering should be considered market price. If they had found only a nickel in their pockets, they may have had to buy less lemons and sugar...but could still launch the business. The price of the discount is not relevant here, the key to the business was to buy lemons and sugar otherwise the business was in trouble.

What should have Taylor done?
A fair value of the price would have been to take the 2 shares and find the average of the price. $1 plus $0.10 divided by 2 = $0.55.

Taylor should have offered Tatum 55 cents for 1 share in the company or maybe even 50 cents if Taylor needed the money....but assuming the strike price of the 2nd share (10 cents) equals fair value was a big mistake and Taylor paid for it with lack of gains.

This mistake does continue to be made in the Canadian market place and a very artificial opportunity to support a Tatum purchase can prevail. Keep an eye out for Canadian rights offerings and with this core logic in hand...maybe some good opportunistic investments could be at hand.



Thursday, August 24, 2017

3 new Drillholes

3 New Drillholes at Chidliak (with Video)

Peregrine Diamonds just released an update at Chidliak and has released new information on 3 new drillholes that have completed recently.

Here is the press release that includes a nice 2D section -- 2017-08-23_NR

Here is a video interpretation of the results and how to process the information in the 2D section.



The drilling season at Chidliak is still underway and the focus will be drilling as many ~500 metre length holes into the deposit to help define and declare a large inferred resource for the next PEA update.


Saturday, July 29, 2017

Hole DD33

Hole DD33

The 33rd diamond drillhole into CH-6 at Chidliak was completed recently.
The news release is located here -- 2017-07-26

It was the first successful hole of the summer program and was completed at a drillhole size of HQ. HQ is larger then the usual NQ hole and was picked to establish some geotechnical data in the country rock near CH-6 pipe. In addition to the geotechnical aspect of this hole, it was also used to find deeper pierce points on the West and East wall of the pipe.

Here is an image from Peregrine Diamonds news release:



The targeted depth point on the West side (first entry into the kimberlite) was not as expected. The drillhole ran into kimberlite much earlier then expected and therefore as a higher (elevation) pierce point then it was trying to achieve. However, finding more kimberlite at slightly high elevations and expanding out the west wall of the pipe will have a significant influence on the number of carats contained and that will directly influence the economics in a positive nature.

The targeted depth point on the East side (exit from the kimberlite) was as expected and maintained a steeply dipping pipe wall.

Beyond this, the drill team decided to extend the hole further into the country rock...probably to gain some additional geotechnical data and maybe just a hunch to go as far as the hole could go.

This turned into some great news as the drilling intersected some new kimberlite material that did not adhere immediately to any signature or properties related to existing kimberlite within the pipe.

Here is the excerpt from the news release:

"Hole DD33 was lost at 433 metre down hole length, at 360.6 mbs and terminated in kimberlite. A 32-centimetre intersection of slightly altered olivine-macrocrystic kimberlite was logged at the end of the last core barrel retrieved. The nature and relationship with CH-6, if any, of this deeper kimberlite intersection is unknown at this time. Future deep drilling from the eastern side of CH-6 will attempt to establish the nature, extent and continuity of this deeper kimberlite intersection."

The drilling finished with this open ended intersection at about 360 metres below surface and to the east of the current pipe wall. The extent of this new kimberlite intersection will be known later.

What does olivine-macrocystic mean?

Macrocystic simple means the size of the 'cysts' or in this case olivine cysts.
The size being -- macrocrystic (0.5–10 mm)

The intersection that Peregrine Diamonds has found has olivine cysts in the order of 0.5 to 10 mm in shapes.

Here is an example from CH-7 (KIM 1) showing some highlighted olivine cysts in the photo.
This is taken from the Chidliak Resource Technical update in 2016.



On the left image, the yellow or highlighted 'OL' are olivine cysts.

Peregrine Diamonds should be looking very closely at that current core intersection and will hopefully be able to get more core from drilling in the very new future.

The next step for that new kimberlite will be to send a reasonable sample to the SRC to determine if and how many diamonds it contains. That sample will probably need to be larger then the current core intersection they have.


Thursday, July 27, 2017

Drilling at Chidliak

Drilling at Chidliak

Peregrine Diamonds is bringing a 3rd drilling rig to Chidliak for an August 1st start date. This is to add an additional 2,000 to 4,000 metres of drilling capacity to the summer program. The original target for drilling during the summer was 4,500 to 5,000 metres (with 1 drill) and that was subsequently bumped up to 7,500 metres with 2 full drills onsite. A third one should add more capacity, but they have had some issues early on in the program. Once resolved, the possibility of hitting past 7,500 metres is realistic.

The last time Peregrine Diamonds had 2 core drill rigs on the site was in 2010 and the drill rigs were used on multiple anomalies in addition to the CH-6 mini bulk program (15 tonne).

History should give an indication of what the current program is capable of. Below are the details of what was accomplished by each drill rig in 2010.

Drill rig #1:



Drill rig #2:


When adding up the metres for July/August/September of that timeframe, one of the rigs did just under 3,000 metres and the other rig just did over 3,000 metres.
The advantage that Peregrine Diamonds has this year is that the 3 core drill rigs are all within a very limited vicinity. All at CH-6. These are not getting transported to other anomalies via helicopters.

With a quick look at the numbers, a very productive program could yield up to 10,000 metres. Considering July is almost over, a final target of 7,500 to 8,500 metres is probably a reasonable goal.

Results of the first successful drillhole of the season DD33 (2017-07-26 news) has been eye opening. Peregrine Diamonds just needs to focus on executing more successful holes at site to bring even more knowledge to the project. These exercises are about finding information...not just diamonds.

Monday, June 19, 2017

2017 Summer Program Announced

Peregrine Diamonds have given final details for the 2017 summer program and announced a commencement of June 27th, 2017.

Details of the program can be found on the Peregrine Diamond website -- 2017-06-19

There has been a significant increase in planned drill metres from an original ~5,000 metres to now an approximate ~7,500. There is a chance that they will add a second core drill rig to site to  achieve this upgraded target. The current drilling permit allows for 2 core drill rigs and also an RC helicopter rig if needed.

An updated event timeline is located here -- Upcoming events


Wednesday, April 19, 2017

Synthetic Diamonds

The irony of synthetic diamonds

Producing mines or developing projects in the diamond industry are always having a close eye on the synthetic diamond market and where it is headed. This does include projects like Chidliak when determining what value the diamonds being extracted from Chidliak could be valued and sold at.

A single rough diamond carat produced at a mine site will have quite a variable range of costs across the many producing mines. A single rough synthetic diamond produced in a lab will have a cost based on the amount of energy and time and materials that are needed to produce that single stone. From that point on, the costs of polishing, marketing, selling are relatively all the same.

A single rough diamond carat will be extracted from a very old volcano emplaced in a kimberlite pipe. A single rough synthetic diamond carat will be produced in a lab. The question that needs to be asked is where that lab get its energy from to create the stone.

The answer to the energy question is basically where is energy is the cheapest. Synthetic diamonds are small and very portable, there is virtually no cost to transporting these stones...so they can basically be produced anywhere in the world. So, to answer the energy question, one only needs to look at digital currency with the likes of bitcoin and other players. Digital currencies are produced via computer algorithms and these computers need cheap electricity to get the most profit out of producing a digital coin. They also generate a lot of heat....so dispersal of heat is also a direct input to the cost.  A simple google search will reveal that iceland has bit currency farms for very good reasons.

Iceland - A very geothermal friendly, active volcanoes, and a very young (geologically) country. A mere 18 million years old. This geothermal energy generates consistent and renewable energy that is very environmental sound. Sounds like a perfect home for a synthetic diamond manufacturer.

Synthetic diamonds are still mostly in the research phase. A lot of the companies that are producing synthetic diamonds for the jewellery market are not actually making money...especially when one takes into account the capital cost. These labs are in different parts of the world where the scientists are...not necessarily where it is the cheapest to produce.

One day, there may be a shift to move these into full production in a place like iceland.

The true irony of synthetic diamonds is that they will one day be made by  current volcanoes (the energy from) versus real diamonds that are made by ancient volcanoes (kimberlite pipes).

Monday, April 3, 2017

Video - Drilling and PEA

Video blog discussing drilling and PEA.

Here is a short video (~17 minutes) that discusses the proposed drilling program for the summer of 2017 and takes a quick analysis as to what may be expected with an updated PEA as the end result of the drilling.




Here are the calculations mentioned in the video:




 The end result is a discounted NPV that could reach CAD$1.2 billion depending on the results of the drilling. An increase in close to CAD$500 million in value add from the original PEA.

Thursday, March 30, 2017

Proposed Summer Drilling

Summer Drill Program - 2017

The timeline is set to start the summer program in about 2 to 3 months from now once the spring melt occurs in and around June.

There is more detail on the planned program. The proposed drillholes are listed in the recent AGM presentation -- AGM Update PDF

On Page 17, the planned drillholes are shown on the image.

This program will try and use the benefits of horizontal drilling to gain more information for less $$'s. On the diagram on page 17, one can see the 'parent' drillhole and the associated wedging off that hole to enter kimberlite pipe at various depths.

The final quantity of drilling footage is still a work in progress and there is a possibility of utilizing 2 core drill rigs instead of just the one already onsite. The equipment listed in the permit to work at Chidliak does list and allow for 2 core drill rigs, so it is just a question of procuring and mobilizing a second rig to site.

All work from the summer program will feed into a second or updated PEA that should include a new underground portion of the CH-6 kimberlite pipe on the assumption the resource continues to a depth of around 500 metres. They will know if it does in a few months from now when the drilling occurs.

Monday, March 13, 2017

2017 summer program

The focus for the development of the Chidliak resource will be carefully selected work to be done during the summer season.

It will be three fold.

1 - Deep core drilling to extend the resource to a target of 500 metres below surface.
2 - Drilling through the adjacent country rock to core log geotechnical data.
3 - Continued environmental/permitting studies (baseline and others) for both the project area and the all weather road corridor.

Starting with #3 - environmental studies are necessary in the permitting process.
Here is a history and some information on permitting -- Permitting details

One of the snippets of information from that link is this:

"The emphasis of a lengthy environmental baseline is very important in the permitting process. Ranging from 6 years to 9 years in a couple of the projects above. Chidliak started independent environmental baseline studies in 2009 and continue each and every year. 2016 will be year 7."

Chidliak did have a baseline study in 2016 and will have another one in 2017. That would put it in the 8 years of studies category that can be included in any advanced permitting applications. The key is the continual studies and it just takes time to collect that information. Meadowbank mine had 9 years of studies going into its final environmental impact assesssment. Chidliak is well on its way in this part of the requirement.

#1 and #2 will be obtained from the same core drilling by utilizing slightly angled holes in the country rock that will pierce the lower part of the kimberlite pipe (300 to 500 metres below surface).

More geotechnical drilling means a more realistic approach as opposed to very conservative approach when deciding what pit wall angles to use. This effects the strip ratio and how much waste one needs to extract or leave in the ground. Geotechnical core drilling will also be used within the kimberlite pipe to help define the size of the stopes that can be extracted underground safely. Bigger stopes means bigger cost savings. Bigger stopes also can lead to more risk to failures.

Deeper kimberlite expansion means expansion of the inferred resource at CH-6 and the concept of bringing in an underground portion to an updated PEA.

In the latest presentation -- 2017-03-01 Presentation
On page 19, there is a big drop off in positive cash flow starting in year 6 and beyond.
The goal will be to prevent that drop off from happening and keep the strong cash flow going for a few more years. The rock value of CH-6 is very lucrative and an underground concept can add substantially to the cash flow in the years 6 to 10. The drilling needs to be done to confirm this and this is a huge part of why the program was selected.

Ch-7 tonnage will be still be included in the PEA. It will be pushed back as far as possible until further work on CH-7 can increase the rock value in light of the diamond breakage issue. If the mine life extends to 15 years, the size of the mill will be put in question and may be increased. This will help bring higher value material further into the present.