De Beers agrees to buy Peregrine Diamonds

Peregrine Diamonds Ltd. July 19 announced that De Beers Canada Inc. has agreed to buy the exploration company in a cash deal worth roughly C$107 million. Under the terms of the agreement, De Beers is to acquire all of Peregrine's outstanding common shares for C24 cents each, a 50 percent premium to Peregrine's share price of C16 cents on July 18.

In May, Peregrine Diamonds published an updated preliminary economic assessment for its Chidliak project in Nunavut that envisions a phase-1 mine expected to average 1.3 million carats per year over an initial 13-year mine life. This mine is calculated to produce an after-tax net present value (at a 7.5 percent discount) of C$471 million, an after-tax internal rate of return of 31.1 percent, and payback the initial capital investment in 2.2 years.

This PEA was based on 4.64 million metric tons of inferred mineral resource containing 11.39 million carats of diamonds in the CH-6 kimberlite, plus 4.99 million metric tons of inferred mineral resource in the CH-7 kimberlite with 4.23 million carats of diamonds.

"The De Beers Canada offer delivers immediate liquidity to Peregrine's shareholders at an attractive premium that recognizes the current value of Chidliak and provides shareholders certainty through an all-cash offer," said Peregrine Founder and Executive Chairman Eric Friedland. "Further, it eliminates the substantial equity dilution, and project and market risks to advance Chidliak to bankable feasibility and, if warranted, to commercial production."

De Beers Canada, which has operating diamond mines in Northwest Territories and Ontario, will look to advance Chidliak as its first operation in Nunavut.

"The Peregrine team has done outstanding work progressing the Chidliak project, demonstrating its quality and high potential. With our extensive De Beers Group operating experience in similar Canadian arctic environments and employing innovative mining methods, we believe we are very well positioned to develop this resource further," said De Beers Canada CEO Kim Truter. "We are delighted to be extending our business presence in Canada to the Nunavut Territory and look forward to working with all community and government partners as we progress the project."

After consulting financial and legal experts, Peregrine's board of directors unanimously determined that the De Beers offer is in the best interests of the company.

"This offer is the result of a comprehensive review process of our options to advance Chidliak towards development," said Friedland. "The board unanimously agrees that this offer represents the best path forward available to Peregrine's shareholders and recommends that shareholders vote in favor of this transaction."

Peregrine has the right to consider and accept unsolicited superior proposals submitted by third parties. In the event of a superior proposal, De Beers will have a ten-business-day right to match the superior proposal. If the arrangement is not completed as a result of a superior proposal, Peregrine will be required to pay De Beers a C$5 million termination fee.

The closing of the arrangement is subject to the approval of at least two-thirds of the votes cast by shareholders at a special meeting and other customary closing conditions. The transaction is expected to close in September.

In addition to CH-6 and CH-7 kimberlites, which have been shown to extend below the resources considered in the PEA, Peregrine has identified 72 kimberlites on the Chidliak property, with six having been identified as potentially economic through drilling and microdiamond analysis.

Peregrine also controls the 8,494-hectare (20,989 acres) Lac de Gras diamond project about 27 kilometers (17 miles) from the Diavik diamond mine in the Northwest Territories.

–SHANE LASLEY