De Beers Canada plans to acquire Peregrine Diamonds, take over Nunavut diamond project
De Beers Canada says it plans to take over the company behind the Chidliak diamond mining project in Nunavut.
In a Thursday morning news release, the corporation announced it has entered into an approximately $107 million agreement to acquire all outstanding securities of Peregrine Diamonds Ltd. at $0.24 per share.
Peregrine owns and operates the Chidliak diamond exploration project, located 120 kilometres northeast of Iqaluit on Baffin Island.
De Beers Canada, which is headquartered in Calgary, previously declined to invest in the project in 2013 after signing an option agreement with Peregrine the previous year. If it had agreed to the joint venture, it would have invested almost $60 million in Chidliak over five years, operating and having majority interest in the project.
A total of 74 kimberlite pipes have been discovered at the site including two pipes — named CH-6 and CH-7 — which are the focus of phase one of Peregrine's development program. The pipes are expected to produce more than 22 million carats.
Peregrine's recent economic assessment estimates the CH-6 pipe alone will produce 24.1 carats per tonne at a diamond valuation of $360 US per tonne.
"When you look at the Chidliak assets... they look like they're the best diamond assets in Canada that are undeveloped. They're very attractive from a value point of view," De Beers Canada CEO Kim Truter told CBC.
He said this is important when it comes to covering the costs of operating a mine in the Arctic Circle.
Truter also explained that many diamond deposits are associated with the rock type kimberlite, which is typically formed through some sort of volcanic process. But he said for every 100 kimberlite, only one generally contains diamonds.
"[They're] very, very difficult to find and [it's] very rare that they're actually economic. We're hoping that this one is economic and that we can develop it."
Completion of the plan of arrangement is expected to take place in September after Peregrine security holders and the Supreme Court of British Columbia approve the plan, along with other closing conditions.
Truter said it will take several years before mines are built following studies, permits, regulatory approvals and discussions with communities.
Nunavut an 'attractive region,' says CEO
The purchase will make Chidliak De Beers' fourth diamond mining site in Canada.
Truter said De Beers Canada has a good understanding of Nunavut.
"Some of the people we employ previously worked in that region. We know Nunavut is in favour of development. It's an attractive region, it's an attractive asset.," he said. "We have lots of experience of opening and running Arctic operations."
The Snap Lake Mine was the corporation's first diamond mine outside of Africa and is located 220 kilometres northeast of Yellowknife. It was Canada's first completely underground diamond mine and was placed into care and maintenance in December 2015.
De Beers Canada also co-owns the Gahcho Kué diamond mine, located on the tundra about 280 kilometres northeast of Yellowknife, which entered production last year.
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It also owns Victor Mine in the James Bay Lowlands of Northern Ontario, located approximately 90 kilometres west of Attawapiskat First Nation. It is an open pit mine and the first diamond mine in the province. De Beers Canada said it will be shutting down the operation in 2019.
With files from Teevi Mackay
