De Beers bids $107M for Peregrine

De Beers has tabled a friendly bid for Peregrine Diamonds (TSX: PGD; US-OTC: PGDIF) of 24¢ in cash per share that values the Canadian diamond exploration company at $107 million.

Peregrine has spent the last 10 years discovering and drilling out 74 diamond-bearing kimberlite pipes at its Chidliak diamond property on Baffin Island in Nunavut, 120 km northeast of Iqaluit.

In May, Peregrine updated the preliminary economic assessment for Chidliak and expanded resources in the key CH-6 and CH-7 kimberlites. The study increases total carats recovered at Chidliak by 44%, its mine life by 30%, and the project’s after-tax NPV by 44% compared to a 2016 PEA.

For an initial capital cost of $455 million, Chidliak is projected to produce 16.7 million carats over a mine life of 13 years. The project’s after-tax NPV is estimated at $679 million, with an after-tax IRR of 31.1%.

CH-6 contains an inferred resource of 17.96 million carats in 7.5 million tonnes grading 2.41 carats per tonne to a depth of 525 metres. CH-7 contains 4.23 million carats in 5 million tonnes grading 0.85 carat per tonne. CH-6 diamonds are valued at US$151 per carat and CH-7 diamonds at US$114 per carat.

The transaction has been unanimously recommended by Peregrine’s board and De Beers says it entered into voting support agreements with the directors and officers and certain security holders of Peregrine who collectively hold 44% of Peregrine’s shares. The deal is expected to close in September, if no other bids appear.

Meanwhile, De Beers reported second quarter production results that were highlighted by a 3% rise in companywide rough diamond production to 9.0 million carats.

The company says this reflected production increases to meet stronger demand plus the contribution from the now-completed ramp-up at the Gahcho Kué diamond mine in Canada.

As a result, De Beers’ Canadian production rose 17% in the quarter to 1.2 million carats. (De Beers owns 51% of Gahcho Kué, with Mountain Province Diamonds [TSX: MPVD; NASDAQ: MPVD] owning the remainder.)

Year to date at Gahcho Kué on a 100% basis, 3.57 million carats have been recovered at an average grade of 2.12 carats per tonne.

Botswana (Debswana) production rose 6% to 6.3 million carats in what De Beers calls a “response to stronger trading conditions” with Jwaneng production up 4% to 3.0 million carats due to an increase in tonnes mined and treated.

In South Africa, De Beers’ production fell 28% to 1.0 million carats, which the company attributes to a suspension at Venetia following a fatal incident in March.

For the first half of 2018, De Beers’ average realized rough diamond price rose 4% to US$162 per carat due.

For all of 2018, De Beers is still guiding production at 34-36 million carats.