Peregrine cashing up for diamond merger

Vancouver A financing tied to a proposed merger between Dunsmuir Ventures (DVV-V) and privately held Peregrine Diamonds is expected to provide about $40 million for the surviving entity to explore prospective diamond projects, mostly in northern Canada.

The proposed “business combination” allows Peregrine to acquire Dunsmuir on the basis of one of its shares for every 20 Dunsmuir shares, with warrants and options exchanged on the same basis.

Peregrine’s main asset is a 54.475% majority interest in the WO diamond project in the Lac de Gras region of the Northwest Territories (NWT). The land package includes the DO-27 kimberlite, which is known to be diamondiferous based on previous drilling and mini-bulk-sampling campaigns. The 9-plus-hectare kimberlite will be further tested with a large-scale bulk-sampling program this winter.

Peregrine’s other assets include interests in the IM, TW, Pellatt Lake and McKay Lake diamond properties, also in the NWT, and the Area 2/Arivat and Nanuq diamond properties in Nunavut.

Dunsmuir holds various interests in a number of properties in the Lac de Gras region, including some near the WO project, along with interests in the Nanuq and Nanuq North properties in Nunavut.

As part of the proposed deal, a syndicate of brokerage firms will arrange a private-placement financing that is expected to raise gross proceeds of about $40 million. The private placement is expected to close in mid-December of this year. The proceeds will be held in escrow until the business combination is approved at a special meeting of Dunsmuir shareholders, scheduled for January 6, 2006.

If all goes as planned, the new Peregrine will have 46.1 million shares issued and 15.2 million shares reserved for issuance. The new entity will be held 78.5% by existing Peregrine shareholders and 4.1% by existing Dunsmuir shareholders. The remaining 17.4% of shares will be issued to the private-placement investors.

Peregrine was founded by Eric Friedland, who will remain president and director. The company’s other directors and officers will also remain in place with the post-merger Peregrine. They include Alan Carter, Myron Goldstein, Peter Holmes, Jennifer Pell, Wendy Mathison, Jonathan Challis, Richard Cohen, Gordon Keep and Bernard Poznanski. Carter and Keep are also directors of Dunsmuir.