Bruce Cleaver. Picture: REUTERS
Bruce Cleaver. Picture: REUTERS

De Beers set its sights firmly on Canada as an area of growth, following its Gahcho Kué joint venture in the country with a C$107m ($81m) outright cash purchase offer of Peregrine Diamonds, giving it a very attractive deposit.

This will be another mine in the frozen northern reaches of Canada, an area in which De Beers has experience in building and operating mines.

The offer, which is backed by the company’s directors and shareholders representing 44% of the shares, comes as De Beers readies its Victor mine in Canada for closure.

De Beers closed and flooded its unprofitable Snap Lake mine in Canada, and Peregrine’s Chidliak deposit will go some way towards restoring De Beers’s presence in the country.

De Beers is in a joint venture with Canada’s Mountain Province at the Gahcho Kué mine, which has recently reached full production.

In a rare move by De Beers, the world’s largest source of rough diamonds by value, the 85%-held Anglo American subsidiary has embarked on corporate action to replace mined carats from its operations in Botswana, SA, Namibia and Canada.

Peregrine is the sole owner of the Chidliak prospect, which has an inferred resource of 22-million carats and needs about C$455m to bring into production, including a C$55m contingency and a 160km all-weather road to Iqaluit, the Nunavut capital.

De Beers will revisit the economics of the project, bringing its experience from Gahcho Kué in order to lower costs of building a mine.

Compared with Gahcho Kué, which has a grade ranging from 1.85 to 2.4 carats per tonne and a value of $60-$100 a carat, the most prospective kimberlitic pipe at Chidliak has an estimated 2.4 carats per tonne at a value of $151 a carat.

Cash flow

Studies by Peregrine show Chidliak would take 2.2 years to pay back its capital and have pretax cash flow of C$2bn over its 13-year life of mine.

"The Chidliak resource holds significant development potential and will be an exciting addition to our portfolio," De Beers CEO Bruce Cleaver said.

"With a strong outlook for consumer demand, we are seeking new opportunities to invest in our future supply potential and look forward to growing our portfolio in Canada and working with community partners in the Nunavut Territory as we further develop the project," he said.

Peregrine, which last traded at 16 Canadian cents, had a market capitalisation of C$71m.

De Beers is paying a premium for the company, offering 24c cash per share.

De Beers said the Chidliak prospect was "one of the most attractive undeveloped diamond resources in Canada".

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