Financing opportunities are hard to come by, particularly for junior companies far from production, which could explain why Peregrine Diamonds’ (PGD-T) shares have been climbing since the firm announced a $10-million financing on Oct. 25.
The Vancouver-based junior, led by Eric Friedland, added nearly 30% in two days after the CEO’s well-known older brother Robert and mining legend Ned Goodman said they would team up to take down 20 million Peregrine shares at 50¢ apiece.
Robert Friedland’s wholly owned company, Newstar Securities, is set to purchase 16.4 million of these shares, with Goodman’s Dundee Corp. (DC-T) taking the remaining 3.6 million shares.
Once the financing is complete, Newstar’s will own 13.2% of the company, and Dundee’s stake in Peregrine will rise to 18.1%.
“Robert and Ned are two of the best mining financiers in the world, and they will provide invaluable support as we move forward with De Beers to confirm a diamond mine at Chidliak,” Eric Friedland says in a statement.
The $10-million cash injection should allow the junior to cover its general costs and planned exploration activities through mid-2014, including a $2.5-million payment due to its former joint-venture partner BHP Billiton (BHP-N).
Last December, Peregrine agreed to buy BHP’s 51% stake in the Chidliak diamond project in Nunavut to bump up its ownership to 100% by paying $9 million over three years. It already has given BHP $1.5 million to close the deal, and needs to hand over $2.5 million every Jan. 31 in 2013, 2014 and 2015.
BHP has a 2% production royalty on the project, with Peregrine retaining the right to match any third-party offer if the major decides to sell all or part of that royalty.
To help meet its commitment with BHP, Peregrine signed an option and subscription agreement with De Beers in September.
As part of that contract, De Beers — which has the exclusive right until Dec. 31, 2013, to enter a joint-venture agreement and earn in 50.1% of Chidliak — completed a $2.5-million private placement with Peregrine in mid-October for 3.33 million units priced at 75¢ apiece. Each unit comprises one share and a half warrant, with each full warrant allowing De Beers to buy a Peregrine share for $2 over two years.
De Beers is also required to cover Peregrine’s $2.5-million payment due to BHP on Jan. 31, 2013.
This payment and the private placement will be credited towards De Beers’ earn-in requirements, where it can own 50.1% of Chidliak and become the project’s operator by investing $58.5 million within five years of entering the agreement.
De Beers is also responsible for completing a bankable feasibility study at Chidliak, including environmental impact studies to evaluate the feasibility of commercial diamond production.
Meanwhile, Peregrine is preparing to collect its first bulk samples from up to six kimberlites at the Chidliak project, located 120 km from Iqaluit, Nunavut’s capital city.
On the financing news, the junior gained 19% to 44¢, and on the following day rose another 10% to close Oct. 26 at 48.5¢.
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