BHP decision drives Peregrine drop

TORONTO – Shares of Peregrine Diamonds fell 8 per cent on Thursday, a day after BHP Billiton elected not to raise its stake in their joint venture, driving the Canadian miner to pump in more money into the project.

Under the JV, mining giant BHP earned a 51 per cent interest in the Chidliak project on Baffin Island in Nunavut, Canada by spending $US22.3 million.

BHP had the option to raise its stake by 7 per cent by funding the project until it reached a feasibility study stage. However, BHP opted to keep its stake at 51 per cent.

Vancouver, British Columbia-based Peregrine had raised $US10 million last month to fund its other projects like the Nanuq diamond project in Nunavut and the Lac de Gras property.

"If BHP had elected to go to a higher ownership level, then Peregrine could have used that cash to explore some of their other properties. But now they will have to use it for Chidliak," said Rodney Cooper, an analyst with Dundee Securities.

Mr Cooper said the minerals and precious gems explorer has set an exploration budget of $US15-$US16 million for next year.

"Our 49 per cent interest （in Chidliak） positions us ideally to build a new type of diamond company, maybe something like a Harry Winston," Peregrine's president Brooke Clements said at a mining conference in Toronto.

He said that Peregrine was looking to become a mine-to-retail type of producer along the lines of Harry Winston Diamond Corp .

Thus far, 50 kimberlites have been discovered at Chidliak, 24 of which contain diamonds. Six kimberlites are considered economically viable, and an aggressive exploration program has been slated for 2011.

"I have never seen a project where so many kimberlites have been discovered at the same time," Ms Clements said.

Peregrine shares, which have doubled in value in the past year on the finds at the Chidliak project, were down 5 per cent at C$2.81 in late morning trade on the Toronto Stock Exchange.

They had earlier touched a low of C$2.72.