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RAPAPORT... Peregrine Diamonds completed an option and subscription agreement with De Beers Canada whereby De Beers has the exclusive rights to enter into an earn-in and joint-venture agreement with Peregrine on the Chidliak diamond project. Under the joint venture, De Beers will be the project operator and undertake mineral exploration and development work potentially leading to the completion of a feasibility study and, if warranted, the construction of a diamond mine. As consideration for the option, De Beers will complete a $2.5 million private placement unit offering in Peregrine priced at 75 cents per unit. Each unit will consist of one common share and one-half share purchase warrant, with each whole warrant entitling De Beers to buy a common share in Peregrine for $2 per share for a period of 24 months. In addition, De Beers will make a $2.5 million payment to BHP Billiton Canada in January on behalf of Peregrine, which agreed to purchase the controlling interest in Chidliak from BHP. Both the private placement and the payment to BHP will be credited towards De Beers' earn-in requirements. Should De Beers decide to exercise the option, Peregrine and De Beers have agreed on the material terms of the joint venture, in it, De Beers is required to invest $58.5 million in Chidliak to earn a 50.1 percent interest, with a minimum work commitment of $37 million. De Beers is to finance all work at Chidliak from when they enter into the joint venture until the completion of the feasibility study, inclusive of appropriate environmental impact studies. Peregrine is to reimburse De Beers 49.9 percent of all Chidliak costs in excess of $58.5 million, the point at which De Beers has earned its interest, to completion of the feasibility study. Reimbursement will consist of an aggregate of $25 million payable in four escalating staged payments at certain milestones. Should De Beers exit the venture prior to completion of the feasibility study, Peregrine can purchase De Beers' unencumbered earned interest in Chidliak for De Beers' expenditures, less $20 million. Both De Beers and Peregrine hold mutual preemptive rights over the sale of any interest in Chidliak. Each participant is to retain diamond-marketing rights for their respective share of production. Eric Friedland, Peregrine's chief executive, said, ''When we began discussions with potential partners for Chidliak last March, our principal objective for any future joint venture transaction was to ensure certainty of finance, in a manner that minimized share dilution to Peregrine's shareholders, for completion of a NI 43-101 compliant, bankable feasibility study. We also wanted to ensure that the extensive work leading up to and including the bankable feasibility study would be conducted in a professional, comprehensive and timely fashion. I'm very confident that these objectives will be met should our new partner, De Beers, the world's most technically proficient, diamond-mining and marketing company and a household name in the diamond industry for the past 124 years, decide to enter into the Chidliak Joint Venture.'' Tony Guthrie, the chief executive of De Beers Canada, said, ''We see Chidliak as an exciting prospect and complementary to our existing pipeline of diamond operations and projects, which are the most comprehensive in Canada. With 50 years of experience in Canada, we look forward to bringing to bear our extensive knowledge of diamond exploration and mining as we work with Peregrine's professional and experienced management team.''
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