A good bit of the excitement in Nunavut's mining sector this summer is being generated by Peregrine Diamonds Ltd. at the Chidliak Project on Baffin Island. The junior's 2009 exploration program of the 9,800-square-kilometer, or 3,784-square-mile property got underway in May. It is drawing significant industry attention, not only because of the hefty $9.2 million that partner BHP Billiton forked over to fund the gambit, but also because it offers the possibility of a major diamond discovery.

BHP, which owns most of the huge Ekati Mine in Northwest Territories, knows what a good diamond prospect looks like and the major likes what it sees at Chidliak. It committed to spend $22.3 million to earn 51 percent interest in the project, and it can gain another 7 percent stake by funding a feasibility study.

For Peregrine, the backing is a godsend in the current recession that enabled the Canadian junior to forge ahead at Chidliak with plans for core drilling, bulk sampling, mineral sampling, magnetic and geophysical surveys, and construction of a second 24-person camp as well as initiation of environmental baseline studies.

Promising diamond indicators

The earliest kimberlites were discovered on Baffin Island in the 1970s, but Chidliak is located 800 kilometers (497 miles) away from them in an unrelated area, according to Jennifer Pell, Peregrine's chief geoscientist.

"It's only 700 kilometers (435 miles) from kimberlites discovered in Greenland," Pell told a Toronto audience in March.

Peregrine began exploring the area in 2005 and has conducted sampling programs every year since. Last year, it enlarged the prospect and discovered three diamond-bearing kimberlites, CH-1, CH-2, and CH-3, at Chidliak.

Pell said the diamond-bearing kimberlites appear to be younger than 475 million years and younger than other kimberlites found in the Arctic.

She said the sampling density is still low at Chidliak, but samples taken so far have more than 10 percent G10 garnets and a significant number are above the graphite diamond stability line. A key goal for the junior this summer will be to increase the sample density

"It's really exciting, the variety and amount of materials these kimberlites have brought to the surface," she said.

A 2.28-metric-ton sample collected from CH-1 returned a diamond content of 1.56 carats per metric ton for diamonds caught on a 0.85-mm screen. It also yielded a 2.01-carat, gem quality, octahedral diamond. Based on its geophysical signature, the estimated surface expression of CH-1 is six hectares.

"CH-1 has the potential for more than 1 carat per metric ton, much larger than Ekati and as big as Lac de Gras," Pell said. "Chidliak has the potential to host a significant diamond discovery."

Much more to learn

About 170 kimberlite-type geophysical anomalies were identified from an airborne geophysical survey done in 2008 over less than 15 percent of the property. Many of the anomalies are associated with kimberlite indicator mineral trains.

The 2009 Chidliak exploration program will further evaluate the known kimberlites, drill-test high priority kimberlite-type targets and to prepare for a substantial 2010 exploration program by expanding the till sample coverage and by prospecting and geochemical sampling of at least 100 of the known geophysical anomalies.

High priority, kimberlite-type geophysical targets will be drilled and about 500 meters of core drilling is planned for each new kimberlite discovery. The CH-1 kimberlite will be evaluated by core drilling and consideration will be given to drilling the CH-2 and CH-3 kimberlites this season.

Exploration this year will involve up to 50 people, two helicopters, one core drill and some excavation equipment. A 50-metric-ton mini-bulk sample will be collected by trenching from CH-1and processed in the lab to recover commercial-sized diamonds.

BHP Billiton has the right to modify the approved budget.

Exploration at other prospects

In February, Peregrine received approval for 86 prospecting permits bordering Chidliak. The new permits, totaling 13,000 square kilometers, or 5,019 square miles, comprise a new property named Qilaq. This summer, Peregrine plans to evaluate Qilaq's diamond potential by collecting about 600 till samples and analyzing them for kimberlite indicator minerals.

Peregrine said it also will spend $1.5 million exploring the 3,140-square-kilometer, or 1,212-square-mile, Nanuq property, about 275 kilometers, or 171 miles, north of Rankin Inlet in Nunavut. The junior holds a 100 percent interest in Nanuq subject to a 2 percent gross overriding royalty payable to BHP Billiton.

Peregrine discovered three diamondiferous kimberlites at Nanuq in 2007 but a number of geophysical anomalies, some of them larger than five hectares, have yet to be tested. The 2009 exploration program is set to begin in early July.

The 2009 program will increase the kimberlite indicator mineral sample density on Nanuq and field-check priority geophysical targets.

Nanuq is immediately south of the Nanuq North property, which is currently funded on a 50-50 basis by Peregrine and Indicator Minerals. The Hunter Exploration Group owns 20 percent interest in the project, and a gross overriding royalty of 2 percent on any revenues generated from 16 claims covering 139 square kilometers, or 54 square miles, while Peregrine and Indicator each hold 40 percent interest in the 16 claims. Hunter's 20 percent interest is carried through completion of a scoping study.

Peregrine and Indicator each have an undivided 50 percent interest in Nanuq North's remaining 192 square kilometers, or 74 square miles, and Indicator is the project operator.