Spec Value Hunter Comment - November 8, 2011: Peregrine rights offering pushes fully diluted to 136 million
Eric Friedland is not taking any chances that dud results for the CH31 kimberlite and yearend tax loss selling will see Peregrine Diamonds Ltd head into a major bulk sampling for grade program in 2012 with a weak treasury. On November 1, 2011 Peregrine announced a rights offering which will raise $11,793,444 if fully subscribed by the expiry December 6, 2011. The junior still had about $16 million working capital as of June 30, but it is not clear how much will be left by the time the 2011 program wraps up. One right will be issued for each share, and it will take 7 rights and $0.85 to buy 1 unit consisting of 1 share and and a half warrant exercisable as one warrant plus $2.00 to buy a share until December 6, 2013. The stock goes ex-rights on Wednesday November 9, 2011 and will most likely settle back to the $0.85 level as arbitragers scoop rights being dumped by American shareholders if any apart from me exist. (American residents are never eligible to exercise a Canadian rights offering because this would infringe on Wall Street's exclusive right to poison Americans with its self-serving fraudulently packaged concoctions. Hey Jon Corzine, how could you be so incompetent as to not know that $633 million of supposedly segregated client funds was actually parked in a single custodial account at JP Morgan? Or that nobody in your organization could pipe up to quell rumors that this money was missing, possibly blown through naked wrong way bets on eurobonds? Oh, hold it, you can't be incompetent, you used to run Goldman Sachs and you were a senator, a guardian of the public interest! I do hope there is a plausible paper trail as to how that "missing" dough wandered from your clients' accounts into that JP Morgan account, and that this is not just an example of Wall Street passing the hat to keep Occupy Wall Street from having one more reason to disinfect this pestilence which is smothering the world with its heads I win tails you lose mentality. Nice of Corzine to remind us that Democrats are to be no more trusted than Republicans; how easy it is to forget that Clinton's man Robert Rubin was a Goldman Sachsman who paved the road for systemic looting. For those of you inclined to dismiss the "occupy" movement, be aware that this is not a rerun of the sixties "trust fund" brats meshed with junkies and the homeless, but an explosion of understanding of how the system has been rigged for the benefit of the trust fund generation, an awareness that is seeping into the consciousness of victims past, present and future whose growing rage to contain the Media Matrix will have to pull the plug on itself.) In any case, Peregrine's dreary stock price is only partly due to the pall the free market neoliberal titans with their Tea Party bootlickers in tow have inflicted on the world; not so great results from the 2011 exploration program are also to blame. The rights offering will result in 13,874,640 shares being issued, with the warrants boosting over all dilution by 20,811,960 shares to bring fully diluted to 135,982,770 shares. Although the offering is not guaranteed, it will likely get fully excercised even if the stock price hovers at or slightly below the exercise price during the next 30 days. Peregrine's backers have sunk quite a bit of capital into this play, and as far as I can tell, most have held their positions for the "big score". And then there are those with a Peregrine Metals windfall and no Peregrine Diamonds paper. As Chidliak now stands it doesn't look like it is a candidate for a "big score" requiring mobilization of Eric's shoe, but when 10 year treasuries are yielding less than 2%, a double to triple over the next couple years is nothing to sneer at. My recommendation is that those who are eligible take advantage of the opportunity to average down and get some warrants. By Q1 of 2012 the focus will be on establishing the value of the main kimberlites, and perhaps we will even have a deal that gets rid of BHP Billiton before Peregrine's team finds something that truly qualifies as a "Big Score", something that has eluded BHP since the early days when Chuck Fipke instructed BHP to "dig here" at Ekati, and the higherups subsequently grumped, "where is Jwaneng". Keep in mind that the only reason Chidliak is a diamond play is because BHP let a DO27 blown up junior use its own nickel to chase after a handful of scattered indicator minerals. I didn't expect this rights offering, so my switch to a Good Relative Spec Value Buy at $1.14 was clearly a little early, but I would be very surprised to see Peregrine Diamonds trade much below $0.85. And CH31 may still surprise us!
*JK owns shares in Peregrine Diamonds Ltd