Peregrine Diamonds teams up with old Africa hands in Botswana
In its first meaningful venture in diamond exploration outside of North America, Peregrine Diamonds (TSX: PGD) expects to be drilling kimberlite targets in Botswana
before the end of the year, thanks to the collective wisdom of three exploration geologists whose previous careers at De Beers spanned more than half a century.
At the end of March, Peregrine acquired Diamexstrat Botswana and the privately held company’s eight diamond prospecting licenses in Botswana. Under the deal, Peregrine secures a foothold over 5,746 sq. km of ground in a country that is the world’s largest diamond producer by value, in exchange for a 1% gross overriding royalty and the assumption of $450,000 of the private company’s debt. The agreement also gives the Diamexstrat team a services agreement to do the exploration for Peregrine, which Peregrine funds.
“The experience and expertise that the DES group has got in Botswana diamond exploration is, in my opinion, second to none,” Tom Peregoodoff, Peregrine’s president and CEO, tells The Northern Miner. “They know where further work, with modern sampling techniques, has a chance to be successful.”
Peregoodoff says there are some areas where all they need to do is some basic ground magnetics to position the airborne magnetic targets they have identified, and “assuming we can get the required permitting done, I don’t see why we won’t be drilling this year.”
Diamexstrat Botswana’s parent company, U.K.registered Diamond Exploration Strategies, is headed by Barry Bayly, a farmer’s son who grew up in central South Africa and studied geology at the University of Cape Town.
He joined De Beers shortly after graduating, where he spent the next twentyeight years, holding senior positions including general manager exploration for southern Africa, India and Australasia, and general manager of the firm’s Marine division. Bayly was part of the exploration team that discovered De Beers’ Venetia kimberlite, as well as the Palmietgat, Marsfontein and The Oaks kimberlites.
Bayly’s colleagues at Diamexstrat are similarly well qualified to find diamonds. Executive directors André Fourie and Mike Shaw have spent the majority of their careers focused on diamond exploration in Africa.
Fourie, born in South Africa, studied geology at South Africa’s University of Stellenbosch and has a graduate diploma in mining engineering from the University of the Witwatersrand in Johannesburg. He has worked for more than 23 years in mineral exploration, twelve of them for De Beers. Shaw, a Brit who has lived in South Africa since the age of eleven, and is now a Botswana resident, spent twelve years of his nineteenyearcareer in diamond exploration at De Beers, after studying geology at South Africa’s University of Natal.
“We have a very creative team of geologists,” Bayly says in a telephone interview from Cape Town. “We’ve been working for about six months now looking at data and geophysics and identifying specific targets that we think we could be drilling in the next six months.”
Bayly explains that a lot of the time, kimberlites are not discovered on the first pass, and points to De Beers’ Venetia kimberlite, which wasn’t located until 1980, as an example. “De Beers was working in the same area in the 1950s and prospected over the same area and didn’t find it,” he says.
The geologist also notes that about 70% of Botswana is covered by the Kalahari Desert, which has masked prospective targets. But with advances in technology, he says, geological teams can go back and have a better chance of finding diamondbearing kimberlites.
“With geophysics advances — the faster the computers get the more sensitive they are — our techniques improve at the same rate, so there’s a lot of potential to go back to areas that previous geologists had looked at,” he explains. “We can look at old data — not just from De Beers — a lot of other people have done good work there too. And if the work was done in the 1980s, for example, we know what to expect from the results and can see what might be missing.”
Bayly, Fourie, and Shaw have examined data and geophysics compiled over a quarter of a century of diamond exploration drilling and sourcekimberlite data for Botswana from publicly available sources and have identified specific targets that look promising.
“There are targets that have been explored to an advanced point and haven’t been drilled for various reasons,” Bayly says, “and we believe these are very good targets and that we should go ahead and fasttrack them.”
The team applied to the government for licenses four or five months ago, and received them without any issues. “That’s what we expect from Botswana, it’s a very organized country to work in,” he says, adding that it is “what we in the business call proven elephant country where it’s proven to produce not only rich diamond mines, but also big ones.”
“Our strategy is to go after worldclass deposits,” he continues, “things that are going to make a big difference.”
Diamexstrat chairman Gerard de la Vallée Poussin also brings fifty years of experience in African mineral and petroleum resources to the table. Initially employed by De Beers and Anglo American in west and central Africa, de la Vallée Poussin also developed African markets for crude oil and refined oil products.
De la Vallée Poussin was born at a gold mine in Tanzania that his father discovered in 1934 and subsequently developed. (His father, Jean de la Vallée Poussin, was dispatched to Africa by the Belgian government in 1929, and was one of the first geologists to map north Kivu in the Democratic Republic of Congo.)
“I’m not a geologist, but in the 1960s, at the age of twenty, I started off at De Beers’ diamond buying offices in West Africa, places like Sierra Leone, Liberia, Ivory Coast, and Brazzaville, Congo,” he says. Among his earliest jobs was personal assistant to Sir Philipp Oppenheimer in London, and responsibility for De Beers’ office in the DRC, where his duties included liaising with local governments and looking after logistics.
“I started in diamonds and moved on to copper and was taken away from De Beers in 1970 and plunked into the start up of Anglo American’s Tenke Fungurume,” he recalls. “I was responsible for establishing the company there — permits, liaison with local government — and at that time, Tenke Fungurume was the largest undeveloped copper mine in the world, so it was a huge challenge and provided me with precious experience.”
He left Anglo American (NASDAQ: AAUK; LSE: AAL) in 19751976 and joined commodity trading firm Philipp Brothers, also called Phibro (“One could say that Marc Rich, Glencore and Traafigura were all fathered by Phibro,” he says), where he worked for about a decade developing and sourcing African oil, and then managing the Phibro Energy London office.
In 1985 de la Vallée Poussin started his own commodity trading company with two former Phibro colleagues, before cofounding Swala Resources, which he sold to Concordia in 2012. He resigned from Concordia’s board when it in turn was sold and became Kaizen Discovery (TSXV: KZD).
“He is an old Africa hand and one of the first oil traders in Nigeria after OPEC’s creation,” Peregrine’s Peregoodoff says. “He is a fantastic guy to help you work your way through the myriad issues an explorer might face in Africa, but fortunately ones we don’t think we’ll face in Botswana, given its stable investment climate and ranking as the world’s largest producer of diamonds by value.”
In a telephone interview from his farm near Coutisse, about 69 km southeast of Brussels, de la Vallée Poussin says his role is to orchestrate Diamexstrat’s strategy, liaise with politicians and regulators, and find the money. He believes the royalty model suits the company better than trying to raise equity.
“We get a royalty buyout in the event of a discovery and we get a management or service contract,” he explains. “Barry and I determined that seeking equity was not the way to go in the current market conditions for exploration juniors. The better thing to do is to make sure we had people dedicated to work without fear and find someone sufficiently funded [like Peregrine] to finance the project. To entice them, we didn’t offer them a buyin, we will do all the hard work to start with, and determine where the projects are, in return for which, we will offer them 100% of the project, but they give us a management contract and royalty with a buyout right.”
De la Vallée Poussin acknowledges that the model is “not something many other companies have done,” but is advantageous “because we don’t have to dilute shareholders or have to worry about an exit.”
“In Peregrine we found a kindred spirit, because their geologists share our view that there is enormous potential in the chosen areas,” he says. “Peregrine’s technical team is led by recently appointed vice president of technical services, Dr. Herman Grutter, and his mineral chemistry experience and industryrenowned skills in assessing cratonscale, multidisciplinary diamond exploration data sets, are an excellent complement to the DES team.”
As for Botswana, de la Vallée Poussin says, one couldn’t pick a better country in Africa in which to do business. “It’s a fantastic place,” he says. “It’s refreshing to operate in a stable and structured environment where you’re not going to get trapped down the road with some unexpected demand.”