Nunavut diamond play

Oct 21st, 2009 – Comment

Interesting case with Peregrine Diamonds Ltd. ( PGD TSX). It has had a huge run since July of 2008 and I think the question you are asking is do trees grow to the sky?


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peregrine1Lou,

Could you look at the activity of PGD. it had really good news last month but then fell back 50 %.

Do you like this stock ?

Betty

London, Ontario

Hi Betty,

Interesting case with Peregrine Diamonds Ltd. ( PGD TSX). It has had a huge run since July of 2008 and I think the question you are asking is do trees grow to the sky? No they don’t.

pgdThe driving force that has pushed the value of the stock has been the activity on their Chidliak property on Baffin Island. The company discovered kimberlites at Chidliak in 2008.

The name of the game from here on in is drilling the heck out of these targets at Chidliak and then seeing if the resource can sustain the funding of a mine. Peregrine is developing Chidliak with BHP Billiton which will earn a 51% stake in the project for spending $22.3M developing the opportunity to a bankable feasibility study.

PGD has interests in other properties but at this point I would say that Chidliak is in the center ring.

The three year chart indicates the trend reversal from a sell off that started in July of 2008 with the discovery of the first kimberlite at Chidliak. The new support level at $0.50 was established when BHP backed into the property in November of 2008.

The big spike to the $4.65 high was driven by some of the results of the 2009 exploration program funded by BHP such as the discovery of new kimberlites bringing the total to 16.

The three month chart provides a better view of the the most recent action on the stock. The move started on September 14 with the news release announcing that seven new kimberlites had been discovered. On September 21 news that large diamonds had been recovered just added fuel to the fire.

pgd2In addition the company was featured in a report by John Kaiser in the August 6th edition of his Bottom Fish Action report which was cited in the Northern Miner. If you want to get people interested in a mining play these would be two places to circulate the story.

The RSI on the three month chart shows that the stock got overbought as the excitement over the news made the rounds. When a stock gets overbought you tend to see a pull back from the frenzy as investors refuse to meet the accelerating price.

The chart is also another good example of a pennant formation with a big stick and a flag at the end. Typically you will see a return to the upside once the pattern is complete.

A junior mining stock with a senior partner funding additional work on its main area of interest, other properties in various stages of development, exposure through highly regarded sources, and a pennant formation. Yes Betty I like the stock but please keep in mind that it is a junior exploration company with a tiger by the tail and that you have to expect volatility on the trading action.

MAKE IT A BIG HALLOWEEN AND HAPPY CAPITALISM!

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