Australian mining giant BHP Billiton (ASX: BHP) announced on Wednesday that it has agreed to sell its 51 per cent stake in the Chidliak diamond exploration project in Canada to Peregrine Diamonds (TSX: PGD).

With the decision, Peregrine will become 100 per cent owner of Chidliak, a diamonds exploration venture on South East Baffin Island in Nunavut. It covers 860,000 hectares of property about 140 kilometres from Iqaluit. Although Peregrine had run the mine since 2006, it held only 49 per cent of the venture.

Peregrine will pay BHP C$9 million over three years and grant the Australian mining firm a 2 per cent royalty on future diamond production from Chidliak. Both parties agreed to complete the transaction by end of January 2012.

"We are pleased to sell our interest in Chidliak to its natural owner. Peregrine has been a good partner and we believe they are a strong operator that is well positioned to advance this promising exploration opportunity," BHP Diamonds and Specialty Products President Tim Cutt said in a statement.

The sale is the result of BHP's review of its diamond business and decision to pursue only options that will preserve EKATI's outstanding safety and environmental standards.

Prior to the sale, Peregrine completed $6.083 million of its rights offering which it announced on Nov 1. It issued 7.156 million units of shares as part of the offering. So far, Peregrine has issued a total of 104.3 million common shares.

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