Saturday 1st October 2016

Resource Clips


Value-Packed

Pretium Hits Bonanza Grades in BC

By Ted Niles

Gold and silver equities continue to disappoint, but Pretium Resources and its Brucejack and Snowfield gold-silver projects are a conspicuous exception. Pretium—or Pretivm as the company prefers it to be spelled, the better to evoke the word’s Latin meaning of ‘value’—made its initial public offering of $6 per share in December 2010. Eight months later, shares have risen 48%. On August 12, Casey Research’s Louis James lauded Pretium as “a clear value proposition.” On July 18, analyst Brian Quast announced that CIBC World Markets had initiated coverage of the company, commenting, “Pretium represents one of the best call options in the gold developer space.” And while Face the Analyst’s Jay Taylor can’t actually be seen swooning during his July interview with Bob Quartermain, it should be noted that the camera isn’t always on him.

How to explain Pretium’s highly auspicious rollout? Louis James gives us the first reason: Pretium has “the right people in place.” The most important being Bob Quartermain, Pretium’s President and CEO. Quartermain earned his reputation with Silver Standard Resources—a company which, when he joined as President in 1985, had a market cap of $1.5 million; this exceeded $2 billion when he retired in 2010. Most notable of his accomplishments at Silver Standard was the development of the Pirquitas Mine in Argentina. Pirquitas started commercial silver and tin production in December 2009 and ranks among the largest silver mines worldwide. Notice, too, that Quartermain’s current management team at Pretium includes many of his Silver Standard colleagues.

Pretium Hits Bonanza Grades in BC

The second reason, as you might have guessed, is the resource. Pretium acquired the Brucejack and Snowfield projects—both located 65 kilometres north of Stewart, BC—from Silver Standard with the proceeds of its December IPO, and the properties’ already impressive resources were updated by Pretium in February 2011. At a 0.3 g/t cut-off, Brucejack contains 8.18 million ounces gold and 116.2 million ounces silver measured and indicated, and 12.56 million ounces gold and 151.2 million ounces silver inferred. At the same cut-off, Snowfield contains an astonishing 25.92 million ounces gold, 75.8 million ounces silver and 2.98 billion pounds copper measured and indicated, as well as 9.03 million ounces gold, 50.9 million ounces silver and 1.1 billion pounds copper inferred.

Thus was Pretium able to IPO at the price that it did. Quartermain explains, “In consultation with our financial advisors, the suggestion was that this was a reasonable share price. It’s a function of the value we had in it. The asset, with the 40-somewhat million ounces of gold justifies the price, and the market was willing to pay for it.”

He continues, “With the Brucejack and Snowfield projects we have one of the world’s largest undeveloped gold projects—about the fifth-largest in North America. That’s what we wanted: a large project that gave our shareholders insurance in a rising gold environment. As gold prices continue to stay strong and improve there will be more recognition coming to Pretium because of the large in-ground resource we have, and the potential for the development of a small high-grade project going forward.”

Brucejack, particularly that “high-grade project” contained within it, is now the focus of Pretium’s attention. A June 2011 preliminary economic assessment of the high-grade resource estimated production of 173,200 ounces gold and 1.12 million ounces silver annually for the first 10 years, with a total mine life of 16 years. The pre-tax net present value of the resource was estimated at $662 million, with an internal rate of return of 27.1%—assuming a gold price of $1,100 per ounce and a silver price of $21 per ounce. Capital costs would be $281 million.

The importance of the high-grade aspect of the project cannot be overemphasized, as it offsets the drawbacks of Brucejack’s location. As Louis James told the Gold Report, “I had been aware of Snowfield/Brucejack when it was still in Silver Standard. We never bought because we just weren’t sure a mine would ever actually get built in this remote part of the world, especially with the low grades. But when you have really high grades, you can build a mine anyplace. Places like Eskay Creek were once very remote, but average grade was over an ounce per ton. That’s what it took to operate in that area. Grade solves a lot of problems, and Brucejack certainly has that potential.”

With the Brucejack and Snowfield projects we have one of the world’s largest undeveloped gold projects—about the fifth-largest in North America —Bob Quartermain

Pretium is undertaking a 70,000-metre drill program, consisting roughly 80% to 90% of infill drilling, which Quartermain expects to be finished no later than October. He says, “Once all that drilling is completed, we will then go through it and do a new resource calculation; both a high-grade resource calculation of the Brucejack area, as well as a resource on the bulk-tonnage, one-gram material surrounding the high grade. With those two resources, which we hope to have 4Q 2011 or 1Q 2012, we would go back and update the preliminary economic study on Brucejack.”

August 22 assays from Brucejack’s Valley of the Kings zone include 2,810 grams per tonne gold and 1,030 g/t silver over 0.5 metres and 1,094 g/t gold and 263.5 g/t silver over 2 metres. August 11 assays include 6,670 g/t gold and 3,630 g/t silver over 0.5 metres, 1,640 g/t gold and 423 g/t silver over 0.5 metres and 1,200 g/t gold and 686 g/t silver over 0.5 metres. July 27 assays included 4,060 g/t gold and 1,660 g/t silver over 0.5 metres and 1,070 g/t gold and 255 g/t silver over 0.5 metres. June 8 results included one interval of a whopping 18,755 g/t gold and 9,312 g/t silver over 0.6 metres. Quartermain remarks, “We’re very encouraged by the results. We continue to have high-grade, visible-gold hits in the Valley of the Kings. They are showing that we are getting some continuity of this high-grade mineralization, which will certainly help in supporting a high-grade underground operation at Brucejack.”

Regarding production, Quartermain admits that Snowfield would require “a much bigger partner.” But as for Brucejack, “With the management team that has come over in part from Silver Standard—and with the work we did at Silver Standard previously in building the Pirquitas mine—the construction and building of the high-grade opportunity at Brucejack is certainly something that we have the capacity to do.”

“If someone were to approach us about the opportunity of partnering up in the high-grade, we’d certainly look at that,” Quartermain says. “We’ll see how the project evolves.”

Quartermain concludes, “I’m very encouraged. I entered into negotiations with Silver Standard to buy the property in October and basically purchased it in December. We’ve been working on it a little more than six months, and during that time we’ve increased resources by 35% and have had some of the highest gold intersections on the property to date. And, fortunately, with the money we raised on the IPO and a small flow through we did in July, we have all of the cash that we need to drill the project this year and hopefully advance it almost through to feasibility next year. We don’t have to go back to the market in the near term, so we can manage shareholder solutions. In that respect, we’re protected from the volatility of the market.”

At press time, Pretium had 86.9 million shares trading at $9.85 for a market cap of $855.6 million.


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