Most gold investors are by now familiar with Pretium Resources’ (TSX:PVG,NYSE:PVG) Brucejack project in Northern British Columbia. And why shouldn’t they be? With an average grade of 17 grams per tonne, the deposit is definitely one to write home about.
To get beyond the glitz and glamor within the rock faces at the Valley of Kings, located north of Stewart, BC, Gold Investing News spoke with Pretium’s CEO, Robert Quartermain, who is setting out to do what he originally planned, even before Brucejack became his flagship project: add value.
It started with a name
A simple question that at first seemed frivolous revealed the entire thesis behind Quartermain’s company: “why is there a ‘v’ in Pretivm?”
Quartermain’s answer was simple. After 25 years of heading Silver Standard Resources (TSX:SSO,NASDAQ:SSRI), he understood the importance of creating shareholder value. That led him to Google.
“I Googled ‘value’ in Latin and the word pretium came up,” Quartermain explained. “I thought, well in Latin they really didn’t have a ‘u,’ they had a ‘v,’ so let’s put the ‘v’ back in for value.”
And sure enough, a company name was chosen. Now for a project.
It’s all about perception
Quartermain’s mining industry experience dates back to the 1970s, when he worked up in the Northwest Territories (now Nunavut) at Baker Lake, exploring for gold and uranium. After his time in the Great White North, Quartermain finished his Master’s degree at Queens and ended up working at the Hemlo gold discovery, drilling off the David Bell mine.
Though Quartermain did catch his big break at Hemlo, he understands the nature of being an exploration geologist. “I spent a lot of my career drilling for failure,” he explained, adding that as an exploration geologist, “we hope that we will achieve and find a mine, but part of the challenge is knowing when to stop.”
So the 5-kilogram-per-tonne drill hole at Brucejack caught Quatermain’s eye; he knew it was not time to stop. Quartermain raised $450 million to buy the Brucejack and Snowden properties from Silver Standard, all based on one thing: perception.
“It’s a perception of having failure in drill holes for so much of your career that you know when to stop drilling and what can make value,” Quatermain explained, also commenting, “you can’t have that kind of high-grade gold in isolation.”
Success does not happen overnight, and when it does happen, maintaining it can be difficult. Unlike many companies, Pretium fared well in the first half of 2013, reaching a high of $10.67 in the summer months. However, by October, a disagreement over testing methods for underground drill results rattled investor confidence; the result was a severely downed share price and two class action lawsuits against the gold exploration company.
While many other companies might not have survived a share price drop from $10.67 to $2.83, Pretium weathered the storm and has managed to climb back up over $7.
When asked his secret to keeping calm throughout that swing in share price, Quartermain chalked it all up to perseverance. “I think it’s the maturity of being in the business as long as I have and understanding the cyclical nature of the markets and some of the things that can come up,” he explained, adding, “it’s a matter of understanding that there can be many aspects about this business, sometimes outside of your control, that you just have to be able to manage.”
Furthermore, Quartermain noted that despite some of the challenges the company has faced in terms of interpretation, there was never a question that there’s gold at the Valley of the Kings. “There is lots of gold here,” Quartermain emphasized, also stating that “those are the things, at least from a science point of view, that keep you going forward.”
For Quartermain, “as long as you focus on the science, have good individuals around you as part of a team, you can continue to move forward. And I think that is why we continue to attract a good price even at this point in time.”
With every intention of moving the Brucejack project along in its development, Pretium has submitted its permit applications to both the provincial and federal governments, and anticipates a decision next spring. To fund the construction of a mine at Brucejack, the company will be looking to raise a sizeable chunk of money — roughly $700 million.
While at first glance raising that much money in the current market might raise some eyebrows, Quartermain noted that Pretium is raising its market cap or less. Furthermore, he insisted that the company is carefully weighing out the best mixture of equity and debt to plan into the financing.
Speaking to his ability to raise the $700 million required to move the project forward, Quartermain highlighted that he has the experience and the know how to raise the necessary funds. “We raised the money to buy [Brucejack],” he said, speaking about himself and chief development officer Joseph Ovsenek’s original financing to purchase the project from Silver Standard.
For investors still doubting Pretium’s potential, it is not difficult to find some positive feedback from analysts and portfolio managers.
In fact, in a recent Gold Report interview, US Global Investors portfolio manager Ralph Aldis shared his two cents, stating that “Brucejack is going to be a mine. This is the real thing. It’s just going to take time. It’s going to have a small mine footprint but be very profitable.”
Likewise, in a separate interview, David H Smith, senior analyst with David Morgan’s Morgan Report, commented that Pretium is “[o]ne of the most exciting exploration stories in the world” adding, “[w]hen Pretium collapsed last year it didn’t bother me much—I bought it after it lost half of its value. It has reclaimed all of that and is hitting new intermediate highs.”
Indeed, with the efforts of Pretium’s team, investors are certain to see Brucejack become one of the highest-grade mines in the world.
Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned.