Investors interested in gold development companies are no doubt familiar with Pretium Resources (TSX:PVG) and its substantial, high-grade Brucejack deposit north of Stewart, British Columbia.
For the last year, Pretium has been diligently working on progressing the Valley of the Kings (VOK) zone at Brucejack. The company has completed an underground bulk sampling and drilling program and re-estimated the mineral resource, which, when announced in December, outlined a measured and indicated resource of 8.7 million ounces of gold grading 17.6 grams per tonne (g/t), and 4.9 million ounces of inferred gold grading of 25.6 g/t. The company has also completed a definitive feasibility study for Brucejack, which it announced in June.
Indeed, 2013 was fairly busy for Pretium, and made more so when the company was faced with “significant public controversy” following the resignation of one of its geological consultants. The company saw its share price dip quite a bit, dropping from the $10 range to $2.83 before climbing its way — albeit slowly — back to the current $7.59.
Following its progress and difficulties last year, it was important for Pretium to provide the market with concrete evidence of its deposit. For that reason, the company invited analysts from GMP Securities and CIBC World Markets on a site tour of its project. Happily for Pretium, it seems to have only helped strengthen the analysts’ stance on the company, due in large part by the visual of the VOK mineralization.
As CIBC analyst Jeff Killeen said in a research note to clients, the aim of the visit was to review the underground VOK bulk sample area extracted in 2013 and how the company’s resource and reserve estimates measure up to exposed geology underground with the VOK.
Overall, Killeen walked away from the site tour with “improved confidence that Pretivm’s VOK interpretation of stockwork veining and gold mineralization is largely correct.” He added, “[w]e did observe the Cleopatra structure that is oriented roughly N/S within the bulk sample area. It was evident that the Cleopatra hosts gold and silver mineralization but visible electrum within Cleopatra appeared to be the same or very similar to mineralization observed in E/W veining. We also note that we observed what we interpreted as minor N/S veinlets and structures in numerous locations underground that often interacted with predominant E/W veining.”
GMP’s George Albino highlighted his renewed confidence in the mineralization, noting that he is ”more comfortable with the geostatistically based approach for resource estimate” and stating,“[t]his comes from our direct observations of coarse electrum as streaks in narrow veinlets that are not part of the throughgoing structures which we focused on last year. Those structures ARE there and we expect that a large part of the gold to be mined will come from them, and that ultimately a mine plan will encompass both selective mining of such zones AND bulk mining of the type envisaged in the DFS.”
Albino also noted that given its high grade, Brucejack is indeed a rarity, with a manageable CAPEX and good location. He believes that these factors will make Pretium interesting to existing mid- and large-cap producers. As the company plans to develop the project on its own, it will have to undergo a substantial chunk of financing, which Albino sees ranging from a variety of sources, including equity, debt and pre-sales or streams. He expects a clearer indication on the company’s plans to finance Brucejack by year end, or early 2015.
Pretium is currently waiting on key permits — which it expects in the first half of the coming year — and a construction decision (slated for next summer); that will be a key factor in starting on the surface work needed to allow mill construction in the summer of 2016. Pretium is targeting production at Brucejack in the second half of 2017.
Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned.
Editorial Disclosure: CIBC World Markets does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.
GMP has within the last 12 months provided paid investment banking services or acted as an underwriter to Pretium Resources. The firm is also owns 1 percent or more of Pretium securities.