Joe Mazumdar, exploration geologist and analyst at Exploration Insights, shares his thoughts on Pretium Resources.
Pretium Resources (TSX:PVG) has certainly been a popular stock in the gold space. Headed by Bob Quartermain, Pretium is advancing the high-grade Brucejack gold project in Northern British Columbia.
So far in 2016, shares of Pretium are up 63 percent, currently sitting at $11.43.
However, some market watchers are a bit more hesitant regarding the stock. Here’s a look at what Brent Cook of and Joe Mazumdar of Exploration Insights had to say about Pretium during their talk at this January’s Vancouver Resource Investment Conference:
Pretium is another popular stock among those that follow the junior mining space. However, Cook and Mazumdar said they are a little more hesitant regarding the high volatility of grades within the company’s Brucejack project in British Columbia. As Mazumdar explained, the plan is to bulk mine the deposit. While it would be better to mine the deposit selectively, that isn’t exactly possible.“I have a lot of respect for the geologists there. The reality is that uncertainty doesn’t really go away,” he said. Mazumdar and Cook do not own shares of Pretium.
When a reader wrote in to ask about the company more recently, the Investing News Network reached out to Exploration Insights for their thoughts. Mazumdar took some time to answer a few general questions via email about his take on Pretium, and he also shared a few other names that the newsletter is looking at right now.
INN: What are your views on Pretium? Have they changed in the past six months?
JM: Not really. Pretium has underperformed the GDXJ benchmark (NYSEARCA:GDXJ) by about 48 percent in 2016 year-to-date. Its news flow is limited as the company advances its US$700 million underground gold project (Brucejack) to commercial production in a remote part of northwest British Columbia.
The underlying gold resource is still a question mark due to the high variability of the gold grade and the continuity of the mineralization, which is the nature of the Valley of Kings deposit. This will not get resolved in the near term so the probability of an M&A bid, which is our preferred exit strategy may be limited .
INN: You’ve spoken before about the ‘nuggety’ nature of Pretium’s deposit in the past. Can you explain that again here for our audience?
JM: The Valley of Kings deposit is one of the highest grade development projects in the world which is a positive. However, the gold mineralization is contained in very high grade but small intersections (>1,000 grams per tonne of gold over <0.5 meters) that comprise a significant portion of the contained ounces. This underpins the nuggety nature of the gold mineralization. Applying an industry standard top cut to the resource estimate would potentially ‘eliminate’ a significant part of the resource.
The high variability makes it difficult to accurately predict where the gold lies within the altered host rock. Over the life of mine, it may deliver the ounces generated in the feasibility study, however the volatility on a monthly to quarterly basis may be high for the underground mining operation due to the head grade uncertainty and potential continuity issues.
INN: Have deposits like this been developed successfully in the past?
JM: There have been high grade mines that have been mined successfully but have tended to be lower throughput operations. The proposed throughput rate for the Brucejack project is 2,700 tonnes per day.
INN: Any other company names you are able to share that are on your watch list right now?
JM: Given the positive market sentiment that is now reviving exploration, we are focused on moving down the ‘food chain’ back to early stage companies versus producers and developers. An example is Colorado Resources (TSXV:CXO) which is a a high risk and high reward grassroots explorer.
Although the company was up 430 percent when we purchased it a few weeks ago, we believe the potential to find a gold and/or copper deposit that could be valued at multiples of its current market capitalization (C$30-32 million) is good. It is exploring in the Golden Triangle of Northwest British Columbia proximal to Pretium’s Brucejack project and Seabridge’s (TSX:SEA) KSM project. SEA and PVG are valued at C$900 million to C$2.0 billion, respectively. CXO has recently closed a financing which leaves them plenty of working capital to initiate a summer drill program to test some high priority targets on their 600 square kilometer land package.
Joe Mazumdar is an Economic Geologist/Analyst at Exploration Insights. Prior to that he was a senior mining analyst at Haywood Securities, then Canaccord Genuity. His work experience includes Director of Strategic planning, Corporate development at Newmont and Senior market analyst/trader at Phelps Dodge. Mazumdar also worked in technical roles for IAMGOLD in Ecuador, North Minerals in Argentina/Chile and Peru, RTZ Mining and Exploration in Argentina, Chile, Peru and Ecuador and MIM Exploration and Mining in Queensland, Australia, among others. Mazumdar has a Bachelor of Science in geology from the University of Alberta, a Master of Science in Geology and Mining from James Cook University and a Master of Science in Mineral Economics from the Colorado School of Mines.
For more information, contact Mazumdar at Exploration Insights.
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Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.