The Conversation (0)
Pretium Resources is one step closer to financing the development of its exceptionally high-grade Brucejack project. On Monday, the company announced a whopping C$81-million strategic investment from China’s Zijin Mining.
Pretium Resources (TSX:PVG,NYSE:PVG) is one step closer to financing the development of its exceptionally high-grade Brucejack project in Northern British Columbia. On Monday, the company announced a whopping C$81-million strategic investment from China’s Zijin Mining (SSE:601899,HKEX:2899).
According to Pretium’s release, the private placement will account for a significant portion of the planned equity component of financing for Brucejack. It will see Pretium issue 12,836,826 common shares to Zijin at a price of C$6.30 per share to raise gross proceeds of roughly C$80,872,004. If the offering closes as expected near January 16 of next year, Zijin will own just under 10 percent of Pretium’s shares.
Michelle Romero, vice president, corporate relations at Pretium, said that the company hopes to have the rest of the financing package for Brucejack resolved by Q1 2015.
Moving forward
Pretium CEO Robert Quartermain said in a statement, “Zijin’s investment positions us well at a critical stage in our advance to production … Zijin is a well-capitalized shareholder, and as fellow shareholders, we value their long-term outlook and commitment to gold and to the successful development of our Brucejack Project as a high-grade gold mine.” Specifically, Pretium will use proceeds from the offering for capital expenditures, “including the procurement of long-lead items and camp infrastructure.”
To be sure, Pretium is moving ahead quickly with the Brucejack project. With a feasibility study completed in June 2014, permitting for a 2,700-tonne-per-day underground mine at the property is already underway. A November 11 article from Seeking Alpha notes that a decision on the permit application is expected in the first half of 2015, and that production could start in 2017.
For those who haven’t yet heard, the mine at Brucejack could become one of the highest-grade gold mines in the world. The Valley of the Kings deposit at Brucejack holds 6.9 million ounces in proven and probable reserves, and this year’s feasibility outlines an 18-year mine life, capital costs of US$746.9 million and a post-tax net present value of $1.45 billion with a 5-percent discount. Investors would see a post-tax internal rate of return of 28.5 percent with a 2.8-year payback period, and that’s all at a base-case price of $1,100 per ounce for gold.
It’s also worth mentioning that the mine at Brucejack will have an exceptionally low all-in sustaining cash cost of US$448 per ounce.
China’s biggest gold producer
Of course, the significance of Zijin’s support for the project won’t be lost on investors. In addition to being China’s largest gold producer, Zijin is also the country’s second-largest copper producer and accounts for a significant amount of China’s zinc, tungsten and iron ore production as well.
“This helps the project, but it also helps the company overall,” Romero said, adding, “we were really pleased to be able to do this kind of raise in what would otherwise be uncertain market conditions.”
Certainly, buying up 10 percent of Pretium’s stock is a strong vote of confidence, and investors will be watching to see how financing for the high-grade mine progresses. At close of day on Monday, shares of Pretium were up just over 2 percent, or 15 cents, trading at $6.65.
Securities Disclosure: I, Teresa Matich, hold no investment interest in any of the companies mentioned.
Related reading:
The Art of Perception and Perseverance: Pretivm’s Bob Quartermain Talks Value