Pretium lowers Brucejack’s resource estimate

Pretium Resources’ (PVG-T, PVG-N) saw total resources at its Brucejack gold-silver project in northern B.C. decrease after publishing an updated resource estimate for one of the project’s underground deposits.

Following the Sept. 7 revision for the Valley of Kings zone, CIBC analyst Jeff Killeen cut his price target from $18.50 to $15.50 a share, citing concerns over the variance in the inferred resource compared to the April 2012 estimate.

“The updated estimate realized an increase in total tonnes and ounces within the indicated category, but total estimated ounces within all categories at Brucejack have decreased,” he writes in a Sept. 12 note. “The decrease in total ounces was driven by substantial changes to the inferred category estimate.”     

The Valley of Kings hosts 9.9 million tonnes grading 16.2 grams gold per tonne and 14.1 grams silver for 5.1 million oz. gold and 4.5 million oz. silver in the indicated category. Compared to the April estimate, indicated gold and silver ounces grew 4% and 8%, respectively, thanks to more tonnes despite the grades dropping slightly.  

However, the same growth wasn’t seen in the inferred category, which contains 5.1 million oz. gold and 2 million oz. silver — roughly half of what it had previously.

Killeen notes while some of the inferred resource was upgraded to the indicated category, most of it was removed following Pretium’s reinterpretation of the zone’s ore geometry.

 The Vancouver-based miner states the mineralized domains are better defined and tightly constrained in its new interpretation, which is based on a further 175 holes or 55,800 metres completed earlier this year for a total of 331 holes, or 115,000 metres.

This has led to a greater confidence in the mineralized zone and subsequently in the estimated resources, Pretium says.  

But this has also contributed to the reduction in the zone’s total resources, which stands at 14.5 million tonnes grading 22.2 grams gold and 13.7 grams silver for 10.2 million oz. gold and 6.5 million oz. silver. Total gold and silver ounces dropped by 33% and 27%, respectively.

After adding the West zone resource, which wasn’t updated, Brucejack now has a total underground resource of 23.4 million tonnes at 16.1 grams gold and 107.7 grams silver, for 11.9 million oz. gold and 58.8 million oz. silver in measured, indicated and inferred.  

That’s an overall reduction of 23% in tonnes, 29% in gold ounces and 45% in silver ounces over the April estimate. Gold and silver grades dropped 8% and 45%, respectively, Killeen notes.

The company’s stock was off 5.5% on the resource update to close Sept. 7 at $13.85. More recently it ended at $13.07 a share.

Pretium has a 100,000-metre drill program planned for the year with nine drills currently turning at the project. It plans to further update Brucejack’s resource by year-end and a release a feasibility study on Valley of Kings by mid-2013. 

Killeen opines that the Valley of Kings could become one of the highest-grade gold deposits to be mined, but cautions that given the amount of uncertainties in estimating the zone’s resources going forward, he remains conservative in his valuation of the company.

The Brucejack project is envisioned as an underground operation with the Valley of Kings and West zone ore feeding a 1,500-tonne-per-day mill.

The proposed mine should produce 6.9 million oz. gold and 17 million oz. silver over its estimated 24-year life, according to an updated 2012 preliminary economic assessment.

The company is guiding mine start-up in 2015 or early 2016, while Killeen expects production to kick off in 2017 at a rate of 1,500 tonnes a day.