Finding a success story on the junior gold mining circuit is tough work these days. But since mid-April, Pretium Resources (PVG-T, PVG-N) has been on a hot streak.
The Vancouver-based company’s shares have climbed 35% since they closed at $5.71 on April 17th, and were trading for $7.74 in Toronto on May 8, and its success offers further evidence of the market’s current fixation on cash and grade — as Pretium has both.
Its run began to gather steam after it secured the cash part of the equation in the form of a sizeable private placement with Liberty Metals & Mining Holdings, a subsidiary of Boston-based Liberty Mutual Insurance. Liberty bought $40 million worth of Pretium equity ensuring that the company had sufficient funds to do proper work at its Brucejack project in B.C. — more specifically on its high grade Valley of the Kings deposit.
At the time of the financing, which was announced on April 23, the company said it would use the money to finish a 10,000-tonne bulk sample at the deposit and to conduct an underground drilling program.
The latest leg-up in its stock price comes after the completion of the exploration ramp to the Valley of the Kings deposit and underground exploration program is set to get underway .
The extensive drill program will compliment the bulk sample, both of which will look to validate its resource model, while infill drilling focuses on the section of the deposit that is targeted for initial development.
The deposit already boasts an impressive resource estimate that marries high grades with good tonnage. Indicated resources at the Valley of the Kings currently stand at 16.1 million tonnes grading 16.4 grams gold for 8.5 million oz. and inferred resources of 5.4 million tonnes grading 17 grams gold for 2.9 million oz.
While the recent market activity seems to be anticipating more impressive high-grade drill results, Hayes says the confirmation of the geology, the analysis of the bulk sample and the implications for the resource model are the real keys to the underground program.
“The key risk for the Brucejack project is determining the grade and tonnage of the deposit,” BMO Capital Markets analyst John Hayes wrote in a recent research note. “Resource grades have a highly skewed distribution due to the geology of the deposit, which presents challenges for resource modeling.”
Hayes has Pretium listed as market perform.
The deposit is currently described as a transitional epithermal gold and silver occurrence that is hosted in stockwork veining, located up stratigraphy from several large porphyrytic intrusions. Gold occurs in both high grade visible gold stringers and within a lower grade gold quartz stock work system.
The Brucejack property sits roughly 65-km north of Stewart in Northwestern B.C.
A preliminary economic assessment released in February of last year envisioned a mill that would process 1,500 tonnes of ore per day for 325,000 oz. of gold production per year and a 24 year mine life. Total life of mine production was estimated at 6.9 million ounces.
The same study estimated that it would cost US$436.3 million to build the mine and processing facility and that operating costs would ring in at US$436.30 per tonne.
The study calculated a net present value (NPV) of US$2.26 billion using a 5% discount, a US$1,100 per oz. gold price and US$21 per oz. silver price.
An underground feasibility study is expected to be finished in the second quarter and commercial production is slated to come on line in early 2016.
Just imagine what POG will be doing in 2016. “Market Perform?” Calling the writer ‘conservative’ seems like understatement.