Pretium completes Brucejack feasibility

A feasibility study on the Brucejack high-grade gold project, 65 km north of Stewart, B.C., has brought Pretium Resources (PVG-T, PVG-N) one step closer to its goal of kicking off mine construction in the second half of 2014 and commercial production in 2016.

The company — which was awarded this year’s Bill Dennis Award for a Canadian mineral discovery — envisions mining Brucejack from underground with the Valley of the Kings deposit, the higher-grade, primary targeted deposit that was developed first, followed by the lower-grade West zone in the second half of the project’s 22-year mine life.

The mine is expected to produce a total of 7.1 million oz. gold and 31.6 million oz. silver. During the first decade, the mine could produce an average of 426,000 oz. gold each year and 321,500 oz. gold annually over its lifetime.

The feasibility study, produced by Tetra Tech, outlines a post-tax net present value at a 5% discount rate of US$1.8 billion and a post-tax internal rate of return of 35.7% at base-case prices of US$1,350 per oz. gold and US$20 per oz. silver.

The capital cost to build the mine is estimated at US$664 million, which includes a US$64-million contingency and US$50 million for a 50 km long transmission line. Average operating costs over the mine’s life are estimated to reach $156.46 per tonne milled, with all-in sustaining cash costs over the mine life of US$508 per oz. 

The company plans to operate at a 2,700-tonne-per-day processing rate and mine 9.6 million tonnes of ore for the first 10 years at an average mill feed grade of 14.2 grams gold per tonne.

Metallurgical recoveries at the Valley of the Kings deposit are 96.7% gold and 84.8% silver, and 94.7% gold and 90.4% silver in the West zone.

Pretium expects to file its application for an environmental assessment certificate later this year. In the meantime, the Vancouver-based company completed the ramp accessing the Valley of the Kings underground from the historical West zone underground workings in early May, and a bulk-sample program is underway.

At the end of May, Pretium reported that the first underground hole drilled as part of the Valley of the Kings bulk sample intersected gold with highlights of 21.57 grams gold per tonne over 12 metres and 8.38 grams gold over 2 metres. Other assay results released on June 6 included intercepts of 33.20 grams gold over 17.5 metres.

The program involves excavating a 10,000-tonne bulk sample and a 15,000-metre underground drill program to test the full widths of two mineralizations used in the company’s 2012 resource estimate. By testing the two domains, the company says, the program will confirm that the resource model projects a range of grade distribution in the 10-metre blocks that make up the mineral resource estimate within the bulk-sample area.

High-grade gold showed indicated resources at the Valley of the Kings — using a cut-off of 5 gram gold equivalent — of 16.1 million tonnes grading 16.4 grams gold for 8.5 million contained oz. gold, and inferred resources of 5.4 million tonnes grading 17 grams gold for 2.9 million oz. gold.

Pretium ended the first quarter with $22.5 million in working capital, and in April completed a private placement with Liberty Metals & Mining Holdings, a subsidiary of Boston-based Liberty Mutual Insurance, for 5.78 million common shares at $6.92 per share, for proceeds of $40 million.

At press time  Pretium was trading at $8.33 per share within a 52-week range of $5.53 to $16.37. The company has 102 million shares outstanding.

Analyst Ash Guglani of Salman Partners has a 12-month target price on the stock of $17.50 per share and a “buy” recommendation, commenting that the feasibility study confirms Brucejack as a “world-class project” that has “robust” economics.

He says that “with the feasibility study completed and permitting well underway, we believe that Pretium remains an attractive acquisition target, which could improve the production profile of its suitor.”