Shareholders of Pretium Resources(PVG-T, PVG-N) have seen the total resources at the company’s Brucejack gold-silver project in northern B.C. whittled down after it published a revised resource estimate for one of the project’s underground deposits.
Following the Sept. 7 update 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 variance in the inferred resource compared to an 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 that 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.
Pretium states that 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 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 a 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.
Since adding the West zone resource, which wasn’t updated, Brucejack 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, with 29% in gold ounces and 45% in silver ounces compared to the April estimate. Gold and silver grades fell 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 24,000-metre drill program with six drills turning at the Valley of Kings. It aims to convert more inferred ounces into indicated to support a feasibility study that is underway.
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.
Killeen expects the mine to come on stream in 2017, at a cost of $460 million.
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