Pretium’s Quartermain a gold bug all along

Many people often think of me as a silver-focused individual,” Pretium Resources (PVG-T) president and CEO Robert Quartermain told a crowd of around 150 in his opening remarks at a recent Association for Mineral Exploration British Columbia speaking event here. 

“But over my thirty-five-year career, I started my first work actually in gold. For those of you familiar with the Turquetil gold property in the Northwest Territories outside of Rankin Inlet, that’s where I kind of started, back in the seventies.” 

From there, the man most know today as the former president of silver miner Silver Standard Resources (SSO-T, SSRI-Q) went on to work in Ontario’s famed Timmins and Red Lake gold camps, as a mine geologist nearly 2 km below surface at the Lamaque gold mine in Quebec; at Hemlo in Ontario for Teck Resources (TCK-T, TCK-N); at Casa Berardi in Quebec; and finally at several projects in Haiti, where he worked closely with another Vancouver-based mining magnate, Ross Beaty.

Now, after 25 years spent advancing silver projects and transforming Silver Standard from a $2-million junior exploration company to a $2-billion producer, Quartermain has returned to gold projects – namely, the Brucejack and Snowfield properties in northern B.C.’s “Golden Triangle,” just north of Stewart. 

The 56-year-old Quartermain resigned from Silver Standard in January 2010, but quickly set to work on his next vehicle, Pretium, by striking a deal to option Brucejack and Snowfield from Silver Standard for $215 million cash and $235 million in shares. Though both properties contain a large amount of silver mineralization, they are primarily gold projects and were non-core to Silver Standard’s operations, with Snowfield containing significant copper and molybdenum credits.

“It was exactly a year ago, on October twenty-ninth, that I had the opportunity to sign an agreement as the only shareholder . . . and agree to buy this asset from Silver Standard for four hundred fifty million,” Quartermain recollected.

Pretium completed its $265-million initial public offering less than two months later, in Canada’s third-largest IPO that year.

Today, Pretium has a three-pronged approach to advancing its projects. First, it is completing advanced exploration and engineering studies for a high-grade underground mine at Brucejack. Second, it will look at developing the lower-grade mineralized areas at Brucejack in a bulk-tonnage, open-pit mining scenario. And lastly, should gold prices remain high and mining Brucejack prove a success, Pretium will try to develop the much larger Snowfield deposit, which it says is more of a long-term call option on gold for the moment.

“When you look at the scale of these projects – and I think it’s one thing that the market hasn’t fully recognized – Brucejack and Snowfield put together have the third-largest undeveloped gold resource in North America,” Quartermain explained. “Thirty-four million ounces of measured and indicated gold, plus twenty-two million ounces of inferred, so fifty-six million ounces in all categories. And when you add that to the KSM project beside us [owned by Seabridge Gold (SEA-T, SA-N)], we’re looking at one hundred fifteen million ounces.” 

Pretium signed a mutual confidentiality and co-operation agreement with Seabridge in May which includes a joint-engineering study to examine the economics of combining Snowfield and KSM into one operation. The study is expected to be completed before 2012.

It is the smaller-scale Brucejack underground project, however, that is the company’s immediate focus. Quartermain says it could be up and running by the end of 2015. Pretium released a positive preliminary economic assessment (PEA) for the high-grade gold-silver project in June, where a 1,500-tonne-per-day mining operation yielded a pre-tax net present value of US$662 million using a 5% discount rate over a 16-year mine life. Annual average production for the first 10 years would be 173,200 oz. gold and 1.12 million oz. silver, while the estimated capital cost, including contingencies, comes in at US$282 million.

“This is a project that we have the capacity at Pretium to build, and we’re moving very quickly to move this project forward,” Quartermain said. “Like any other project, it is not a brand-new discovery . . . most of the work was done by the Northair Group back in the eighties. They spent about thirty million and completed five kilometres of underground work.” This included 908 drill holes totalling 120,000 metres of drilling, but a downturn in the market put the project on hold and Silver Standard eventually picked it up for $2 million in 1999. 

The company has drilled 70,000 metres in Brucejack this year and expects to update the project’s resource calculation with the results later this quarter. Notable from this summer’s exploration campaign were assays from the Valley of the Kings, a high-grade zone as little as 60 metres from surface where drilling returned 12 intersections grading over 100 grams gold per tonne, including a 0.5-metre section grading 17,750 grams gold.

At Snowfield, meanwhile, work continues regarding how to profitably develop a large open-pit mine in the remote area. The widespread gold-silver-copper-molybdenum mineralized system comprises 1.37 billion tonnes averaging 0.59 gram gold, 1.73 grams silver, 0.1% copper and 85.5 parts per million molybdenum in measured and indicated categories, which in turn contain 25.9 million oz. gold, 75.7 million oz. silver, nearly 3 billion lbs. copper and 258 million lbs. moly. 

One idea is to mine only the higher-grade portions, which would drastically reduce tonnage but aid manageability. As Quartermain sees it, “if we take a one-and-a-half or one-and-a-quarter-gram cut-off, we get down to about one hundred ten million tonnes of two-gram material. We think that’s the kind of situation you’re seeing with Detour Lake and with Osisko, and that’s the next opportunity that we’ll be looking at above and beyond the high grade, which we’re currently focusing on [at Brucejack].”

At presstime on Nov. 3, Pretium’s shares traded for $9.92 within a 52-week range of $5.75-$14.19. The company has 92 million shares outstanding once fully diluted. 

Its largest shareholder is Silver Standard with 24.6 million shares, or 28% of the company. Quartermain controls 2.87 million shares, or 3.3%.