Pretium’s Robert Quartermain a goldbug all along

Vancouver – “Many people often think of me as a silver-focused individual,” keynote speaker Robert Quartermain told a crowd of around 150 mining executives in his opening remarks at a recent Association for Mineral Exploration B.C. (AME BC) Speaker Series event in Vancouver.  

“But for those that have known me for some time over my 35-year career now, 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 1970s.” From there, the man most know as the former president of major 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 6,000 feet 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 senior producer, Quartermain has returned to gold projects, namely the Brucejack and Snowfield properties in Northern British Columbia’s “Golden Triangle” just north of Stewart.

The 56-year-old Quartermain resigned suddenly from Silver Standard in January, 2010, but quickly set to work on his next project, Pretium Resources (pvg-t), by striking a deal to option Brucejack and Snowfield from Silver Standard for $215 million cash and $235 million worth of shares. Though both properties contain a large amount of silver mineralization, they are primarily gold projects and were thus non-core to Silver Standard’s operations, with Snowfield containing significant copper and molybdenum credits as well.

“It was exactly a year ago, on Oct. 29, 2010, that I had the opportunity to sign an agreement as the only shareholder and one person in Pretium and agree to buy this asset from Silver Standard for $450 million,” Quartermain recollected on the podium. Pretium completed its $265-million initial public offering less than two months later, in what would be the third-largest IPO in Canada that year.

Pretium is now working on a three-pronged approach to advance 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 explains. “Thirty-four million oz. of measured and indicated gold, plus 22 million oz. inferred, so 56 million oz. 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 115 million oz.”

Pretium signed a mutual confidentiality and cooperation 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 in the fourth quarter of 2011.

It is the smaller-scale Brucejack underground project, however, that is the company’s immediate focus. Quartermain says it could be up and running as early as the end of 2015. Pretium released a positive preliminary economic assessment (PEA) for the high-grade gold-silver project in June whereby a 1,500-tonne-per-day mining operation yielded a pretax net present value of US$662 million using a 5% discount rate under 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, came in at just US$282 million.

“This is a project that we have a capacity at Pretium to build and we’re moving very quickly to move this project forward,” according to Quartermain. “Like any other project, it is not a brand new discovery… Most of the work was done by the Northair Group back in the 1980s. They spent about $30 million and completed about 5 km of underground work.” This included some 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 there 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 one 0.5-metre section grading 17,750 grams gold.

At Snowfield, meanwhile, work continues as to how exactly such a large-scale open-pit mine might be profitably developed in the remote area. The wide-spread gold-silver-copper-molybdenum mineralized system comprises 1.37 billion tonnes averaging 0.59 grams gold, 1.73 grams silver, 0.1% copper and 85.5 parts per million molybdenum in measured and indicated categories alone, 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 sections, which would drastically reduce tonnage but be much more manageable. As Quartermain sees it, “If we take a 1.5 or 1.25 gram cut-off, we get down to about 110 million tonnes of 2-gram material. We think that’s the kind of situation you’re seeing with Detour Lake, 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. President Quartermain controls 2.87 million shares or 3.3%.