In a previous article we discussed the resignation of Strathcona Mineral Services Ltd., one of the companies dealing with Pretium Resource's (NYSE:PVG) bulk sample update. Then we detailed a bit about the disagreement they had with that Snowden Mining Industry Consultants ("Snowden") (the other independent qualified party).
Pretium's latest news release show some spectacular results from the bulk sampling processing, and they seem to confirm Snowden's modeling methods. This has significant implications for the company's stock price, which has been hammered over the past two months over and beyond the other miners. We believe PVG's results are a significant achievement by the company and suggest that the Brucejack deposit is the world-class deposit that the company claims.
Recent Press Release: Bulk Sample Surpasses 4,000 ounces of Gold
On November 22nd, Pretium released the following results from its bulk sampling program:
What this shows is that the company processed 8,090 tonnes of ore (the bulk sample was 10,000 tonnes) and produced 4,215 ounces of gold and 3,593 ounces of silver. That works out to about .52 ounces of gold per tonne, or about 16.2 grams per tonne. Additionally, the bulk sample so far has produced 13.8 grams per tonne of silver. If the last 2,000 tonnes of the bulk sample produces no gold, the total average grade will be 13.1 grams per tonne - higher than expectations, and much higher than the market's bleak outlook.
These are spectacular results because not only does it surpass management's expectations of 4,000 total ounces, but the bulk sample still hasn't even been completed. More importantly, it gives much credence to Snowden's methodology and is a big step to confirming the reserves specified by Snowden in the feasibility study done on Brucejack, which had estimated reserves graded at 12 grams per tonne. The 16.2 grams per tonne found is significantly higher than the feasibility study's estimates and even if investors unfairly assume that no more gold will be found in the rest of the bulk sample - it is still above the feasibility study's total.
Conclusion for Investors
This recent press release should be a big step towards confirming Brucejack has one of the largest, high grade gold projects in the world. Though more work needs to be done, the market's bleak outlook on the company's bulk sample prospects after the Strathcona resignation suggest that this stock will be priced significantly higher and it was trading close $8 per share a mere 2 months ago before the resignation - significantly higher than its current price under $3 per share.
Additionally, the lower gold price may actually be of great benefit to the value of the Brucejack deposit. That's because the high grade nature of the deposit means that these ounces can be produced at a gold price far below the current $1240 price of gold, which would be very attractive to a major gold miner like Goldcorp (NYSE:GG), Newmont (NYSE:NEM), or Barrick (NYSE:ABX) that are looking to replace mined ounces at a all-in costs price point lower than the current price.
At PVG's current valuation of $300 million, it may make a lot of sense for one of those majors to acquire a position in the shares now before the new feasibility study is issued. This will give them insider insight into the company, and if they decide that Brucejack is a project they want to develop, they will need to purchase less shares to acquire the company.
There aren't many high grade deposits with low initial capital costs in low political risk jurisdictions; at these low gold prices it makes Pretium's Brucejack very attractive. We believe investors have a significant upside by investing in Pretium - it may be wise to buy before the majors do.
Disclosure: I am long PVG, GG, SGOL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.