Today, Pretium Resources (PVG) announced the impatiently awaited Q3 production results. The company announced that it was able to produce 82,203 toz gold during Q3, at its British Columbia Brucejack gold mine that started operations only in late Q2. The news was welcomed by the market very positively and the share price jumped by more than 20% shortly after the market opened.
PVG data by YCharts
Besides the Q3 production numbers, there were another similarly important numbers released. During Q3, the company processed 261,262 tonnes of ore, which equals to 2,840 tonnes per day on average. It means that the mill operated more than 5% above its nameplate capacity of 2,700 tpd. However, this information is not surprising, as the CEO of Pretium Resources has already stated that during the commissioning, the mill ran at 3,300 tpd for over 24 hours without any issues and that they are planning to utilize the excessive mill capacity and expand production to 3,300 tpd or more (however, some additional permits are needed).
The gold recovery rate stood at 96.49% during Q3, which is also a very positive news. It means that Pretium is able to recover almost all of the gold contained in the ore. Moreover, during August and September the gold recoveries were even higher, at 96.92%. It means that the recoveries achieved over the last two months were slightly above the 96.7% level projected by the feasibility study.
A very important information is related to the feed grades. For the quarter, the mill feed grade averaged 10.52 g/t gold. However, during August and September, the first two months when only the stope ore was being processed, the feed grade averaged 12.36 g/t gold. It is an important news as the feed grade approaches the expected numbers. According to the mineral reserve estimate, the proven and probable reserves should be grading 16.1 g/t gold. Although Pretium is not there yet, as stated in the recent corporate presentation, the management expects to reach the steady state production by the end of Q4 which means that there are three more months to improve the numbers. It was discussed here on Seeking Alpha for several times, that given the nature of the Valley of the Kings deposit, it should be more appropriate to look at the average grades over a longer time period, as the short-term numbers may fluctuate quite wildly.
Although the feed grade of 12.36 g/t gold is lower than the reserve grade of 16.1 g/t gold, Pretium should do quite well even if it manages only to maintain the current level of mill feed grades. At a throughput rate of 2,840 tpd, recoveries of 96,92% and feed grade of 12.36 g/t, the annual gold production should equal almost exactly 400,000 toz gold. It is quite a nice number that more than validates the current market capitalization of approximately $1.75 billion. Although the Q3 AISC will be probably higher than the sub-$500 level outlined by the feasibility study, a nice profit should be reported.
This news was really positive, which was confirmed also by the initial market reaction. The Q3 and especially the August and September numbers give a reason for optimism. Although some risks, as well as some doubts, may still remain, this was an important step on the way to validate the geologic models and the viability of the project. Another important news will come probably sometimes during November when the Q3 earnings should be released. Especially the AISC number will be very important as it should indicate whether the mine will be able to approach the projected very low production costs. As a bonus, it is possible to expect that Q3 was the first profitable quarter in Pretium's history. Despite today's strong price jump, Pretium's shares still hide a lot of upside potential.
Disclosure: I am/we are long PVG.
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.