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Major Issues For Pretium Resources

Apr. 03, 2018 10:54 AM ETNewcrest Mining Limited (NCMGF), NCM:CA26 Comments


  • Shares of Pretium Resources have been obliterated over the last few months because of grade reconciliation issues at Brucejack.
  • The current problem at Brucejack also potentially impacts whether the company will be in a position to buy back the stream on the mine and repay debt.
  • It's going to be at least another 1-2 quarters before we have a firmer grasp of the situation.

Pretium Resources (PVG) has been punished over the last few months as the company's Brucejack mine in Canada is running into some potentially major issues. That steep drop in the shares in January took place after PVG released an operations update - in which it announced fourth quarter 2017 production results from Brucejack and also provided guidance for the first six months of 2018.

ChartPVG data by YCharts

Issue #1

Gold production for Q4 came in at 70,281 ounces, that's down from the 82,203 ounces of gold produced in Q3. Considering that Brucejack is in the ramp-up stage, production should not be going backwards. Recoveries are running just slightly below expectations, but that's not where the problem is at as grade is the issue.

The company stated:

Grade reconciliation to the reserve model for the period August 1, 2017, to December 31, 2017, was approximately 75% to 80%.

According to the technical report, Au grade in year 1 is expected to be 15.4 g/t. If grade is coming in around 75-80%, then that equates to an ~11.5-12.0 g/t head grade. But PVG also wasn't able to access as many high-grade stopes, so actual mined grade was only about 8-9 g/t in the fourth quarter.

(Source: Pretium Resources)

Unfortunately, this wasn't an isolated quarter as the guidance that PVG is giving introduces even more uncertainty in terms of grade reconciliation and the mine plan. The company is forecasting gold production at Brucejack for the first half of 2018 to be in the range of 150,000 ounces to 200,000 ounces. That would put the total first year of gold production at 302,000 ounces to 352,000 ounces (July 1, 2017, to June 30, 2018). Brucejack should be producing over 100,000 ounces per quarter right now and was expected to hit over 400,000 ounces in its first year of production.

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