Pretium update: disappointing grades

(*Disclosure:  Pretium is by far my largest short position so I am biased.  Take what I say with a grain of salt and do your own homework.)

The production figures reported in Pretium’s MD&A filed on August 10, 2017 fall far short of the projections from Pretium’s latest published feasibility study.

According to the feasibility study filed on June 30 2014 (effective date June 19, 2014), year 1 production from Pretium’s flagship project would have a head grade of 15.4 g/t gold with a recovery of 96.8%.  The effective grade after recovery losses would be 14.9072 g/t gold.

Figures are from Table 17.2 of the technical report.

Compare this with the data from page 2 of the MD&A:

  • For June, 8510 ounces of gold were produced and 70805 tonnes of ore were processed.  8510 / 70805 X 28.3495 gram/ounce = 3.407 g/t for June
  • For July, 16882 ounces of gold were produced and 83667 tones of ore were processed.  16882 / 83667 X 28.3495 gram/ounce = 5.720 g/t for July
  • An average of 4.660 g/t for June and July

The 3.407 g/t and 5.720 g/t fall far short of hitting the 14.907 g/t mark projected from Pretium’s feasibility study three years ago.

While grades so far have been low relative to the estimates from the feasibility study, Pretium does expect grades to ramp up [page 4; emphasis mine]:

Working Capital

As the Brucejack Mine continues to ramp-up grade, we expect the increased production and concomitant proceeds from the sale of doré and flotation concentrate will enable us to overcome our short-term working capital deficit. We expect as gold production ramps up this deficit will reverse (refer to the “Liquidity and Capital Resources” section below). In addition, we are evaluating other opportunities to bolster our short-term working capital.

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Pretium 2017 recap – “they will not have a mine producing 425,000 oz. a year for the next 20 years”

(Pretium has a US$1.8B market cap and the borrow is in the low single digits.  I have written about this stock previously.)

Back in 2013, Strathcona resigned from the Brucejack gold project due to disagreements over what Pretium was telling investors.  Graham Farquharson (Strathcona’s head honcho) was being a gentleman and allowed Pretium to disclose on their own terms (with their own PR spin).  Unfortunately, Pretium instead tried to discredit Strathcona.

So, Farquharson did an interview with The Northern Miner, a trade publication.  You can read the interview on the website (no paywall):

Yes, and we told them that it has an excellent chance of being a small-tonnage, high-grade mine in the Cleopatra vein, and a couple of other similar occurrences that they found in the last drilling program.  If they lined all those up, there’s an excellent chance that they could have a small-tonnage, high-grade gold mine. But they will not have a mine producing 425,000 oz. a year for the next 20 years, as they have been advertising so far.

Here’s the crazy part.  This is 2017 and Pretium is almost finished building that mine.

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Silver Standard sells shares of Pretium in secondary offering

Here is Pretium’s press release.  Silver Standard seems to be in a strong financing position given that the company has around $671M in current assets (versus $333M in total liabilities), a producing mine, and a book value of $837M.  Instead of investing this capital in producing assets, the company is selling a mining asset (part of its stake in Pretium) for cash.  In my opinion, Silver Standard is not making a mistake.

*Disclosure:  I am short Pretium common shares and will be holding onto my position.  I don’t follow Silver Standard and have no interest in it.

Pretium: The bullshit engineering continues

Today, Pretium issued a press release: Pretium Resources Inc.: Mineral Resource Estimate Adds Measured Gold Resources, Increases Grade at Valley of the Kings

Basically, Snowden is pretty much going to stick with its aggressive approach in modeling the VOK deposit.

The press release also contains some information aimed at invalidating Strathcona’s competing theory about how the resource should be modeled.

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