Pretium questions from a reader of this blog

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Pretium update: Apparently all the gold is there?!

Today, Pretium dropped a bomb of a press release: Bulk Sample Surpasses Target of 4,000 Ounces of Gold; Processing Continues.  The preliminary results are that there is 4,215 ounces of gold in the 8,090 tonnes processed so far.  It looks like the bulk sample results will exceed the resource estimate; this would be strong evidence that there is more gold in the deposit than originally thought.  I’d be curious as to how much gold should have been in the 8,090 tonnes processed so far (according to Snowden’s resource model) as the press release does not say.  Anyways, here are some possible scenarios for the current results:

1. Strathcona messed up.  In my opinion, this would be the least bizarre explanation and the most plausible.
2. The preliminary results from the bulk sample are fraudulent due to assay problems.  (Less likely.)
3. Somebody added millions of dollars worth of gold to the bulk sample.  (Least likely.)

Pretium update: Graham Farquharson speaks out

Those interested in Pretium should definitely check out this Financial Post article on the company.  In the article, Graham Farquharson (president of Strathcona) comments on what’s happening and criticizes Pretium’s management.

Pretium: Strathcona says that there is no gold

See Pretium’s press release for yourself.  The stock is currently down around 26%.  Here’s one juicy tidbit from the press release:

Strathcona withdrew from the Program on October 8, 2013 before any results from the processing of the bulk sample were available. In withdrawing from the Program, Strathcona advised Pretivm that “…there are no valid gold mineral resources for the VOK Zone, and without mineral resources there can be no mineral reserves, and without mineral reserves there can be no basis for a Feasibility Study.” They also advised that “…statements included in all recent press releases [by Pretivm] about probable mineral reserves and future gold production [from the Valley of the Kings zone] over a 22-year mine life are erroneous and misleading.”

Strathcona is saying that there is no gold (“no valid gold mineral resources”).

Shorting VIC (ValueInvestorsClub.com), PRXI, PVG

Occasionally, I find myself shorting long ideas that are written up on VIC (ValueInvestorsClub.com).  VIC is an exclusive website where a mix of professional money managers and non-Wall Streeters post investment ideas.  Non-members like myself can sign up for a guest account and see ideas with a 45-day delay.

Here are situations where I have taken the opposite side of their trades.

Pretium Resources (PVG) – Massive red flags

Strathcona has was hired to oversee Pretium’s bulk sample program.  The purpose of these programs is to get a better idea of the amount of gold contained in a deposit since the gold distribution may be erratic and drilling samples very little of a deposit.

Strathcona has inexplicably resigned from the project.  This is a massive red flag for me.  In my opinion, Strathcona has a very good reputation as Graham Farquharson’s work is famous for uncovering the Bre-X fraud.  He has also continued to attack John Felderhof over his involvement in the fraud.  (Felderhof remains a free man, his children are reported to be millionaires, and has never been convicted.  I agree with Farquharson’s assessment.)  His company strikes me as having high integrity.  I was surprised that Strathcona would work with Pretium in the first place since Pretium’s quality control checks were consistent with fraud (see my previous post).  It wouldn’t make sense for Pretium to hire Strathcona if fraud was occurring because Strathcona’s engineers are smart and have integrity.  Now I’m less confused and strongly believe that the red flags are too big to ignore.

Here is Pretium’s press release:

Strathcona Mineral Services Ltd. (“Strathcona”), which had been engaged as the independent Qualified Person to oversee and report on the 10,000-tonne bulk sample for the Program, has resigned from the Project.

Reading NI 43-101 reports: Data verification

Typically in a NI 43-101 technical report, the author will re-assay the drill core to verify the integrity of the assay results.  This is to help spot Bre-X style frauds where somebody may be ‘salting’ a crushed sample with gold.

Here’s the crazy thing:

1. Some people still commit blatant fraud… even though they will eventually be caught.
2. Often in technical reports, there are issues with data verification and the author doesn’t care.