Pretium Resources up 14%, Quartermain set to retire

By Peter Kennedy

Pretium Resources Inc. [PVG-TSX, NYSE] shares rallied Friday May 3 after the company posted higher than expected production and lower than expected operating costs in the first quarter of 2019 from its Brucejack gold mine in northwestern British Columbia.

Pretium also said it launched the search for a successor to Executive Chairman Robert Quartermain, who will be retiring on December 31, 2019. Before being named Executive Chair, Quartermain served as Chairman and CEO from October 2010 to December 2016, and as President from October 2010 until May 2015.

“Brucejack has evolved as envisaged when Pretium was launched in 2010, and as a major shareholder, I have full confidence in Pretium’s President and CEO, Joe Ovsenek, and the operating team that he has put together at the company, to continue to deliver full value for all Pretium shareholders from this premier gold asset,” Quartermain said.

The share price jumped 14.18% or $1.35 to $10.87 on volume of 1.3 million, and now trade in a 52-week range of $8.58 and $12.87.

The Brucejack Mine is a high-grade underground mine located approximately 65 km north of Stewart. A year-round all-weather road connects the mine to Highway 37. Production commenced in the summer of 2017.

Total proven and probable reserves currently stand at 6.4 million ounces of gold (16.0 million tonnes, grading 12.6 g/t).

Pretium reported production of 79,180 ounces of gold in the first quarter of 2019, beating a Scotiabank forecast of 74,000 ounces, and marking an increase of 5% from the first quarter of 2018. That was after the company milled 295,000 tonnes of material at a grade of 8.5 grams per tonne.

All-in sustaining costs of US$868 an ounce was below the Scotiabank forecast of US$1,003 an ounce. Lower operating costs and sustaining capital spending during the quarter allowed Pretium to pay down $20 million of debt and add $5 million to its cash balance.

The company reiterated earlier production forecasts for 2019 saying Brucejack is expected to produce between 390,000 and 420,000 ounces of gold with an average grade of 10.4 g/t gold. Pretium has indicated that lower grade material is currently being mined (with 5.0 g/t gold cutoff) and that production targets will be met this year through the mining of higher grade material in the second half of 2019.

Pretium mined 308,000 tonnes in the first quarter at a rate of 3,427 tonnes per day. During the quarter, the company prioritized increasing the development rate to 1,000 metres per month and opening up the deposit to allow access to a greater number of stopes.

“Brucejack delivered another profitable quarter and generated free cash flow,” said Ovsenek.  “Our AISC (all-in-sustaining cost) for the quarter was within our annual guidance, and we generated almost US$40 million in cash from operations, which enabled us to pay down US$20 million of debt ahead of schedule.”

Ovsenek said the company made significant progress in the quarter towards achieving its 3,800 tonnes per day production rate target at Brucejack. With increased accessibility from continued underground development, he said the company has established a solid foundation for operating effectively at its higher target rate.

The better-than expected first quarter numbers follow on the heels of a recently updated reserves and mine plan for the Brucejack Mine.

The updated plan envisages an expansion to higher throughput in a move that will reduce the projected mine life to 14 years from the previous 18-year estimate.

However, life-of-mine average production is expected to increase to 441,000 ounces of gold annually from the previous 404,000 ounce target. Estimates include average production of 520,000 ounces annually in years one to five and an average of 525,000 ounces in years one to 10.

Life-of-mine all-in-sustaining costs are forecast to be US$502 an ounce, an increase from US$448 per ounce.

Meanwhile, Pretium generated revenue of US$103.1 million in the first quarter, up from US$89.4 million in the equivalent 2018 quarter. Net earnings in first quarter were US$4.2 million or $0.02 per share, compared to a loss of US$8.1 million in the first quarter of 2018.