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Pretium continues to rightsize Brucejack

Pretium Resources has produced 79,180 ounces of gold from its Brucejack mine in British Columbia, Canada, in the first quarter as it continued to rightsize its financial performance.
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Brucejack in British Columbia, Canada

Production fell 17.8% from the 96,342oz produced in the December quarter of 2018 as the mill feed grade fell to 8.7 grams per tonne gold, compared to 11.5g/t in the prior period as the mine plan sequenced through a lower grade area.

However, the company expects the grade to average about 10.4g/t through 2019, with both grade and tonnes expected to be higher in the second semester. Gold recoveries averaged 96.8% during the March quarter.

"We made significant progress in the quarter towards achieving our 3,800 tonnes per day production rate target at Brucejack and with increased accessibility from continued underground development, we have established a solid foundation for operating effectively at our higher target rate," said Pretium president and CEO Joseph Ovsenek.

"We remain on track to achieve 2019 guidance."

Pretium has given guidance that it will produce between 390,000oz and 420,000oz in 2019 as it ramps up production from 2,700tpd to 3,800tpd throughout this year. With first gold production achieved at Brucejack in June 2017 and commercial production declared in July of the same year, the operation has so far struggled to live up to initial expectations.

The June 2014 feasibility study detailed proven and probable reserves of 13.6Mt tonnes grading 15.7g/t for 6.9Moz but this was updated to 16Mt at 12.6g/t for 6.4Moz in April. The life of mine plan was also updated to detail average annual production of more than 520,000oz over the first five years, 525,000oz over the first 10 years, and more than 440,000oz over 14-year mine life.

This may change again if Pretium's evaluation of moving to a longitudinal longhole stoping mining method, which would minimise dilution and smooth out grade variability, is successful. "We have completed four test stopes and are doing two more. This would reduce our development costs as the development would be in ore, not waste. If we do procced, expect to see an updated reserves and resource estimate and update life of mine plan in the first quarter next year," said Ovsenek during a results conference call.

Production costs fell 15% in the first quarter to $180/t from $211/t in the first quarter of 2018, resulting in a cash cost of $686/oz of gold sold and an all-in sustaining cost (AISC) of $868/oz sold. The company expects full year AISC to be between $775/oz and $875/oz.

Pretium generated net earnings of US$4.2 million on revenue of $103.1 million in the quarter compared to a loss of $8.1 million in the first quarter of 2018.

The company generated free cash flow of $39.9 million of which $20 million went towards repayment of its $480 million senior secured loan facility. It aims to reduce its debt by $140 million in 2019 and be debt free before the scheduled maturity in December 2022. "We will continue to build cash from ongoing operations to and use it to pay down debt," said Ovsenek on the call.

The failure of Brucejack to perform as expected required the company to restructure its construction credit facility in December 2018, replacing the $423 million debt and repurchasing an 8% precious metals stream with a four-year $480 million debt facility. This was comprised of a $250 million senior secured amortising non-revolving credit facility and a $230 million senior secured revolving credit facility, which reduced the debt interest rate from 15% to 5.9%. As a result, Pretium's interest payments in the quarter fell to $9.4 million from $15.6 million in the prior year period.

Pretium is undertaking a 70,000m underground drilling programme this year to both upgrade resources into reserves and expand resources below the 1,200 mine level and to the west. It also plans to undertake more exploration drilling. "We have found high grade 1km to the east under the Flow Dome zone. We will drive a drift there to facilitate underground drilling," said Ovsenek.

Quartermain to retire

Pretium has also announced that executive chairman and founding shareholder Dr Robert Quartermain will retire at the end of the year.

"Brucejack has evolved as envisaged when Pretivm was launched in 2010," said Quartermain in a statement, perhaps forgetting the construction cost overruns and lower-than-planned head grades.

The June 2014 feasibility study gave a capex of $747 million that the company updated to $696.8 million in February 2016 and a year later updated again with a 16% increase to $811.1 million, necessitating additional debt and equity raises to cover.

Shares in Pretium Resources (TSX:PVG) opened Friday almost 13% higher at C$10.73 valuing the company at C$1.9 billion. Its share price has fallen 6% so far this year.