When I interviewed Pretium Resources CEO Bob Quartermain at the company’s offices for a Vancouver Sun profile early this year, he talked about the continuing allure of gold in China and other Asian countries. (Read that article here)
“What we’re seeing is the slow and systematic movement of physical gold from the West to the East,” Quartermain told me. Pretium is developing the high-grade Brucejack underground gold project in northwestern B.C. and the CEO’s first trip after Pretium’s late-2011 IPO was to Shanghai.
A deal announced last week means that Pretium’s gold could eventually be part of that movement. The firm announced an $81-million financing that would see Zijin Mining Group acquire 12.8 million shares at $6.30, giving Zijin an approximate 10% stake and a seat on Pretium’s board.
Zijin is a $9-billion market cap mining giant, the country’s largest gold producer and second largest copper producer (as well as a producer of other base metals).
I had first interviewed Quartermain in December 2011 when Pretium IPOed on the TSX at a gold price of US$1,400 an ounce. Pretium purchased the Brucejack and Snowfield projects from Silver Standard, from which Quartermain had just retired as CEO.
Gold is trading below $1,200 at the time of writing in the midst of one of the worst mining bear markets in decades, particularly for junior exploration companies, so the agreement is a bright spot for the sector.
The Zijin deal also gives Pretium another deep-pocketed major shareholder as it advances Brucejack through permitting and toward construction. Subsequent to the Zijin announcement, the company announced that other large shareholders – including Liberty Metals & Mining – would also maintain their pro rata ownership of Pretium shares, putting a further $18 million into Pretium’s coffers (also at $6.30/share).
A June 2014 feasibility study done at US $1,100 gold shows 6.9 million ounces of gold (13.6 million tonnes grading 15.7 grams per tonne) and capital construction costs of about $750 million, for an 18-year mine life and average annual production of 404,000 ounces of gold. So the company has more work to do, particularly on the financing front.
But the agreement reinforces Brucejack’s status as one of the world’s premiere undeveloped gold projects. And once built, the mine will also be a shot in the arm for British Columbia’s northern economy, not to mention First Nations in the area who will be beneficiaries through impact and benefit agreements.
Pretium seems to be executing on the financing, permitting and development fronts, so the million-dollar question remains: Will the gold market cooperate?
Disclosure: No position in Pretium.