Friday, February 2, 2018

Pretium - Opportunity costs

Archaeologists near Stewart, BC have discovered what is believed to be the missing front cover of the Brucejack Feasibility study.

Thank you Grant Naylor

If genuine it belongs at the beginning and is believed to have read "To my darling Daniela. All figures portrayed within this report are fictitious and any resemblance to the truth is purely coincidental"*

*Just my warped sense (lack) of humor.

Why don't we state the obvious:

  1. The mine is profitable
  2. The first 6 months production was a big miss
  3. H1 2008 guidance - will be a big miss when compared to the FS

The nice thing about Brucejack is that we can compare the actual production figures against Tetra tech's feasibility study.

Here are the projected gold and silver projections:

1st Year production (essentially July 2017 to June 2018)

  • Feasibility Study = projects 402,393.74 oz production
  • Pretium guidance:
    • Low end = 302,000
      • 100,000 oz or 24.85% less than the FS
    • High-end = 352,000 oz
      • 50,000 oz or 12.4% less than the FS
What does that mean? 

Simply, Pretium will be receiving much less revenues from Brucejack than original calculated by:

  • At $1100/oz = $55.4M - $110M less revenues for Year 1
  • At $1300/oz = $65.5M - $130M less revenues for Year 1



  1. A 50% haircut on head grade is OUTRAGEOUS. What this co's management is facing now is the complete decimation of any credibility. That's a chronic problem with no sign of correction. How can a body believe a single word from a public company after being lied to (yes lied to) already?

    Heads need to roll in order for this pale elephant to be anything other than a joke for extremely naive people. Is there any actual value here? Perhaps, but only time can tell the tale and nothing can be swallowed at face value any more.

  2. So what is the correct valuation and target price now?

  3. Who knows? Less than it was before, clearly. Worst case zero (because of the debt) but it would be a while before that can be determined.

  4. "The nice thing about Brucejack is that we can compare the actual production figures against Tetra tech's feasibility study."

    No you should not. This is using the feasibility study for a purpose that it was never intended for. The objective was to calculate how the mine will work out over time, they were not trying to imagine every wrinkle, twist and turn, even the sill pillar during ramp up, in detail, years ahead of time. Clearly impossible to even try. The mine production and costs are distributed into a spreadsheet generally evenly, with variations only if it is known they will occur, and can estimate and explain them accurately enough to be reasonable years in advance. Some people do place more value and weight on the report, than the author would ever ask for. I have never made a feasibility study for an entire mine, but I have worked on cost studies required for a hoisting shaft to extend an operating mine. So I can say that, I have been on the report preparation side of this. It would have bothered me, if somebody quoted parts from the study, after just getting started, highlighting any individual specific details that can be found later to have been incorrect.

    The revival of exploration in the Golden triangle area started with the Skyline discovery in 1981/82, so it has been 36 years of effort by about 100 companies and the hard work of oh so many people that lead to two mines that had difficulties, and finally what is hoped to be a breakthrough into a reasonable success with Pretium. It would be better if only more people could restrain their criticism, until these issues can actually be fully verified. Would it not be embarrassing if/when so many with less than positive comments are found to be wrong in the end, having to eat their words for years to come, wishing one would have been more thoughtful. Either that or having to close some blogs, and or changing to new names for writing comments??

    Regards, Paths (from pvg board)

    1. Hello Paths,

      I acknowledge that it will be impossible for a project to follow the FS outline perfectly, but we should expect that an operation's production should follow the FS to some degree.

      I was wanting to highlight that, according to Pretium's own guidance, they don't expect to reach the production figures outlined in the FS.

    2. You're being way too nice, TAG. Rare indeed that I feel the need to write in a comments section anywhere but Paths, yours just beggars belief. You have the right to throw your own money down the toilet, but your level of ignorance shouldn't be allowed to infect the brains of others. This is, quite seriously, the most stupid thing I've seen written about mining in years and made worse because it's dangerous to the back pockets of neophytes, you've honed a style (on Stockhouse!) to make your ignorance sound like you have a clue as to what you're talking about. Which you don't. Not a single one.

      There are many things I could say about your stupidity (e.g. laying off the crits is what nobody should do ever and it's also why PVG is going to the wall, ask Farquharson of Strathcona all about that) but just one point is enough: It's patently obvious that you don't understand what a FS is, why they are compiled, what they're used for, why they cost oodles more than, let's say, a PEA.

    3. This comment has been removed by the author.

    4. I used to go to the Denver show and tells back when Quartermaine was CEO of SSRI. The man was great and offered what I considered honest reviews. And, I profited .

      Flash forward to the recent time Otto mentioned on his site when the assaying going on was highly questioned by a quality outsider. ---PVG stock dropped under $.50. My logic then, based on those presentations Quartermain made waaaaay back when, and relative to his reporting honesty, told me to buy. The outsider was saying it was anything but a future mine, and he drove that stock down to almost nothing. And again, I did well.

      Trust, me looking for honesty in the management community, I haven't found many penny stock miners that have a continuous propensity to tell it. That one thing compels me to continue to believe the positive spin PVG is putting on their present stance. I know, Quartermain is retired(?). But, he was around when those assays were being reported. I tend to trust him and the people he surrounded himself with in making decisions.

      I also need people like Otto and TAG. Looking for truth in the mining Sector, so much of it is pure lying drivel./jimo

    5. Otto is clearly keen and has a passion, which is good. However, there has to be a limit to civility, and what is reasonable to say in a message, good grief, AG would you not consider taking his message down??? He can post another reply now that he has cooled down.

      Nobody knows which of our two sides will be correct, as the answer is held inside of rock that is still being broken, but on the basis of the probabilities as presented in the Snowden reports, the chances remain clearly weighted on my side. Chances are very good that it is Otto that will have the rude awakening, and will be having to eat his own words, the chances of me getting this obviously wrong, I would think are less than 5%. Even from his thinking alone, no technical backup, rigid, and certain that only a lack of resource coupled with deception is the only explanation, with a belief that old outdated procedures should be viewed as the best option. (Argh!)
      Best Regards!, Paths

  5. If we arnt supposed to use a FS as some sort of guide to future performance then what the fuck is it for? Maybe we should just do away with them, save a ton of cash and build a mine based of a wild fuckin’ guess? And if you’re saying they need more time to show us how amazing Brucejack-off is, maybe they shouldn’t have sign that debt deal with payback terms that are gonna fuck them. FFS.

    1. It is perfectly ok to use the FS as intended. However, where in the FS do they explain the concept and/or scheduling effects of excavating lower to establish a base that will become the top surface of a sill pillar, to support backfill through many years of mining?

      Using the FS to judge this is like using a yardstick to measure the width of a hair. There are so many better ways to evaluate these factors.

      How about, meet me back here in a quarter or two Pappa!

    2. Paths, Please speak to somebody knowledgeable about what is contained in a Feasibility Study before continuing the debate. The FS does in fact include a comprehensive sequencing of the entire mine. It contains the development work to establish the sill pillars and the order in which stopes should be mined to maximize value (higher grades, closer to development heading, earlier). The development and stope sequence is then plugged into an economic model that uses head grades and other factors to derive cash flows. There are a myriad reasons that the actual mining and the operating results deviate from the FS model. These deviations can tell you a lot about the mine or the model. Usually it's that the mine is not as good as the model makes it out to be. But that's rarely because the model didn't contemplate the development necessary to sequence the production in accordance with the model itself.

    3. It is nice to see the sincere interest many have, and I have seen Tom has making helpful comments before, that stood the test of time. However, I see it differently. The information and assumptions that went into the FS become much less valid as soon as the development excavates the ore body and allows people to finally really see it. Within months it's becoming a historical document only, and after a year it's just a good place to find examples of how people once calculated it. Like the boxer said "everyone has a plan until you get punched in the face". So much changes fast, which is ok as they have employees every day making changes to the plans. I think my probability of being correct on this is very high. Look at all the shorting, and the 5$ put options that have been bought, oh well, they will still be worth $80/tonne at the scrap paper recycling plant.


    4. I don't disagree that the mine plan is subject to modification because there are some unknowns that become known as you gain mining experience. This in fact is my basis for claiming that a mine started on a smaller scale using selective methods is how you should approach a deposit such as VOK because mining will usually allow you to figure out the grade distributions much better than drilling can (there is an old trope, "drill for structure and drift for grade") while also allowing you to test various stope sizes and orientations. And I've also stated they can modify the mine plan by high grading to some extent especially if early results demonstrate such grade variability that it becomes impossible to resolve the probability of debt repayment. Indeed, at least one early development schematic of the mine (beginning of 2017) showed some stope preparation at the 1230 Level targeting blocks that appear to be high grade. So I suspect mgmt didn't have Plan A exclusively in mind. The question is, did they move to a Plan B or even a Plan C, and how were the results compared to what they expected? I don't think we'll know that anytime soon, if ever.

  6. The FS lays down the mining sequence (where to start, what to do, what blocks to mine therefore it estimates grades and production (ozs) for those blocks by taking in consideration everything from mining dilution to costs) so the feasie should be pretty accurate i.e. TAG is right to compare predictions with the harsh reality.

    One thing that could happen sometimes is that they 'optimize' the mine design AFTER the release of the FS and the updated plan is slightly different from the one proposed by the FS. This optimization (if that's the case, but I doubt it happened here at PVG) should have been done during the FS stage unless the study was rushed or they didn't want to pour more money into the study thinking hey we're better than the consultants.

    Again, I don't think that it happened here as you start mining where you're suppose to start mining. You can encounter difficulties (unknown faults, geotechnical problems, water inflows etc) or lower grades later in the mine life in parts of the mine that are not that well known (and you'd 'optimize' the mining plan accordingly) but you don't f-up when you start unless something is really wrong.

    Yeah ramping up production etc might be difficult but this is not a processing problem, it is not a mining method problem it is a mineral resource estimate problem.

    1. Dan do you see a mineral resource here that allows them to mine via transverse long hole stopes? Farquharson didn't.

    2. For me, what will be interesting is once the mill upgrades are in place, will we see:
      1. compression of teh FS schedule, with the FS reserves mined over 13 years instead of 18, but generally the grade remains the same
      2. grade drops by 30-40% as they dilute the mineralization with low-grade material and the grade drops to around 6-9 g/t Au

  7. Hate censorship, particularly when it's beneficiary is a very well proven securities mutt of over a decade named Mr. Mark Turner. Tell us why you ran from the UK Mark. And tell us all about your education and experience touting chit stocks to all the stupid 'gringos'

    Perhaps he's right this time. TAG are you are fukkin joke?

    1. I have the comments section as I want people to review (and criticize) my work, but I don't allow people to use them for personal problems and issues.

      If you have an issue with Mr. Mark Turner, then that is an issue between you and him and does not belong on my blog.

  8. I don't belong on this blog you goofy shemale, that's obvious. Glad I learned your colours here and now instead of later. I stuck my neck out to some high rollers for your benefit. Naturally you 'delivered' zero. Tis all good honey. Read about Mark Turner the very open charity thief right here ...

    1. You don’t belong on any blog “Ace”, because your a sociopathic nut job.

  9. Well Otto thank you for your feedback. I wish I could say that nobody has spoken to me like that before. This is actually why I am taking a stand and writing about this. There are times when huge amounts of derision are heaped too frequently, without restraint, from people willing to say too much quickly, without considering the accuracy or impact of their words.

    In the span of a week Pretium, past criticisms have escalated into this becoming a whipping boy for everybody who wants to criticize a mining start up. It's fed on itself leading to relentless selling.

    You say that I must have lost money on this, but my messages on stockhouse include a buy supported with posted charts, a sell before the recent news with my reasoning, then recent buys, most lately Friday before the close 6.60 usd. So my calls on the share price have been disclosed, for any who want to verify that part, no loss so far. However, to me this is not about some stock trades, it's about a company being bullied and heaped with abuse that is not deserved.

    Have you taken a geostatistics course, even just read a book? Can you tell us what part of the reports are wrong? Do you understand what is underway, besides making these "gorilla with no feelings" expressions.

    Sincerely, Paths

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  11. Good debate gents but I think people are missing a couple points. The mine is not ramping up, it hit full production months ago. The grade simply is not here as Strathcona has stated all along.

    1. Shhhhh, don't be mean to Paths.

      The evidence is pointing strongly in that direction, they even admint in their last PR that GC was poor, reconciliation is poor, and their own guidance is stating that the head-grade will be lower than outlined in the FS.

      The good news is that the mill is performing well, they didn't go to much over budget.

      The bad news is - will the mill upgrade, impolitely, fuck 'em up the arse?