Pretium Resources Inc. (PVG, Financial), the Canadian precious metal producer and explorer of properties in the Americas, will repurchase the entire callable 8% gold and silver stream of the total production that the company will make at Brucejack Mine in northwestern British Columbia.
Pretium Resources Inc. sold the stream for $150 million in 2015 to fund the construction of the underground mine at Brucejack. At that time, the financing also included a $350 million line of credit and a $40 million private placement of ordinary shares of Pretium. The company never undertook an equity financing transaction.
The move is value accretive for shareholders of the company because with an investment of $237 million Pretium has canceled its obligation to deliver about 566,000 of refined gold and about 2.1 million ounces of refined silver starting Jan. 1, 2020, over the entire life of operations at Brucejack.
Pretium Resources has guaranteed its operations with an additional future production valued approximately $710 million, assuming a price of $1,200 per ounce of gold and $15 per ounce of silver. Those prices are usually taken by mining companies for the determination of total proven and probable reserves at the end of each fiscal year.
The acquisition will be possible thanks to the liquidity that the company has amassed with the sale of 339,000 ounces of gold that miners have milked from the reserves of the Brucejack Mine in the first year of production.
Pretium Resources is a low-cost, intermediate gold mining company. The Brucejack Mine has a mine life of 18 years and total proven and probable gold reserves of 8.7 million ounces. The facility mill has a capacity rate of 2,700 tons of mineral to process per day. At that rate, the company is forecasting a production of 404,000 ounces of refined gold over the entire life of the mine and 504,000 ounces of gold over the first fight years of operations. The average grade of the reserves is estimated at 16.1 grams per ton over the first 10 years of exploitation and 14.1 grams per ton of ore over the entire life of the mine.
In the first half of 2018, the high-grade gold deposit produced 187,000 ounces of gold and for the second part of this year, the miner is anticipating 7-17.5% growth in gold production of 200,000 to 220,000 ounces.
Pretium Resources is up 2.59% to $8.38 per share in early trading on Tuesday. The share price is above the 50-, 100- and 200-day simple moving average lines. The market capitalization is about $1.526 billion.
Other indicators are telling that the price-book ratio is 1.73 versus an industry median of 1.74, and the EV-to-Ebitda is 14.64 versus an industry median of 9.3.
The recommendation rating is 2 out of 5. The average target price is $13.66 per share.
Disclosure: I have no positions in any security mentioned in this article.
