In a Dec. 22 research note, Eric Zaunscherb, an analyst with Canaccord Genuity, reported that Pretium Resources Inc. (PVG:TSX; PVG:NYSE) applied for approval to increase capacity at its Brucejack mill to 3,800 tons per day (3,800 tpd) from the current 2,700 tpd. The company submitted the request to the British Columbia (B.C.) Ministry of Energy, Mines and Petroleum Resources and the B.C. Ministry of Environment and Climate Change Strategy. Pretium preliminarily estimated the expansion cost to be $25 million.
Canaccord expected that Brucejack production would peak at ~450,000 ounces per year (~450 Koz/year), Zaunscherb indicated. However, "with an expansion, we would theoretically see a move to nearly 640 Koz/year, for a 42% annual increase."
Were Canaccord to incorporate these numbers into its Pretium model, Zaunscherb explained, "in 2020 we would see an increase in price target by CA$2 to CA$20.50." However, the financial services firm is leaving the data out of its model for the time being because the project still requires further engineering work and provincial approval.
The analyst pointed out that the Brucejack mill, in the past, "demonstrated the ability to achieve above-expected recovery rates while operating above nameplate capacity." For instance, the mill "ran for 92 consecutive days at 2,840 tpd while achieving nearly 97% recoveries."
Perhaps Pretium is increasing milling capacity, Zaunscherb speculated, "not only to improve current project economics but [also] for future expansion." The company has discovered gold and silver epithermal targets, through its extensive exploration around the Brucejack mine. "Sample grades of up to 62.5 grams per ton gold demonstrate the potential of other high-grade systems within the company's 1,250 square kilometer land package," he added.
Zaunscherb reiterated Canaccord Genuity's Speculative Buy rating and CA$18.50 per share price target on Pretium Resources, whose stock is currently trading at around CA$14.57 per share. He wrote, "We expect potential volatility quarterly with possible fluctuations in head grade, not uncommon in high-grade deposits, but maintain our view that Pretium should be a core holding, with any weakness viewed as an opportunity to add to one's position."
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