Pretium – Pretium’s Predictable Predicament

Author: Viceroy Research Published on: January 10, 2019 Published in: Pretium TSE/NYSE:PVG

JANUARY 10, 2019 – Pretium released the Brucejack Mine’s Q4 2018 production update yesterday after-market, and market reaction shows it fell short of expectations. Pretium’s ore grade has predictably fallen since Q2 2018 by >22%, leading to a miss of Pretium’s H2 low-end gold production guidance of 200,000 ounces. At 11.5g/t, Pretium’s head grade is now 30% below feasibility study sampling.

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Per our previous reports, Viceroy believe Pretium’s grades will continue to fall as Pretium appear to be at the tail end of extracting high-grade deposits found along the Cleopatra Vein. As a reminder to our readers, we have appended this section of our thesis to this note.

Pretium have attributed their production and grade shortfall on their grade control system, which they state will be refined. We believe this is an unnerving excuse, and have provided substantial evidence to support our thesis that Pretium is overmining or selectively mining its deposits.

Production capacity increases of Pretium’s mill will not fix this problem.

Viceroy was astonished at the >10% PVG stock decline on massive volume on January 8, 2019, prior to any announcement by Pretium. This is likely related to earlier bullish sentiment disseminated by The Globe and Mail, who reported Barrick was ‘eyeing’ Pretium.

We find it highly unlikely that Barrick would consider Pretium as an acquisition given it’s performance and grades have fallen well below expectation, and would likely not meet internal IRR criteria.

Pretium has failed to address in any depth the issues raised in our report including:

The involvement of SEC-sanctioned fraudster Sima Muroff in the bulk sample program’s milling operations
The narrowing of drill core spacings as part of the grade control program, the results of which show no continuity within the VOK deposit
Accelerated mine development
Resignation of key consultants
Blown-out costs

We maintain that Pretium is fundamentally overvalued, and see limited value in its current form.

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