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 minng 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 annoucement 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.
Viceroy detail Pretium’s unannounced departure of Brucejack’s General Manager just 12 days after our initial report (NYSE:PVG).
Download Link – Report
SEPTEMBER 18, 2018 – Viceroy continues its coverage on Pretium Resources Inc. This report will detail what appears to be an exodus of personnel from Pretium since the start of the operation at the Brucejack mine.
Notably the General Manager of Pretium’s Brucejack mine, Kevin Torpy, has just resigned from the company. This was not announced by Pretium, but instead by Torpy’s new employers: Titan Mining Corporation – a microcap zinc explorer – on 17 September 2018.
Yet again it is left to Viceroy to inform stakeholders of key developments.
Viceroy addresses Pretium’s revised ARR and presents new evidence supporting overmining thesis. (PVG:TSX / PVG:NYSE)
Download link – Pretium’s Catch 22
SEPTEMBER 11, 2018 – On 6 September, 2018, Viceroy research published its first report on Pretium Resources detailing what we believe is a scheme to distort the company’s mining results and inflate the projected reserves of the company’s Brucejack mine.
On September 10 Pretium issued a press release correcting its 2017 Annual Reclamation Report, the contents of which were used in Viceroy’s original report. We believe this is a badly thought-out attempt at damage control for the following reasons:
- Pretium’s new ARR figures are internally inconsistent and imply that Pretium misreported the Brucejack mine underground void by the volume of 140 Olympic-size swimming pools.
- The decrease in the change of underground void volume continues to present major discrepancies to Pretium’s feasibility study, particularly around expected and historical bulk density figures obtained from the Brucejack mine
- If investors choose to accept that no overmining has occurred, a pandora’s box of serious operational issues continues to plague Pretium. Specifically, it becomes inexplicable that Pretium’s COGS and Capex have blown totally out of proportion and why explosive has dramatically exceeded expectation.
- Viceroy present new evidence of accelerated mine development from comments by Pretium management in last week’s Rodman Conference. Pretium appear to have accelerated stoping by 18-24 months, moving well into the VOK lower zone well ahead of schedule. If investors choose to accept no overmining has occurred, Pretium’s accelerated mine development and excess dore recoveries imply the company is selectively mining high grade deposits, and has already exhausted a large portion of these in the VOK-lower/upper zones.
- Viceroy present new evidence of excess waste generated by Pretium throughout its development phase. Pretium sought indefinite extension of time to dispose of excess waste in extracted from its mines. Viceroy’s consultants confirm This is further evidence that the rate of mining and development at Brucejack mine far exceeds the design of the mine site, given that as far back as 2015 it was clear that Pretium lacked the correct equipment to dispose of waste ore.
Investors must seriously consider the implications of Pretium’s financial and operational figures should they choose to accept that no overmining has occurred. Further, they should question management as to their responses to our findings, instead of confining their responses to fireside chats with sell-side analysts.
Viceroy continue to believe that Pretium’s grades will fall significantly, operating metrics/analysis has been distorted, and assets will be seized by its secured creditors as collateral as the company is overburdened by debt.
Viceroy maintains its belief that Pretium’s equity is likely worthless.
Distorted grades, involvement of SEC sanctioned entities, and high turnover of mineral consultants – Pretium flies many red flags. (PVG:TSX / PVG:NYSE)
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SEPTEMBER 6, 2018 — Pretium Resources owns and operates the purportedly high-grade Brucejack gold mine in Northwest British Columbia in Canada. Viceroy is short Pretium Resources, as our research suggests its mining results have been distorted and the equity likely worthless as the overindebted company bleeds cash over the next 12 months:
- Strathcona Mineral Services Limited (Strathcona), the mining consultancy that famously declared Bre-X to be a fraud, resigned from Pretium’s 2013 bulk sample program later stating, “…they will not have a mine producing 425,000 oz. a year for the next 20 years, as they have been advertising so far”. The entire Pretium investment thesis rests on the validity of the 2013 bulk sample program.
- After Strathcona’s resignation, Pretium hired Strategic Minerals LLC (Strategic Minerals), an entity owned and managed by disgraced investment manager Serofim “Sima” Muroff to handle the testing of its bulk sample program. Muroff was charged by the SEC for securities fraud after misappropriating millions of dollars of investor funds and siphoning away millions more. Our research suggests that Muroff has knowingly assisted Pretium in overselling the quality of Brucejack Mine to investors.
- The funds embezzled by Muroff were partially invested in numerous early-stage gold mining assets which to date have produced no gold. We believe Muroff’s entity was created to similarly distort gold grades for these gold mining assets. Muroff’s investors funds were also used to invest in equities and derivatives of other gold mining assets which we believe included Pretium.
- The overwhelming majority of our research indicates Pretium manipulated the results of its bulk sample program through an overreliance on samples taken from the Cleopatra vein, thereby artificially inflating Pretium’s grades and reserve projections for the Brucejack Mine.
- The manipulated bulk sampling test performed by Strategic Minerals was used by the courts in Wong v. Pretium Resources, 2017 as the basis of their decision that the Strathcona analysis was incorrect. This did not exempt the company from withholding Strathcona’s preliminary analysis from investors.
- Government documents indicate Pretium is moving approximately double the tonnage from the underground mine than disclosed to investors. This suggests reported grades and reserves are significantly inflated, a much greater amount of waste is being dumped into local lakes, and more explosives are being utilized. Pretium’s operational plan has experienced dramatic changes in a short amount of time, leading us to believe that management is scrambling to find consistent, high-grade ore to maintain the charade that its debt and equity are viable.
- Pretium founder and chairman, Robert Quartermain’s only mine operating experience at Pirquitas, an Argentinian silver mine owned by Silver Standard, resulted in a ~53% reserve cut and subsequent shutdown. A number of Quartermain’s management team left Silver Standard to operate Pretium.
- As of Q2 2018, Pretium has ~$700M of debt (excl. convertible notes) with an effective interest rate of ~15%. If Pretium can’t make or re-negotiate the payment, then Pretium may be unable to remain a going concern. We believe this deadline has provided an incentive for Pretium to inflate its results through the near-term depletion of the Cleopatra vein and take more rock out of the ground than disclosed and planned.
The implications of our findings on grade, tonnage and life of mine are damning and lead us to believe that Pretium’s equity is highly likely to be worthless in its current state, and its credit significantly impaired.
Viceroy believe Pretium bears striking resemblance to Rubicon Minerals, now operating as a shadow of its former self after revising mineral reserve estimates down ~90%.
We believe the most likely scenario is that Pretium’s assets are seized by its secured creditors as collateral.