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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1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures from Canaccord Genuity, Pretium Resources, Flash Update, Dec. 22, 2017
Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst’s coverage universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research.
Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Pretium Resources Inc. currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated companies. During this period, Canaccord Genuity or its affiliated companies provided investment banking services to Pretium Resources Inc.
In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Investment Banking services from Pretium Resources Inc.
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from Pretium Resources Inc. in the next three months.
An analyst has visited the material operations of Pretium Resources Inc. Partial payment was received for the related travel costs.
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