Mr. Joseph Ovsenek reports
PRETIUM RESOURCES INC: CONTINUED ROBUST ECONOMICS OF BRUCEJACK MINE CONFIRMED WITH UPDATED MINERAL RESERVE AND RESOURCE, 14-YEAR MINE PLAN
Pretium Resources Inc. has provided an updated mineral reserve and mineral resource and life of mine plan for the Brucejack mine, which highlight the continued robust economics of the low-cost, long-life operation.
The 2019 updates will be detailed in a National Instrument 43-101 technical report prepared by Tetra Tech. The 2019 report updates the operating parameters contemplated in the Brucejack feasibility study entitled "Feasibility Study and Technical Report Update on the Brucejack Project, Stewart, B.C." with an effective date of June 19, 2014, before the mine was constructed and operating, and confirms Brucejack as a low-cost, high-grade gold producer. The 2019 report will be filed in Canada under the company's profile on SEDAR and in the United States on the EDGAR section of the Securities and Exchange Commission website within the coming weeks.
All dollar amounts are expressed in United States dollars unless otherwise noted.
"Since achieving production at Brucejack we have processed over 1.5 million tonnes of ore and produced over 500,000 ounces of gold, providing us a solid foundation of operating experience and key metrics to update the life of mine plan and outlook for the mine," said Joseph Ovsenek, president and chief executive officer of Pretium. "At $1,300 gold, Brucejack now has an estimated after-tax net present value at a 5-per-cent discount rate of $2.59-billion over a 14-year mine life. This is a significant increase from the 2017 estimated net present value at a 5-per-cent discount rate of $2.10-billion. With Brucejack as our foundation and with our considerable growth profile, Pretium is well positioned as a profitable gold producer."
Summary of 2019 updates
The updated life of mine (LOM) plan highlights Brucejack's low cost, long life, with the Brucejack mineral reserve grade more accurately accounting for internal dilution from transverse long-hole stoping.
2019 Brucejack mine estimated total life of mine plan (Valley of the Kings and West zone)
Average annual production of over 520,000 ounces of gold over the first five years with average annual cash flow of $350-million (posttax).
Average annual production of over 525,000 ounces of gold over the first 10 years and over 440,000 ounces of gold over 14-year mine life.
Average operating costs of $166/tonne milled over the first 10 years and average LOM operating costs of $168/tonne milled.
At the mine level, average sustaining costs of $502/ounce of gold sold over the first 10 years and average LOM sustaining costs of $502/ounce.
At the corporate level, average all-in sustaining costs (AISC) of $535/ounce of gold sold over the first 10 years and average LOM AISC of $539/ounce.
After tax net present value (NPV) at a 5-per-cent discount of $2.59-billion ($3.6-billion pretax) at $1,300/ounce gold, $16.90/ounce silver and exchange rate of 77.5 U.S. cents/$1 (Canadian).
2019 Brucejack mine total proven and probable mineral reserve estimate
6.4 million ounces of gold (16.0 million tonnes grading 12.6 grams of gold per tonne);
The West zone mineral reserves were not updated;
Excludes all mineral reserve material mined prior to Jan. 1, 2019.
2019 Valley of the Kings proven and probable mineral reserve estimate
5.8 million ounces of gold (13.1 million tonnes grading 13.8 grams of gold per tonne);
Proven mineral reserves of 700,000 ounces of gold (2.0 million tonnes grading 11.2 grams of gold per tonne);
Probable mineral reserves of 5.1 million ounces of gold (11.1 million tonnes grading 14.3 grams of gold per tonne);
Excludes all mineral reserve material mined prior to Jan. 1, 2019.
2019 Brucejack mine economics
SUMMARY OF BRUCEJACK ECONOMIC RESULTS BY METAL PRICE
Low case Base case High case
Gold price ($/ounce) $1,100 $1,300 $1,500
Silver price ($/ounce) $14.30 $16.90 $19.50
Net cash flow ($) $3.62-billion (pretax) $4.87-billion (pretax) $6.13-billion (pretax)
$2.63-billion (posttax) $3.43-billion (posttax) $4.22-billion (posttax)
Net present value (1)
(5.0% discount) ($) $2.67-billion (pretax) $3.60-billion (pretax) $4.54-billion (pretax)
$1.98-billion (posttax) $2.59-billion (posttax) $3.18-billion (posttax)
Exchange rate (US$:C$) 0.775 0.775 0.775
(1) NPV is discounted to January, 2019.
Summary of 2019 updates compared with prior
The 2019 updates are based on the six quarters of mining operations at Brucejack since commercial production commenced in July, 2017. The Valley of the Kings proven and probable mineral reserve gold grade has been decreased from 16.1 grams per tonne to 13.8 grams per tonne (a 14-per-cent decrease) to account for more internal waste than was anticipated in the company's 2016 mineral reserve update (see news release dated Dec. 15, 2016). All estimated costs have been updated with actual costs from 2018. Areas of cost increase include labour, environmental compliance and snow removal. The net present value increase of 23 per cent is attributable to the increase in production from 2,700 tonnes per day to 3,800 tonnes per day.
A comparison of the main parameters of the 2019 report and prior information is summarized below in the "Comparison of main parameters of 2019 report with prior" table.
COMPARISON OF MAIN PARAMETERS OF 2019 REPORT WITH PRIOR
2014 report, 2016 mineral reserve
2019 report and 2017 economics (3) updates
Operating rate (tonnes/day) 3,800 2,700
Mine life (years) 14 18
Proven and probable mineral reserve gold grade (g/t) 12.6 14.4 (1)
Recoveries gold/silver (%) 96.5/87.9 96.7/90.0
LOM average annual gold production (000 ounces) 441 404
LOM average operating costs ($/t) CAD$217 CAD$163
LOM average mine site AISC (4) ($/ounce gold sold) $502 $448
LOM average AISC (2) (4) ($/ounce gold sold) $539 N/A
USD:CAD exchange rate 0.775 0.92
NPV5 pretax/posttax ($M) $3,602/$2,587 $3,210/$2,097
($1,300 Au/$16.90 Ag) ($1,300 Au/$16.50 Ag)
NPV5 pretax/posttax ($M) $2,707/$2,009 $2,250/$1,450
($1,100 Au/$16.90 Ag) ($1,100 Au/$14.00)
(1) The mineral reserves in the 2014 report were updated for the Valley of the Kings in December, 2016 (see
news release Dec. 15, 2016). The 2016 proven and probable mineral reserve grade for Brucejack (Valley of
the Kings and West zone) was 14.4 g/t Au.
(2) Two thousand nineteen LOM AISC includes corporate general and administrative (G&A) costs of $37/ounce not
included in the 2014 report.
(3) The mine economics in the 2014 report were updated in February, 2017 (see news release dated Feb. 3, 2017).
(4) Mine site AISC excludes 3,800 tpd expansion capital.
2019 Brucejack mineral reserve
Brucejack mine total mineral reserve
The updated mineral reserve estimates by zone and mineral reserve category are summarized below in the "2019 Brucejack mine total mineral reserve (1) (2)" table. The 2019 updates include mineral reserve updates for the Valley of the Kings. The West zone mineral reserve was not updated.
2019 BRUCEJACK MINE TOTAL MINERAL RESERVE (1) (2)
Grade Contained metal
Zone Ore Tonnes (Mt) Au (g/t) Ag (g/t) Au (Moz) Ag (Moz)
Valley of the Kings zone Proven 2.0 11.2 11.8 0.7 0.7
Probable 11.1 14.3 10.5 5.1 3.8
Total 13.1 13.8 10.7 5.8 4.5
West zone Proven 1.4 7.2 383.0 0.3 17.4
Probable 1.5 6.5 181.0 0.3 8.6
Total 2.9 6.9 278.5 0.6 26.0
Total mine Proven 3.4 9.5 166.5 1.0 18.1
Probable 12.6 13.4 30.8 5.4 12.4
Total 16.0 12.6 59.3 6.4 30.5
(1) Mineral reserves exclude all mineral reserve material mined prior to Jan. 1, 2019.
(2) Valley of the Kings mineral reserves based on $185/t net smelter return (NSR) cut-off
grade, $1,200/oz gold, $15.60/oz silver, C$:US$ exchange rate of 1.00:0.78.
Validation of 2019 mineral reserve to actual mined and milled production in 2018
The 2019 mineral reserve process was validated by evaluating the complete mineral reserve process on the undepleted 2019 mineral resource model, creating mining shapes as if no mining had occurred. These generated shapes are referred to as 2019 reserve validation shapes. The 2019 mineral resource model that was contained within the validation shapes that are broadly coincident with the 2018 actual stope and development ore positions were compared with the 2018 milled and mined results. Applicable validation shapes were determined by the use of cavity monitoring systems (CMS) scans of the mined material for 2018. The "Validation of 2019 Brucejack mine mineral reserve model versus 2018 actual production" table summarizes the comparison.
VALIDATION OF 2019 BRUCEJACK MINE MINERAL RESERVE MODEL VS. 2018 ACTUAL PRODUCTION
Year Tonnes Gold grade Contained Tonnes Ounce
Year (000s) (g/t) ounces (000s) difference difference
2018 actuals 1,006 11.9 385 - -
2019 reserve validation 801 15.4 397 20% 3%
The tonnage from the validation shapes is 20 per cent less than actual mined while ounces produced are comparable. The primary cause for this is the mining of material outside of the 2019 validation shapes that were originally part of the 2016 mineral reserves. This additional material is not encompassed within the validation shapes and therefore would not be a part of the 2019 reserves if these areas were to be mined again. The inclusion of uneconomic material (waste) within the mined stopes resulted in mining more tonnage at a lower grade in 2018 than would have been mined based on the 2019 reserve validation shapes.
Mining and processing
Brucejack is a high-grade underground mining operation using the long-hole stoping mining method and cemented paste backfill. The Valley of the Kings, the higher-grade, primary targeted deposit, has been developed first; the lower-grade West zone will be developed in the second half of Brucejack's 14-year mine life. The mine is planned to increase the processing rate from 2,700 tonnes per day to 3,800 tonne per day by year-end 2019 and mine a total of 15.8 million tonnes of ore for the 14 years at an average mill feed grade of 12.6 grams gold per tonne.
Mineral processing at the current operation uses conventional gravity concentration and sulphide flotation, producing gold-silver dore and gold-silver flotation concentrate. The mill will be upgraded to use the same process flowsheet at an increased mill feed rate of 3,800 tonne per day. Predicted metallurgical recoveries over the life of mine average 96.5 per cent and 87.4 per cent for gold and silver, respectively. A total of 6.2 million ounces of gold and 26.0 million ounces of silver are estimated to be produced over the remaining mine life of Brucejack. Projected production and processing is summarized in the "Life of mine projected production and processing summary (1)" table.
LIFE OF MINE PROJECTED PRODUCTION AND PROCESSING SUMMARY (1)
Gold Silver Gold Silver
Tonnage Development grade grade production production
Years (2) (t) metres (2) (g/t) (3) (g/t) (000s ounces) (000s ounces)
1 1,235,000 10,924 10.6 11.2 407 392
2 1,371,000 10,950 12.0 11.3 512 445
3 1,383,000 8,550 13.0 11.7 563 462
4 1,386,000 8,550 13.6 10.2 592 404
5 1,387,000 8,550 12.3 17.5 533 663
6 1,388,000 7,350 13.5 20.7 586 779
7 1,388,000 7,240 14.3 52.1 613 1,993
8 1,380,000 4,370 13.9 93.7 594 3,637
9 1,180,000 3,530 12.6 85.6 457 2,832
10 1,180,000 1,010 12.0 130.3 436 4,371
11 902,000 1,320 10.8 87.7 299 2,220
12 826,000 920 14.4 119.3 366 2,793
13 571,000 250 9.8 220.1 171 3,634
14 177,000 100 7.4 269.4 40 1,387
Life of mine 15,754,000 73,610 12.6 58.4 6,169 26,012
(1) LOM begins on Jan. 1, 2019. The mineral reserve excludes all mineral reserve material mined
prior to Jan. 1, 2019.
(2) Tonnes are rounded to nearest thousands. Development metres are rounded to the nearest tens.
(3) Gold grade is estimated within a tolerance range of plus and/or minus 10 per cent for the proven
mineral reserve, and plus and/or minus 15 per cent for the probable mineral reserve in the
remaining years of production.
Capital and operating costs
The capital cost for the mine throughput upgrade to 3,800 tonnes per day is estimated at $22.5-million over the next three years, including a contingency of $1.9-million. Capital costs are summarized in the "3,800 tpd expansion capital costs summary" table.
3,800 TPD EXPANSION CAPITAL COSTS SUMMARY (1)
Mine underground $2.4
Process and infrastructure 13.9
Total direct costs 16.3
Indirect costs (2) 2.4
Contingency (2) 3.8
Total capital cost 22.5
(1) Year 2019 to 2020 capital cost expenditure
for expansion of mine, process and
infrastructure, including mine throughput
(2) Mill-expansion-related indirect costs
and contingency only.
The total sustaining capital cost for the remainder of the LOM at Brucejack is estimated at $200.8-million. Sustaining capital costs are summarized in the "Sustaining capital costs summary" table.
SUSTAINING CAPITAL COSTS SUMMARY
Site services and surface maintenance 115.7
Total sustaining capital cost 200.8
Average LOM operating cost is estimated at $168 per tonne milled. Operating costs are summarized in the "Operating costs summary" table.
OPERATING COSTS SUMMARY
Mine general and administrative 36
Surface services and others 36
Total operating cost 168
All-in sustaining cash costs, which include byproduct cash costs, sustaining capital, exploration expense and reclamation cost accretion, are summarized in the "All-in sustaining costs life of mine" table.
ALL-IN SUSTAINING COSTS LIFE OF MINE
($ million, except for cost per ounce)
Total cash costs (1) $2,835
Reclamation cost accretion $29
Sustaining capital expenditure $201
Mine site sustaining costs (2) $3,065
Gold sales (ounces) 6.1 ounces
Mine site sustaining cost per ounce (3) $502/ounce
Corporate G&A Costs $37/ounce
All-in sustaining costs $539/ounce
(1) Net of silver credits at base case silver price of
(2) Excludes 3,800 tpd expansion capital.
(3) Includes offsite shipping, treatment, refining charges and
2019 mineral resource
Brucejack mineral resource
The 2019 mineral resource estimate incorporates 76,697 metres of infill drilling in 1,275 drill holes and 18,250 metres of mapped underground development completed in the Valley of the Kings zone since the 2016 mineral resource estimate (see news release dated July 15, 2016). The updated mineral resource reported by zone and confidence category is summarized in the "Brucejack mineral resource estimate" table. The Valley of the Kings mineral resource was updated in 2019, but only in an area where new data were available; the West zone mineral resource was not updated.
BRUCEJACK MINERAL RESOURCE ESTIMATE (1) (2) (3) (4) (5) (6)
Confidence Grade Contained metal
Zone category Ore tonnes (Mt) Au (g/t) Ag (g/t) Au (Moz) Ag (Moz)
Valley of the Kings zone Measured 1.8 17.15 16.4 1.0 1.0
Indicated 11.9 17.15 15.4 6.6 5.9
Total M+I 13.7 17.15 15.5 7.6 6.8
Inferred 3.8 17.7 19.4 2.2 2.4
West zone Measured 2.4 5.85 347 0.5 26.8
Indicated 2.5 5.86 190 0.5 15.1
Total M+I 4.9 5.85 267 0.9 41.9
Inferred 4.0 6.4 82 0.8 10.6
Total mine Measured 4.2 10.71 205 1.5 27.8
Indicated 14.4 15.19 45.6 7.1 21.0
Total M+I 18.6 14.2 81.6 8.5 48.7
Inferred 7.8 12.0 51.3 3.0 13.0
(1) Mineral resources are reported inclusive of mineral reserves.
(2) Mineral resources which are not mineral reserves do not have demonstrated economic viability.
The estimate of mineral resources may be materially affected by environmental, permitting,
legal, marketing or other relevant issues. The mineral resources in this news release were
estimated in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (CIM),
CIM standards on mineral resources and reserves, definitions and guidelines prepared by the
CIM standing committee on reserve definitions and adopted by CIM council.
(3) The quantity and grade of reported inferred mineral resources in this estimation are uncertain
in nature and there has been insufficient exploration to define these inferred mineral resources
as an indicated or measured mineral resource. It is uncertain if further exploration will result
in upgrading inferred mineral resources to an indicated or measured mineral resource category.
(4) Tonnes, grade and contained metal figures in totals may differ due to rounding.
(5) For comparative purposes only, the Brucejack mineral resource is reported at a gold equivalent
value defined as AuEq is equal to Au plus Ag divided by 53.
(6) Mineral resources exclude all mineral resource material mined prior to Jan. 1, 2019.
The 2019 mineral resource estimate for the Valley of the Kings zone differs from the 2016 mineral resource estimate in that there are significantly more drill holes used in the estimation of the model, the classification has been adjusted to allow for the change in confidence as a result of the new information, the estimation parameters have been adjusted to allow greater local accuracy of the grade estimates (based on validation of the model estimates against production information) and production volumes have been removed for all production prior to Jan. 1, 2019. This has resulted in a reduction in the number of tonnes in the measured and indicated resource categories. The 2019 measured and indicated resource for the Valley of the Kings zone is 13.7 million tonnes at 17.2 g/t Au compared with 16.4 million tonnes at 17.2 g/t Au in 2016.
Independent qualified persons
The qualified persons as defined by National Instrument 43-101 in the attached table are independent of Pretium and responsible for the 2019 report, and each has reviewed, approved and verified the scientific and technical information contained in this news release relating to his or her respective scope of responsibility, as applicable.
Qualified person Scope of responsibility
Ivor W.O. Jones, MSc, PGeo, FAusIMM (CP) Geology and mineral resources
Mark Horan, PEng, MSc, Tetra Tech Mineral reserves, mining methods; underground
infrastructure; paste backfill distribution; mining
operating cost estimate; financial analysis
John Huang, PhD, PEng, Tetra Tech Metallurgy and recovery methods; market studies; process,
G&A; and site services operating cost estimates
Hassan Ghaffari, PEng, MASc, Tetra Tech Surface infrastructure; capital cost estimate
Maritz Rykaart, PhD, PEng, SRK Waste rock and tailings storage facility
Rolf Schmitt, MSc, PGeo, ERM Aspects of environmental, social, community studies and permitting
Hassan Ghaffari, PEng, MASc, Tetra Tech Capital cost estimate
Alison Shaw, PhD, PGeo, Lorax Geochemistry, water quality
Hamish Weatherly, MSc, PGeo, BGC Engineering Inc. Water management
Trevor Crozier, MEng, PEng, BGC Engineering Inc. Hydrogeology
Cathy Schmid, MSc, PEng, BGC Engineering Inc. Underground mine geotechnical
Ed Carey, PEng, BGC Engineering Inc. Site geotechnical
Longitudinal mining test stopes based on refined geological understanding
The plan for underground development and mining at the Valley of the Kings was based on the initial understanding that the high-grade gold was carried throughout the broad quartz stockwork running nominally east-west. Consequently, the 2014 report selected transverse long-hole stoping as the mining method for the Valley of the Kings, which provided for stopes up to 40 metres wide to be mined across the width of the quartz stockwork corridors.
The experience gained from over six quarters of mining at Brucejack and the Valley of the Kings has led to a refined understanding of the geology and controls on the gold mineralization. The high-grade gold mineralization is now understood to be carried in multiple zones of between 10 to 15 metres wide running nominally east-west within the broader quartz stockwork at the Valley of the Kings.
Based on improved understanding of the geology and controls on the gold mineralization longitudinal long-hole stoping, mining along the direction of the corridors of high-grade gold mineralization, may be a better method of mining. Longitudinal long-hole stoping will be tested this quarter and is expected to reduce the amount of internal waste within stopes, potentially increasing the average stope grade and reducing the amount of underground development. If successful, an updated mineral reserve and life of mine plan will be prepared for year-end with longitudinal long-hole stoping included in the mining method and incorporating the reserve expansion drilling from this year's drill program.
Production and cash flows
Over the next five years, estimated gold production of over 2.6 million ounces of gold will generate cash flows of $1.74-billion, which are more than sufficient to pay down the scheduled debt maturities of approximately $580-million. Capital allocation strategy for 2019 is focused on organic growth and paying down debt. Capital allocation for 2020 and beyond will be addressed later this year.
Scientific and technical information in this news release not set out in the 2019 report has been reviewed, approved and verified by Warwick Board, PhD, PGeo, PrSciNat, Pretium's vice-president, geology, and chief geologist, and Nicolas Scarcelli-Casciola, BASc, PEng, Pretium's mine planning manager, each of whom is a qualified person as defined in NI 43-101.
Reserve and resource estimate update webcast and conference call
Webcast and conference call details: Thursday, April 4, 2019, at 8 a.m. EDT (5 a.m. PDT)
Webcast: see company website
Toll-free (North America): 1-800-319-4610
International and Vancouver: 604-638-5340
About Pretium Resources Inc.
Pretium is a low-cost intermediate gold producer with the high-grade gold underground Brucejack mine in Northern British Columbia.
We seek Safe Harbor.
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