Pretivm Resources' stock drops after announcing bulk sample results

The Brucejack property comprises six mineral claims, with the total area of these six claims equalling 3,199.28 ha located
within the Sulphurets District in the Iskut River region, approximately 65 km northnorthwest of the town of Stewart, British Columbia, Canada. Map from InfoMine.

Pretivm Resources (NYSE:PVG) dropped 27% to $3.39 a share after the company announced processing results today from its Valley of the Kings Bulk Sample Program.

The company is expecting 4,000 ounces of gold from its 10,000-tonne bulk sample program. Results to date are as follows:

After milling 2,167 tonnes of bulk sample material contained in the 426585E cross-cut, the company announced the following mill results:

  • Gold Ounces Gravity Concentrate: 94
  • Gold Ounces Flotation Concentrate: 174
  • Gold Ounces Tailings: 13
  • Total Contained Gold Ounces: 281
  • Total Contained Silver Ounces:532

"The processing of the excavated 10,000-tonne bulk sample is proceeding as planned at a rate of approximately 1,000 tonnes per week to produce gold/silver gravity and flotation concentrates.," said the company in a news release.

"Processing of the 426555E cross-cut is underway and is expected to be completed this week, followed by the 426645E cross-cut. A total of 4,000 ounces of gold were projected to be produced in total from the material excavated for the Program."

Snowden Mining Industry Consultants is reviewing and signing off on the milling and processing component of the program after Strathcona resigned earlier this month.

In its news release Pretivm commented on the controversy.

Strathcona's Withdrawal from the Program

As stated above, consultants from Strathcona were engaged in late 2012 as independent Qualified Persons to oversee the 10,000-tonne bulk sample and produce a report at the conclusion of the Program once all data, including the assay results from sample tower and the 16,789 meters of completed underground drilling, had been compiled. The report was expected to reconcile the assay results from the sample tower against a local resource estimate prepared by Snowden based on the Program drilling, which would provide an empirical grade prediction variance for a stope-sized tonnage that could be related to and used for resource classification. Strathcona's report on the Program was expected in early 2014.

Strathcona withdrew from the Program on October 8, 2013 before any results from the processing of the bulk sample were available. In withdrawing from the Program, Strathcona advised Pretivm that "…there are no valid gold mineral resources for the VOK Zone, and without mineral resources there can be no mineral reserves, and without mineral reserves there can be no basis for a Feasibility Study." They also advised that "…statements included in all recent press releases [by Pretivm] about probable mineral reserves and future gold production [from the Valley of the Kings zone] over a 22-year mine life are erroneous and misleading." Snowden maintains its stance that the November 2012 Mineral Resource Estimate remains valid, and has taken steps to involve a third party peer review in its up-coming mineral resource update.

In addition, Strathcona advised that, "The infrequent high-grade intercepts reported in the press releases have been shown in the underground exposures of the bulk sample program to usually be of very narrow width (0.5 meters) and associated with narrow geological structures that occasionally have mineable continuity as in the case of the Cleopatra Vein." The results from Valley of the Kings Program drilling have been, from the outset, consistent with results from prior exploration drilling in the Valley of the Kings. Drilling has frequently intersected extreme grade mineralization over narrow widths, with 47 intersections grading greater than 1,000 grams of gold per tonne from underground drilling (on average there is one in every 550 meters of 2013 drilling) and 125 intersections in total to date grading greater than 1,000 grams of gold per tonne for the Valley of the Kings. The Program was initiated, amongst other reasons, to determine the bulk mineability of the Valley of the Kings mineralization. These reasons and the form of mineralization were discussed with Strathcona prior to their engagement.

When it withdrew, Strathcona advised Pretium that it had previously asserted similar views critiquing the Snowden resource model for the Valley of the Kings, accompanied with "recommendations" for public disclosure of the preliminary bulk sample data supporting their conclusions. At one point, these assertions, conclusions and "recommendations" were made on the basis of approximately 20% of the underground drilling results, no assay results from the sample tower and no results from production.

Snowden has consistently and repeatedly advised in response to all comments from Strathcona that the true test of the resource estimate will only come from the reconciliation results between the ultimate grade of the bulk sample (as defined by produced metal and metal accounting) and the grade of the resource estimate for the same volume. Strathcona resigned before Snowden had an opportunity to formally respond to their assertions.

Both Pretivm's management and Snowden share a number of significant concerns with respect to Strathcona's conclusions. They contend that the Strathcona conclusions are based on: (a) the interpretation of preliminary data, (b) the interpretation of too few data, and (c) the incorrect interpretation and application of preliminary local data for comparison to the resource estimate model. Pretivm management and Snowden also share significant concerns that the sampling tower approach for the Valley of the Kings deposit may be flawed.

Snowden's Response

Given the heterogeneous nature of the Valley of the Kings mineralization, Snowden has consistently advised Pretivm that the entire 10,000-tonne bulk sample needs to be processed prior to completing a reconciliation that can be considered robust. Dr. Simon Dominy of Snowden is reviewing the sample theory underlying Strathcona's sampling protocols for the sample tower and will be providing a formal expert opinion to Pretivm. Dr. Dominy has noted that he concurs with the current approach of submitting the entire bulk sample (as batches) for full processing through the Montana plant, and has advised that such an approach is always the best route to fully evaluate bulk samples and/or trial mining parcels.

Dr. Dominy has provided a preliminary report to Pretivm that covers several areas of consideration for the evaluation of the design of the sampling Program. This includes the appropriate application of mineralisation characterization study, and the difficulties in achieving representative samples in a high-nugget coarse gold environment.

Dr. Dominy is a dual qualified mining geologist-engineer with 25 years of experience, across mine operations, academic research and consulting. He has an extensive global track-record of auditing, designing and managing gold sampling and assaying programmes. He is a leader in the sampling of coarse gold deposits, and consulted, lectured and published widely on the topic. Recent sampling assignments have included: audits and reviews; integrated studies of ore characterisation, gold deportment and metallurgical testing; sample size determination; sample protocol design and optimisation; the application of the Theory of Sampling; metallurgical plant sampling; metallurgical sampling; and grade control systems. He also has extensive practical experience in surface and underground bulk sampling/trial mining programme design, planning, management and interpretation.

Pretivm's Position

Pretivm maintains that it conceived of the Valley of the Kings bulk sample excavation and associated work as an opportunity to compile and analyze all the possible data which could be generated by a multi-tiered exploration program constrained by the proscribed legislated limit of a 10,000-tonne excavation. Integral to the Program design is the element of corroboration and assimilation for all input data to ensure that any analysis of the deposit will result in robust conclusions about the nature and the extent of the gold mineralization in the Valley of the Kings. It was on this basis that it engaged Strathcona and Snowden, two well-regarded firms, to fulfill their roles as independent experts and act in collaboration on the Program.

"We are disappointed by Strathcona's decision to withdraw prematurely from the bulk sample program," said Robert Quartermain, Pretivm's Chief Executive Officer. "We are satisfied with the results of the initial bulk sample processing, and are confident that the results from the mill will provide the conclusive outcome that our investors expect. The underground drilling and associated development to date has demonstrated that the Valley of the Kings deposit contains significant high-grade gold mineralization."

Independent Qualified Persons from Snowden are responsible for the review and sign-off of the milling and processing component of the Program, and will issue a final report on its completion.

As previously disclosed, the total amount of gold and silver produced by the mill will be reported on the completion of processing. An updated Mineral Resource estimate for the Valley of the Kings incorporating all 2013 underground and surface drilling and milling results will be prepared following the receipt of all assay data. The updated resource estimate will incorporate learnings from the bulk sample evaluation as well as from additional drilling completed during the underground program so that the confidence and the robustness of the mineral resource estimate can be maximised.

Ivor Jones (FAusIMM(CP)) of Snowden is an independent Qualified Person, as defined by National Instrument 43-101 and is responsible for the resource evaluation at the Project. Ian I. Chang, M.A.Sc., P.Eng., Vice President, Project Development, Pretium Resources Inc. is the Qualified Person responsible for the Bulk Sample Program processing and Feasibility Study. Kenneth C. McNaughton, M.A.Sc., P.Eng., Chief Exploration Officer, Pretium Resources Inc. is the Qualified Person responsible for the Brucejack Project exploration program. The information in this release which relates to the Brucejack Project has been reviewed and approved for release by Messrs Chang, McNaughton and Jones, and they have consented to the inclusion of the information in this press release in the form and context in which it appears.

Correction: Story was intended to show a stock drop that coincided with the bulk sample results. Second paragraph was changed to make this clear. We regret the error.