Pretium Resources Provides Update on Brucejack Mine, Stock Drops Nearly 30%

For the most part, when a company provides the public with an update on one of its project, it’s usually a good thing. For Pretium Resources (NYSE:PVG) (TSE:PVG), the opposite happened.

What Happened?

Today, Pretium Resources, which is based in Vancouver, Canada, provided the public with a production update on its Brucejack mine. The gold miner also issued its guidance for 2018.

After the news reached the masses, the stock started to drop. As of this writing, Pretium Resources is trading at $9.96, which puts the PVG stock down $3.46, or 25.78%. Currently, the company has a market capitalization of 1.79 billion.

Why? Well, clearly, the update was not what investors were expecting to hear.

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The Brucejack Mine Update

Personally, I’m not shocked to see Pretium Resources stock down nearly 30%, considering the Canadian gold miner announced that it witnessed a considerable drop in the fourth quarter in regards to the amount of gold it produced at the Brucejack mine.

For those who don’t know, the Brucejack Mine is located in northwestern British Columbia, and it commenced commercial operation last year. At the B.C. based mine, Pretium Resources uses the following mining method: long-hole stopping using a mixture of transverse and longitudinal mining. Keep in mind this mining method depends entirely on the orientation and zone width.

One of the last times that Pretium Resources provided the public with an update on the mine was in September of last year, in which it stated that it was going to try to achieve steady state output for the end of 2017.

Apparently, that didn’t happen. According to the update, Pretium Resources produced a mere 70,281 ounces of gold during Q4. If you’re unfamiliar with the Brucejack mine, you might think that 70,000 ounces of gold is pretty significant. However, when you consider that Pretium Resources produced 82,203 ounces of gold in Q3, you’ll get a better understanding as to why the stock is dropping today.

Pretium Resources cites the decline in production due to a lower gold recovery rate.

Further, the company also provided its guidance for the first half of this year, which most likely, I would suspect, played a defining role in today’s decline. Pretium Resources announced that gold output should be between the range of 150,000 ounces and 200,000 ounces and that all-in sustaining costs would come in a range of $700 to $900 per ounce.

The Takeaway

A nearly 30% drop following the production update is unfortunate considering the company is six months into increasing its output at the Brucejack mine, but I wouldn’t necessarily oust the company from your mind just yet.

Sure, by having just one mine, it makes this a risky gold stock, but I do think that investors will, at some point, reap the benefits of Pretium Resources moving from gold mine developer to a producer.

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