Pretium - an admission of failure?

As Otto mentioned (link) the grades 'that should not be mentioned' mined during Q4 at the Valley of the Kings Wangs* was a lot lower than planned - 8.4 g/t vs 15.4 g/t, a 45% difference.

*I'm pandering to my Chinese overlords

The market didn't go yippee!

down 35%

Fortunately, the Brucejack web-page (link) contains all the answers to those irritating questions about grade, production and so on.....

I was interested that they included a set of guidance figures for H1, 2018.

Steady state - like Brownian motion and the infinite probability drive. The last sentence is very intriguing...

A 50K or 33% (or 25%  if you are using the upper end of the prediction) swing is massive, that equates to a variance of up to 8,333 ounces per month.

However, this isn't too surprising if you are mining a highly variable deposit with many erratic, inconsistent ultra high-grade veins in a low grade host rock. So, why don't we have some fun, and interrogate the information that we've been given.

I want to calculate the planned head-grades for H1, 2018 to see how they compare to the 2016 reserves (link).

Assumptions:

• Recovery =  95% - slightly below average recovery for 2017
• Mill Throughput = 2850 tonnes per day - slightly less than average throughput in 2017
• Mill utilization = 100% or 181 days
• Production - Pretium PR
• Top end = 200,000 ounces
• Bottom end = 150,000 ounces

Step 1 - RecoveryI'm going to apply the recovery, 95%, to the production. This will tell us how much gold they'll mine before the 5% is lost through the milling process.

• Bottom end = 150,000 / 0.95 =  157,894.74 ounces mined
• Top end = 200,000 / 0.95 = 210,526.32 ounces mined

Step 2 - calculating the tonnage

• 2850 x 181 =  515,850 tonnes milled

Step 3 - Back calculating the head grade

• Bottom end
• 157,874.74 / 515,850 = 0.306 oz/t
• 0.306 oz/t = 9.52 g/t Au
• Top End
• 210,526.32 / 515,850 =  0.408 oz t
• 0.408 oz/t = 12.69 g/t Au

Even if Pretium meet the top end of their guidance, the planned head-grade at Brucejack will be >20% lower than expected, which poses some interesting questions:

• Are Pretium deliberately aiming low so that so that they don't over promise and under deliver?
• Are we seeing and indirect acknowledging that there is a problem with the deposit?
• Whoever designed the mill did a great job - it is over-performing, both with throughput and recovery!

However, there is no cause for alarm, Pretium are telling us that everything is going so well (ignoring teething problems like mining lower grade rock and producing less gold - nothing important), they've decided to make the mill bigger (link). We all know that bigger is better, but is this quick 'paper over the cracks' fix to bring short-term production up to levels stated in the feasibility study?

They admit to albeit indirectly, in the PR with the new grade control drilling and poor reconciliation,   is it wise to increase the mill capacity if they still don't fully understand the gold distribution?

They may find themselves in a position where they have a hungry hungry mill that they'll either start to shove any ol' crap through it (i.e. low grade development rock) or use bulk mining techniques (excessive dilution) to keep it fed.

Often this starts the death spiral for an operation, with decreasing head grades leading to decreasing production, lower revenues and so on. 
2018 is going to be an interesting year...

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