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The controversy around Pretium Resources Inc. is escalating after the miner revealed that a highly-respected team of geologists declared its entire resource to be invalid.
The judgment came from Strathcona Mineral Services Ltd., the Toronto firm that famously declared Bre-X to be a scam. Pretium shares plunged 28% to $3.45 on Tuesday as investors absorbed the news.
There is plenty of gold in Pretium’s “Valley of the Kings” discovery in British Columbia, but disagreement persists over how it should be measured. Strathcona, which was hired by Pretium to oversee a bulk sample program for the deposit, resigned two weeks ago because it disagreed with the company’s chosen methodology and found fault with its resource.
Strathcona President Graham Farquharson criticized Pretium management on Tuesday, saying his firm informed Pretium about its concerns several times and they were not immediately disclosed.
“Our differences with Pretium management are all about when is public disclosure of material facts appropriate,” he said in an email.
On Tuesday, Pretium revealed that Strathcona’s evaluation of the bulk sample revealed less gold than the approach it elected to use. Vancouver-based Pretium also disclosed parts of Strathcona’s resignation letter, which includes a scathing assessment of the work so far at the project.
“There are no valid gold mineral resources for the [Valley of the Kings] zone, and without mineral resources there can be no mineral reserves, and without mineral reserves there can be no basis for a feasibility study,” Strathcona said. The firm went on to say that Pretium’s statements about probable mineral reserves and future gold production from the project are “erroneous and misleading.”
According to Strathcona, the proper way to evaluate the bulk sample from Valley of the Kings is to take a small amount of material (a “sample tower”) for analysis. Pretium believes the right thing to do is to run the entire 10,000-tonne sample through the mill and see how much gold is produced.
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