Up above the treeline in the mountains of northwestern B.C., Pretium Resources’ Brucejack project promises to add lustre to the province’s mining industry.
Cost overruns in the gold mining industry have become so commonplace that investors are justifiably wary of feasibility estimates. But the Brucejack project in British Columbia is trending in the opposite direction as construction progresses, shedding capital costs amid fiercely competitive conditions for equipment and contractors and favourable currency markets.
Since Vancouver-based Pretium Resources released a feasibility study for Brucejack in mid-2014, estimated capital costs for the project have dropped 14 per cent to US$641 million. That excludes the US$56 million in working capital set aside for startup in case gold receipts are delayed. The portion allocated to the underground mine fell 33 per cent to about US$101 million.
It is mostly a matter of timing. “The silver lining for us in this industry downturn is that there are a lot companies and individuals looking for work, so there was a very competitive bid process for the underground contracting job and we were successful in getting good terms from a reputable contractor in Cementation Canada,” said Pretium president Joseph Ovsenek.
And while the feasibility estimate assumed an exchange rate of US$0.92: CAD$1, the value of the Canadian dollar has fallen significantly since. Actual conversions – including hundreds of millions in debt and equity financing – are occurring at or near US$0.75 to the Canadian dollar. The exchange savings amount to roughly US$145 million, offsetting higher costs for environmental monitoring, winter construction and additional man hours.
Pretium is also celebrating a financing milestone in an otherwise brutal market for miners. In early March the company raised the final US$130 million needed to build Brucejack through a public share offering at US$4.58 per share. The offering followed a US$540 million financing consisting of US$350 million in debt, a US$150 million prepayment under a gold-silver stream agreement and a US$40 million private placement of shares. Investors opened their wallets after Brucejack received final permits from the provincial and federal governments in mid-2015.
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