Precious Metals

Research suggests two gold mines ripe for purchase

The first doré bars were poured in 2013 at the Detour Gold Mine in Ontario, Canada. A doré bar is a semi-pure alloy of gold and silver, usually created at the site of a mine. It is then transported to a refinery for further purification.

Images courtesy of Silverpoint Media.

An analysis by Katusa Research of the current state of the gold market suggests mining firms Pretium Resources and Detour Gold are ripe for acquisition, although neither firm is currently for sale.

Katusa Research in Vancouver, British Columbia, Canada, issued a market research report Sept. 21 outlining its reasoning.

Pretium Resources is 100 percent owner of the Brucejack Mine, a high-grade gold underground mine located in northwestern British Columbia. The Brucejack Mine is producing 2,700 metric tonnes of ore daily.

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The mine began commercial operation in the summer of 2017 and produced 230,000 ounces of gold during the first nine months of ramp-up.

According to Pretium Resources, “A feasibility study completed in June 2014 and updated in December 2016 has outlined Proven and Probable mineral reserves in Brucejack’s Valley of the Kings comprising 8.1 million ounces of gold (15.6 million tonnes grading 16.1 grams per tonne gold).”

In 2009, Pretium discovered what the industry refers to as the Valley of the Kings zone. One of the first drill holes yielded gold at the rate of 17,000 grams of gold per metric tonne. Analysis notes that the Brucejack Mine has 8.7 million ounces of proven and probable gold reserves at an average rate of 14.66 grams per metric tonne.

Pretium has increased production to 500,000 ounces annually, which can be maintained for 18 years. At that rate, the mine will rank 29th in the world in terms of production and the highest grade mine out of any of the world’s largest gold mines.

Detour Gold is projected to yield approximately 600,000 ounces of gold annually for the next 18 years.

However, according to Karusa’s research, “the Achilles heel of the mine is that production will average 0.97 grams per tonne over the life of the mine.” Production costs per ounce are $843.

“It makes it a great mine to own in a strong gold market, and a disaster to own in a weak one,” according to Katusa Research. “And right now, things are shaky in the gold market. Volume is low, sentiment is low and the gold price is struggling,” with a spot price falling below $1,200 per troy ounce in recent months.

With high production costs against the spot price, Detour Gold stock is trading at a 30 percent discount, according to Katusa Research.

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