Viceroy Research hammered away at Pretium Resources Inc. in an interview with S&P Global Market Intelligence, arguing that the miner's production figures are hard to believe and that the Brucejack gold mine in British Columbia — its main asset — is not as gold rich as the company claims.
The firm, which has gone short on Pretium and stands to benefit from shareprice declines, claimed in a recent report that it has uncovered evidence calling into question fundamental production figures released by the gold miner. Viceroy's Gabriel Bernarde and Fraser Perring, veteran stock shorters, expanded on those claims.
Pretium has firmly denied allegations questioning the accuracy of its production figures in an initial response to S&P Global Market Intelligence. It has yet to respond to more detailed questions, or issue a press release in response to the short report.
Brucejack has long courted controversy as a difficult deposit to model, making it a clear target for some skeptics. The gold is nuggety, and defining how continuous high grade areas of the deposit remains a difficult task.
It was an issue that blew up during reserve modeling, with one veteran consulting firm withdrawing in protest over a disagreement about how to measure the resource.
Viceroy highlighted these well-known concerns in its short report about the firm and went a step further. It claimed, among other things, that Pretium's Brucejack disclosures to the government about how much rock it moved suggest it has mined more tonnes of rock than otherwise known.
"It doesn't match," Perring said. "The figures don't match what they've been disclosing to the government."
The firm, in its short report, said that according to government disclosures, Pretium moved 773,000 cubic meters of rock in 2017, which meant it mined about 2.15 million tonnes, assuming rock with a density of 2.78 tonnes per cubic meter.
But Viceroy said Pretium only reported mining 1.2 million tonnes of waste and ore in 2017 to the province. The implication is that Pretium was working harder to mine Brucejack than the market knew.
"If you back it into their results all of a sudden you have an OMG moment," Perring said. "How are their grams per tonne like that?" To Viceroy, the implication of the alleged higher tonnage figure is that the economics at Brucejack, and ultimate grade of the deposit, may be lower than Pretium has estimated.
If so, Viceroy takes the view that Pretium may have trouble generating cash flow, paying back debt in the near term and supporting mining plans in the years to come.
Digging deeper difficult
But perhaps there is a simple explanation for the discrepancy.
It's not clear how Pretium reported its production figures to the province and broke down what tonnage of rock went into which categories. Is the amount of rock Pretium reported as waste and ore — 1.2 million tonnes — all of the rock it would have reported as the cubic meters of rock it moved? Or does this latter figure include other sources?
Pretium has yet to respond to the claim. Bernarde said he believed Viceroy was on firm ground with the figures.
"We consulted experts on a similar question and the feedback was that this should be included in the underground waste," he said, referring to possible other sources of rock.
Viceroy did not ask Pretium about the alleged discrepancy, however. "We shouldn't have to ask because their numbers are public," Perring said.
Joe Mazumdar of Exploration Insights and a geologist familiar with the company, took a cautious view of Viceroy claims. In part, he had a hard time believing Pretium would under report tonnes that it had mined and court regulatory scrutiny in Canada and the U.S. in doing so.
He also pointed to the controversial nature of the deposit and the debate over how to measure its gold content. "It's not fraud," he said. "It's just that people have different opinions."