As subscribers know, back in June I went long Pretium (PVG) (PVG.to) and then in August I sold the position, earlier than originally expected and accompanied by a slice of humble pie, for a modest profit thanks largely to luck by getting out when gold had run up to over $1.4k. The reason for the sale was a case of cold feet about the VOK deposit, which was explained in four points in IKN224, dated August 18th. Then one week later I dumped the position.
Below is a mail just sent to A.N Other which includes my reply to the person (one of several with whom I’ve been exchanging re PVG these last 24 hours) and the four points of IKN224. It’s slightly redacted and presented not as a fait accompli, but as a best guess as to WTF has been going on between PVG and Strathcona.
The bottom line is that Strathcona resigning is very bad for PVG and yesterday’s share price drop was fully deserved. Period. No mess, no fuss, no argument.
Also, it’s worth noting that PVG has put out a new NR this morning full of more high grading drill results. I’d also suggest at this point that we’re going to have to see a whole lot more drill numbers in the YEARS (not weeks or months) to come, because the signal from the last 24 hours is that VOK won’t work as a bulk mine operation and those superduper veins will have to be mined out selectively for this to be an economic mining operation. If so, there’s mucho mucho work and more exploration that will need to be done on VOK before this thing stands a chance. Throw that feas study out, and now.
Anyway, here’s the mail sent to my mailpal and the points made in IKN224 dated August at the end of it
Consider this scenario. These are three things that we know:
a) Snowden wants to process all the 10,000 tonnes of bulk sample, Strathcona wants to select ten “towers” which is roughly 10% of the total as its representative sample.
b) the 10,000 tonnes are being processed.
c) Strathcona has resigned.
From these, we can logically deduce that the problem is indeed the Cleopatra vein. PVG took a lot of its bulk sample from Cleo and Strathcona then may have said, “Well fine, you can do that, but it skews out the entirety of the 10k of rock and makes the whole unrepresentative. What we need to do is select representative rock from the 10k bulk and process that to get a true idea of VOK.”
PVG refuses to do that and for obvious reasons. Strathcona resigns, because it has a high reputation and integrity. What we then see is Robert Quartermain suggesting to the market “Yeah well, Strathcona only wanted to use 10%, Snowden and we want to use all of it and SURELY 100% is better than 10%???!?!!?”
There’s the rub, i think. Yes, it’s about Cleo and yes Strathcona has walked because PVG is doing something akin to salting.
From IKN224 dated August 18th
Point one: If we go back to previous announcements from PVG, e.g. this one (15) dated June 19th, we read amongst other lines that, “The Bulk Sample Program excavation and sampling is expected to be completed in late July or early August.” And also, “The drill program is expected to be completed by mid-August.” Cut to last week’s NR, very much mid-August, and we read (again amongst other words) that “four fans remain to be drilled”, also that drilling “….is expected to conclude in early September” and later that the 10,000 tonnes bulk sample has to date got to 8,600 tonnes. First conclusion drawn, the program is late and I’d now expect it to run over the “by end 3q13” timeline we were originally offered by the company. Maybe not a red flag in itself, but a pinkish tinged one.
Point Two: The second thing to come from last week’s info is to look at the maps PVG kindly offered and note exactly where they’re taking the 10,000 tonne bulk sample from inside the VOK deposit. The idea was to offer up a representative sample of the whole of the deposit, which sounded like smart idea to me, but we now have to factor in a new discovery from PVG, the recently announced Cleopatra Vein and its location. If you consider this map (16) that shows the area from which PVG is taking its sample, it seems pretty clear that a decent proportion of this bulk sample is coming from an area right at and running parallel to the Cleopatra vein system. Now I don’t know about you, but when you consider that Cleopatra has 21 returned samples of up to 27,000 g/t Au over 0.5m widths (17) and the whole idea of the bulk sample was to be representative of the whole of the rock in order to determine whether VOK stands up as an underground bulk mining plan, a big fat question mark appears above my head to wonder just how “representative” the material being extracted for this 10,000mt program really is. Second conclusion drawn: The bulk sample may well pass muster on first look when it’s eventually published, but I wonder whether the big mining companies, that’s to say the potential purchasers of PVG and/or VOK, will be as impressed when they start getting granular and picky on the data provided.
Point Three: There’s also the potential for points one and two to be related. After all, PVG has a big team at VOK, it’s clement summer weather time and the original bulk sample program was only going to be 10 weeks long. What’s the sudden logistical problem that’s spun out a relatively short program covered by near optimal work conditions by 20%? Is it because, perchance, PVG has decided to change the places from which it wants to take its ‘representative’ bulk sample?
Point Four: The final doubt that’s been floating round my brain regarding PVG this week is a more general one, that I’m starting to feel a little uncomfortable about this long position because I’m outside of my speciality field a little too much. It’s becoming clear that the potential viability of VOK depends a lot of real hard data geology and the conclusions it spits out, which will then have to pass peer review before it gets some sort of industry thumbs-up. I’m not a geologist, never have been, never will be and never pretend to be and I even though I can hold down my end of a conversation with the rockbangers (as long as they don’t start all that pretty jargon talk on me) and get the idea on the wide-sweeping geological themes and concepts these days, I know when I’m out of my depth and on this subject, it’s exactly that feeling. Plus I’m dealing with a region of the world that’s not Latin America and I don’t have any edge to offer to myself or to readers who’d be better off reading other experts who know the North backwards.