Consider two advanced stage gold projects, both located in the same vicinity in northern BC: Seabridge Gold Inc.‘s KSM project and Pretium Resources Inc.‘s Brucejack project. Both companies have been trashed by the markets, as gold prices flounder and investment capital remains extremely hard to come by.
Seabridge’s KSM (Kerr-Sulphurets-Mitchell) project has a massive orebody. An updated PFS released on May 14, 2012 reported reserves of 38.2 million ounces of gold, 9.9 billion pounds of copper, 191 million ounces of silver and 213 million pounds of molybdenum. Three successive Preliminary Feasibility Studies (PFS) were then completed. An Environmental Assessment Application was then submitted to the provincial and federal regulatory authorities in early 2013 and was subsequently accepted into the formal review process. In August, 2013, during its sixth drill program, Seabridge announced a major discovery of high-grade core zone at Deep Kerr. The PFS envision mining the deposits over a 55 year period. The mill feed from the Mitchell, Sulphurets, Kerr, and Iron Cap deposits will be processed at an average rate of 130,000 t/d.
Pretium’s anchor Brucejack project has 6.6 M oz. of probable reserves. A feasibility study was completed in June for an underground mine with an operating rate of 2,700 tonnes per day using a mining method of long-hole stoping. The Feasibility Study envisioned a mine life of 22 years producing an estimated 7.1 million ounces of gold. Average annual production would be 427,000 ounces of gold over the first 10 years and 321,000 ounces of gold over the life of mine.
Seabridge (ticker SEA on TSX)shares trade at $7.09 with a market cap of $323M. The shares have declined from a high of $18 early in 2013.
Pretium (ticker PVG on TSX) trades at $5.94 with a market cap of $634 M. Pretium’s shares have dropped from a high of $14 to a low of $3, but have risen to the current level in the past 2 weeks. Pretium shares were devastated in Oct-13 when highly regarded Strathcona Mineral Services withdrew from the Brucejack project. This move caused a $2 drop in share value amounting to $235 M in market cap.
Declining commodity prices, particularly gold, has meant painful declines in equity values in 2013. These two companies are cases in point.
The Brucejack project is smaller and further advanced—Pretium’s market cap exceeds Seabridge by 2:1 yet the KSM deposit is more than 6 times larger.