Pretivm buys back offtake

Brucejack mine performance allows accelerated debt repayment

Investors in Pretivm, a gold mining company with offices in Smithers, got an early Christmas present earlier this month.

On Dec. 2, the company, which operates the Brucejack gold mine north of Stewart, announced it had completed the repurchase of its 2015 offtake agreement, which provided construction financing for the mine.

An offtake agreement is a financial instrument that basically amounts to a pre-purchase of future production at a fixed price—in this case the mine’s first seven million ounces of gold—with an option to buy it back for a fee.

Pretivm paid US$80 million to complete the transaction. In 2018, the company was also able to buy back its precious metals stream (another pre-purchase instrument) for US$237 million.

“I believe the lenders never expected we would buy back either the stream or the offtake,” said Joseph Ovsenek, Pretivm president and CEO. “However, in just over two years from achieving commercial production on July 1, 2017, we have repurchased the offtake and the precious metals stream with cash flow from operations. Thanks to the hard work and commitment from the team at Pretivm, we brought Brucejack into production ahead of schedule and have been profitable every quarter since start-up.”

The move leaves Pretivm with just $US480 million in bank debt. According to its third quarter financial report, the company is on track to pay down $180 million in 2019.

“With the offtake repurchased, we are now focusing our cash flow on paying off our debt as quickly as possible, making the most out of gold trading well above $1,400/ounce,” Ovsenek said.

Since the announcement, Pretivm’s share price has gone up by approximately $1 to $13.46CA on the Toronto Stock Exchange as of press time. Although Ovsenek would not draw a direct connection between the offtake repurchase and the share price, he said the mine’s performance, which allowed for the repurchase, is likely a factor.

“We believe the market is starting to recognize the cash flow potential and profitability of Brucejack,” he said. “As we continue to pay down debt and generate cash flow, we expect shareholder confidence will continue to increase and that should be reflected in an improved share price.”

Meanwhile, the company is awaiting assay results from a new round of exploration, which has shown promising preliminary results. Based on the known resource, the mine currently has a life expectancy of 14 years, but that could increase.

“Based on drilling to date, we believe there is excellent potential to expand the Valley of the Kings at depth, to the east, west and northeast,” Ovsenek said. “And there are a number of other prospective zones on the property where we have only scratched the surface. Putting all this potential together, we expect Brucejack to be a top tier gold producer for many years to come.”

In 2019, Brucejack ramped up production to 3,800 tonnes of ore per day.

On Oct. 30, the company reported its ninth consecutive quarter of positive earnings with revenue of $132.7 million on 90,713 ounces of gold and net earnings of $6.3 million.

“We have always had high expectations for Brucejack; however, our ability to generate profits out of the gate and continuously during ramp-up really highlights what a robust operation it is,” Ovsenek said.

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