Multi-Billion Dollar Offer Will Transform the Region

This takeover offer from a major confirms the importance of the Golden Triangle in the future of the mining industry. The Triangle is generally recognized as one of the most richly mineralized areas on the planet but development has so far lagged. This move signals the start of a transformation that will generate huge gains for the small companies that now dominate the region.

Decades of exploration have outlined a gold endowment in the Golden Triangle in line with Nevada, one of the top gold producing regions in the world. A big investment from a gold major signals a ramp up in mine development that will see the Triangle rise to prominence as a gold producing region. Within the foreseeable future, the GT will start to look like Nevada in terms of gold production as well as ounces in the ground.

At the same time, the Triangle will also become an important copper producing region. At least one of the deposits in the region ranks among the monster copper-gold deposits in the world. Other deposits are also expanding into that league.

Along the way, shareholders of the various juniors that now control much of the GT will see the value of their holdings escalate: Some will be bought at premium prices; everybody will benefit as the whole region grows in value with further investments from majors.

Before we lay out the basis for these bold predictions, let’s look at this pivotal investment and why it is so significant.

On November 8 the major gold producer Newcrest Mining announced an offer to acquire Pretium Resources. Pretium explored, developed and is now operating the Brucejack mine in the heart of the GT. The Newcrest offer values Pretium at C$3.4 billion.

That takeover offer is a signal that the mining industry now recognizes the Golden Triangle as an important part of the global mining scene. Further takeovers and massive investments will follow.

Decades of exploration, mostly by the juniors, has outlined a gold endowment that exceeds 200 million ounces, a figure that rivals Nevada. Beyond having a lot of ounces, the GT deposits have impressive grades. Yet, in spite of that incredible treasure trove of gold in the ground, only a single gold mine is in operation – Pretium’s Brucejack mine, the target of the Newcrest offer.

On the copper side, likewise, a single mine is operating – Red Chris. Newcrest began their Golden Triangle adventure 2 years ago when they acquired a controlling interest in Red Chris, a modest mining operation producing copper with gold as a by-product. Newcrest saw a lot more gold than was coming out of that mine, which operates on a porphyry copper-gold deposit. In their two years with the Red Chris mine, Newcrest has already developed plans to ramp up production, with a focus on gold. The prefeasibility study published in October projects a 3-fold boost in copper production and a 5-fold boost in gold, to 316,000 ounces annually. Work is already underway, with the underground decline reaching 400 meters.

Another porphyry copper-gold deposit in the GT ranks among the largest such deposits on the planet. The Sulphurets porphyry system is in the same league as the giant porphyrys in Chile, which support some of the largest mines on the planet. (see: second article in Resource World). And there are several other big porphyrys in the GT, where exploration to date has shown potential to join those lofty ranks. So far, none of those monster deposits are in production. They will be soon enough.

[Page 2 graphic: map of the GT and location map]

As icing on the cake: the GT is one of the few places in the world that ranks as a billion-ounce silver district. To put this into context: Total silver production from the fabled Silver Valley of Idaho totals 1.2 billion ounces over the past century. The sum of past production plus current resources in the GT now stands at 1.4 billion ounces, with a lot more ounces yet to be delineated. (This is not a direct comparison. It is inintended to show that the GT is in the same league as one of the top silver districts in the world – and that silver treasure is merely a by-product of the gold and copper… an added bonus.)

In spite of the incredible metal riches that have already been outlined, the response to date from the majors has been cautious. Teck has been working in the region for at least 5 decades, but their total investment would be measured in the hundreds of millions even though they control two major coppergold porphyrys.

Another major that is active at the moment is Newmont, with a total investment to date of roughly US$600 million: They bought half of the Galore deposit a couple of years ago and earlier this year paid about C$400 million to acquire GT Gold to get their hands on the Tatogga project.

Newcrest is the first of the majors to take an aggressive stance. In 2019, they paid U$700 million to acquire an 80% stake in the Red Chris mine and are now committing another C$3.4 billion.

When Newcrest announced the acquisition of Pretium, their share price initially fell 1.5%, with analysts concerned about whether Newcrest had full confidence in the geology of the deposit. Newcrest’s chief development officer stated: “We’ve done very extensive technical due diligence, particularly on the resource geology, spending a lot of time on-site and a lot of time with the Pretium team over an extensive period of time to really understand what’s going on there.” That extensive due diligence builds on two years of working in the region, both exploring and mining. Newcrest’s experience at Red Chris includes completion of a prefeasibility study that examines a major expansion of the mining operation. It’s fair to say that Newcrest is in a good position to know what they are doing in buying Pretium.

Pretium has been plagued by naysayers from the beginning. In 2013, with a feasibility study well advanced on the Valley of the Kings deposit, an underground bulk sample was being taken to confirm the grade. One of the top engineering firms, which was engaged to oversee the bulk sample program, resigned, stating: "There are no valid gold mineral resources for the [Valley of the Kings] zone, and without mineral resources there can be no mineral reserves". Fortunately, another firm had a different opinion. Work continued on the bulk sample, leading to a resource estimate and then a reserve statement. Based on that reserve, the mine was successfully developed. The company again came under criticism when the mined grade fell slightly short of the initial projections. In spite of the naysayers, the mine produces big operating profits and now supports a multi-billion dollar takeover offer.

This big investment by Newcrest is hugely important in so many ways. For one, after this deal closes, some portion of the C$3.4 billion will be recycled into other companies in the region, providing a boost for their share prices.

Newcrest will undoubtedly ramp up exploration on the vast property held by Pretium around the mine. Newcrest’s CEO Sandeep Biswas said, “The really exciting thing is the expansion potential. We believe there's a lot more gold there.” As one indication of that potential, Pretium announced, on October 25, results from a new discovery 3.5 km north of the mine: Hole SU-786 intersected 72.5 grams per tonne gold over 53.5 metres. That is an exceptional intercept in any setting. Coming a few kms from a mine already exploiting a high-grade deposit, it has enormous significance.

The most important aspect of the Newcrest deal is that it signifies that the majors, after decades of watching from a distance (or at most dabbling in the region) are now ready to commit the big bucks to acquire and develop the numerous discoveries in the Golden Triangle.

The juniors that now control much of the Triangle will see their share prices rise as the activity heats up.