Flurry of mining deals has industry watchers wondering if Pretium is next

Open this photo in gallery:

With deal-making in the gold sector heating up once again, attention is turning to which company might be swept up next. Some industry players wonder about Pretium Resources Inc.

In the past two weeks, three big gold deals have been unveiled. On Nov. 25, Kirkland Lake Gold Ltd. reached a friendly agreement to acquire Detour Gold Corp. for $4.9-billion. This past week, China’s Zijin Mining Group Co. Ltd. announced it was buying Canada’s Continental Gold Inc. for $1.4-billion, and Canada-listed Endeavour Mining Corp. made an unsolicited $2.5-billion proposal to acquire Centamin PLC.

If Detour disappears, Vancouver-based Pretium would be one of the last large single-asset gold companies left in Canada – making it a prime target.

“Pretium is certainly the asset that sticks out now,” said Jon Case, precious metals portfolio manager with Sentry Investments Inc.

Given its size, and profitability, Pretium would be of interest to many senior gold mining companies as a potential acquisition, Mr. Case added.

Pretium operates the high-grade Brucejack mine in British Columbia. Last year, the company produced 376,000 ounces of gold, at an all-in sustaining cost of US$764 an ounce, making it among of North America’s lowest-cost and highest-margin producers.

Toronto-based Barrick Gold Corp., the world’s second-biggest gold miner, has already expressed an interest in Pretium. In an interview in January, chief executive officer Mark Bristow mused about buying Pretium.

A few months later he curbed his enthusiasm considerably, telling investors in a conference call that he felt Pretium’s erratic geology was potentially problematic.

Recently though, Mr. Bristow brought up Pretium again.

Money manager Adrian Day said he was in a meeting with Barrick’s CEO in September. During a discussion focused around mergers and acquisitions, Mr. Day said that Mr. Bristow singled out Pretium’s Brucejack as a rare example of a large mine in a good jurisdiction.

“I was surprised that he threw out the name of Pretium," Mr. Day said. "There was no need to. It wasn’t in the news in the sense of, is Barrick going to buy Pretium?” added Mr. Day, president of Adrian Day Asset Management.

A Pretium shareholder himself, Mr. Day said he’d be “delighted” if Barrick bought the company because he’s sure it would be a good operator.

Barrick, which started the year with its well-received zero premium acquisition of Randgold Resources Ltd., potentially has the financial firepower to make another one. The company recently sold its half share in the Kalgoorlie gold mine in Australia for US$750-million. Barrick also intends to sell another $750-million worth of non-core assets by the end of 2020, including its Lumwana copper mine in Zambia.

Barrick did not respond to a request for comment.

Sentry’s Mr. Case said he was a little surprised that Kirkland didn’t try to buy Pretium, given the obvious similarities in the two companies. Both are high-grade, underground specialists that generate a lot of free cash flow.

But Kirkland never had eyes for Pretium.

“That wasn’t one that we were considering,” Jeff Parr, chairman of Kirkland Gold, said in a recent interview.

“Pretium was fully priced. You’re going to have to pay a premium to get it. It’s going to be competitive. We just felt more bullish on Detour.”

Any potential buyer of Pretium would also have to come to terms with its tricky geology. While Brucejack is among the highest-grade gold mines in North America, it has been an unpredictable orebody to mine. On a number of occasions in recent years, Pretium has shocked the market with poor results because of unforeseen grade shortfalls at the mine and its shares have see-sawed sharply.

In late October, Pretium cut its production forecast for the year and raised its cost estimates after running into more operating difficulties at Brucejack. The stock tumbled, but has since regained ground and closed at $13.45 apiece Friday on the Toronto Stock Exchange.

Pretium declined to comment for this story.

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.