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Pretium Resources upgraded at CIBC World Markets after "significant de-risking" milestone

Last updated: 10:07 25 Nov 2013 EST, First published: 11:07 25 Nov 2013 EST

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Pretium Resources (TSE:PVG) received a boost over the weekend from analysts at CIBC World Markets, who upgraded their recommendation on the company to a sector outperformer from a sector performer on the back of positive bulk sample results announced last week.

The stock rallied 80% on Friday after the gold company reported that gold produced from its bulk sampling program at its Valley of the Kings (VOK) deposit surpassed its original target of 4,000 ounces. 

The deposit, which is being permitted for a high grade, underground gold mine, is part of the company's Brucejack project in British Columbia. The gold developer said 4,215 ounces of gold were produced from 8,090 dry tonnes of excavated material from the Valley of the Kings, with roughly 1,815 wet tonnes remaining to be processed, according to the British Columbia-based company's statement. 

The company was initially targeting 4,000 ounces of gold from the entire 10,000 tonnes of material it is planning to excavate for the program. 

"Given the total ounces produced has already met Pretivm's estimate with only ~80% of the tonnes processed, it is possible that total ounces will exceed expectations," wrote analysts Jeff Killeen and Jeff Jackson in a research note published Sunday. 

"This should remove some of the market's concerns regarding the accuracy of estimated reserves within the VOK deposit."

They added that while some investor concerns will inevitable linger, the results support further development and indicate that Valley of the Kings is an economic deposit. 

"We await further aggregate detail from the program to understand the location of recovered ounces and the influence of the recently discovered Cleopatra vein," the analysts noted. 

Killeen and Jackson, who left their price target of $8.00 on Pretium unchanged, said they believe the positive bulk sample results represent a significant "de-risking milestone" for the company, and remove "some of the overhang resulting from the recent resignation of third party consultant Strathcona". 

Pretium has already begun the shipment and sale of the gravity concentrate, with shipping of the flotation concentrate to start once processing is finished. The total amount of gold produced from the bulk sampling will be announced by the middle of next month.

The Brucejack property comprises several gold-silver mineralized areas. These areas include West Zone, Valley of the Kings, Galena Hill, Bridge Zone, Gossan Hill and Shore Zone. The majority of the mineral resources lies within Valley of the Kings and West Zone.

Commercial production from the site is targeted to begin in 2016. 

Shares of Pretium pulled back on Monday after the sharp rally last week, lately down over 2.7% at $5.38 in morning deals. 

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