U.S. SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549




FORM 40-F


o

REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934.





þ

ANNUAL REPORT PURSUANT TO SECTION 13(a) OF THE SECURITIES EXCHANGE ACT OF 1934




For the fiscal year ended: December 31, 2014Commission File Number: 001-35393




PRETIUM RESOURCES INC.





(Exact name of Registrant as specified in its charter)




British Columbia, Canada





(Province or other jurisdiction of incorporation or organization)


1040

None(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification Number)




570 Granville Street, Suite 1600


Vancouver, British Columbia, Canada V6C 3P1


(604) 558-1784


(Address and telephone number of Registrant’s principal executive offices)





CT Corporation System


111 Eighth Avenue


New York, New York 10011


(212) 894-8940





(Name, address (including zip code) and telephone number (including area code)


of agent for service in the United States)




Securities registered or to be registered pursuant to Section 12(b) of the Act.


Title of each class

Name of each exchange on which registeredCommon Shares

New York Stock Exchange




Securities registered or to be registered pursuant to Section 12(g) of the Act.




None





(Title of Class)


Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.




None





(Title of Class)




For Annual Reports indicate by check mark the information filed with this Form:




þ Annual information form      þ Audited annual financial statements




Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:




There were 116,828,081 Common Shares, of no par value, outstanding as of December 31, 2014.




Indicate by check mark whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to filing requirements for the past 90 days.


Yes þ No o




Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).


Yes o No o





This Annual Report on Form 40-F shall be incorporated by reference into or as an exhibit to, as applicable, the registrant’s Registration Statements on Form F-10 (File Nos. 333-179726 and 333-197304) and under the Securities Act of 1933, as amended.


1




PRINCIPAL DOCUMENTS







The following documents have been filed as part of this Annual Report on Form 40-F as Appendices hereto:





A.
Annual Information Form




The Annual Information Form of Pretium Resources Inc. (the “Company” or “Registrant”) for the fiscal year ended December 31, 2014 is included as Appendix A of this Annual Report on Form 40-F.





B.
Audited Annual Financial Statements




The Company’s audited consolidated financial statements for the fiscal year ended December 31, 2014, including the auditor’s report with respect thereto, are included as Appendix B of this Annual Report on Form 40-F.





C.
Management’s Discussion and Analysis




The Company’s Management’s Discussion and Analysis for the year ended December 31, 2014 is included as Appendix C of this Annual Report on Form 40-F.








CERTIFICATIONS AND DISCLOSURE REGARDING CONTROLS AND PROCEDURES




Certifications. See Exhibits 99.11, 99.12, 99.13 and 99.14 to this Annual Report on Form 40-F.




Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures and internal control over financial reporting designed to ensure that information required to be disclosed in the Registrant’s filings under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”). The Registrant’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), after having evaluated the effectiveness of the Registrant’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report, have concluded that, as of such date, the Registrant’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Registrant in reports that the Registrant files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. However, as recommended by the SEC in its adopting release for the rules governing the disclosure and control procedures discussed above, the Registrant will continue to periodically evaluate its disclosure controls and procedures and will make modifications from time to time as deemed necessary to ensure that information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.




The Registrant’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and, as indicated in the preceding paragraph, the CEO and CFO believe that the Registrant’s disclosure controls and procedures are effective at that reasonable assurance level, although the CEO and CFO do not expect that the disclosure controls and procedures or internal control over financial reporting will prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.




Management’s Annual Report on Internal Control Over Financial Reporting. The required disclosure is included under the heading “Management’s Report on Internal Control over Financial Reporting” in the Registrant’s Consolidated Financial Statements for the fiscal year ended December 31, 2014, filed as part of this Annual Report on Form 40-F in Appendix B.




Attestation Report of the Registered Public Accounting Firm. The required disclosure is included under the heading “Independent Auditor’s Report” in the Registrant’s Consolidated Financial Statements for the fiscal year ended December 31, 2014, filed as part of this Annual Report on Form 40-F in Appendix B.




Changes in Internal Control Over Financial Reporting. During the fiscal year ended December 31, 2014, there were no changes in the Registrant’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.







NOTICES PURSUANT TO REGULATION BTR




None.


2


IDENTIFICATION OF THE AUDIT COMMITTEE





The Registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of the audit committee are: Messrs. Ross Mitchell, Christopher Noel Dunn and Peter Birkey.





AUDIT COMMITTEE FINANCIAL EXPERT





The board of directors of the Registrant has determined that each of Messrs. Ross Mitchell, Christopher Noel Dunn and Peter Birkey, members of the Registrant’s audit committee, qualify as audit committee financial experts for purposes of paragraph (8) of General Instruction B to Form 40-F. The board of directors has further determined that each of Messrs. Ross Mitchell, Christopher Noel Dunn and Peter Birkey is also independent, as that term is defined in the Corporate Governance Listing Standards of the New York Stock Exchange (the “NYSE”). The Commission has indicated that the designation of each of Messrs. Ross Mitchell, Christopher Noel Dunn and Peter Birkey as an audit committee financial expert does not make any of them an “expert” for any purpose, impose any duties, obligations or liabilities on them that are greater than those imposed on members of the audit committee and the board of directors who do not carry this designation or affect the duties, obligations or liabilities of any other member of the audit committee or the board of directors.





ADDITIONAL DISCLOSURE





Code of Ethics.





The Registrant has adopted a “code of ethics” (as that term is defined in Form 40-F), entitled the “Code of Business Conduct and Ethics”, that applies to all of its directors, officers, employees, and consultants including its principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions.  In 2014, there were no waivers, including implicit waivers, or amendments granted from any provision of the Code of Business Conduct and Ethics.





The Code of Business Conduct and Ethics is available for viewing on the Registrant’s website at www.pretivm.com.





Corporate Governance Practices.





Our corporate governance practices are consistent with all applicable current Canadian regulatory guidelines and standards. We are classified as a foreign private issuer in connection with our listing on the NYSE and are not required to comply with most of the NYSE's corporate governance standards (the “NYSE Rules”) and instead may comply with Canadian corporate governance practices. However, our corporate governance practices incorporate many best practices derived from the NYSE Rules and there are no significant differences between our corporate governance practices and the NYSE Rules.





Principal Accountant Fees and Services.





The required disclosure is included under the heading “Audit Committee Information—External Auditor Service Fees” at page 41 of the Registrant’s Annual Information Form for the fiscal year ended December 31, 2014, filed as part of this Annual Report on Form 40-F in Appendix A.





Pre-Approval Policies and Procedures.





The Audit Committee pre-approves all audit services to be provided to us by our independent auditors.  The Audit Committee’s policy regarding the pre-approval of non-audit services to be provided to us by our independent auditors is that all such services shall be pre-approved by the Audit Committee.  All non-audit services performed by our auditors for the fiscal year ended December 31, 2014 have been pre-approved by our Audit Committee.





Off-Balance Sheet Arrangements.





The Registrant has no off-balance sheet arrangements as defined under Form 40-F.


3


Tabular Disclosure of Contractual Obligations.





We have no material long term debt, capital lease obligations, operating leases or any other long term obligations, other than payments related to the acquisition of certain mineral claims and a commitment for offices lease and operating costs that require minimum payments in the aggregate as follows:





Commitment

Fiscal 2015


Fiscal 2016

Fiscal 2017

and after

TotalOffice lease and operating costs

$
470,000


$
470,000

$ nil

$
940,000Mineral claims acquisition


50,000



50,000

nil(1)


100,000
(1)Total

$
520,000


$
520,000

$ nil(1)

$
1,040,000
(1)





(1)
We have an ongoing commitment for mineral claims acquisitions of $50,000 per year which is not included in the calculation of amounts owed in Fiscal 2017 and after or in the Total column.








Mine Safety Disclosure.





Not applicable.





UNDERTAKING




Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.




CONSENT TO SERVICE OF PROCESS




Form F-X signed by the Registrant and its agent for service of process has been filed with the Commission together with Registrant’s Registration Statement on Form 40-F (001-35393) in connection with its securities registered on such form.





Any changes to the name or address of the agent for service of process of the Registrant shall be communicated promptly to the Commission by an amendment to the Form F-X referencing the file number of the Registrant.








4










SIGNATURES






Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.


Date:  March 31, 2015
Pretium Resources Inc.By:
/s/ROBERT A. QUARTERMAIN________Name: Robert A. QuartermainTitle: President, Chief Executive Officer & Director

















5







EXHIBIT INDEX











Exhibit

Description99.1

Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accountant99.2

Consent of Tetra Tech99.3

Consent of Snowden Mining Industry Consultants Inc.99.4

Consent of AMC Mining Consultants (Canada) Ltd.99.5

Consent of ERM Rescan99.6

Consent of BGC Engineering Inc.99.7

Consent of Alpine Solutions Avalanche Services99.8

Consent of Valard Construction99.9

Consent of Ian I Chang M.A.Sc., P.Eng.99.10

Consent of Kenneth C. McNaughton, M.A.Sc., P.Eng.99.11

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200299.12

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200299.13

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200299.14

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


6































APPENDIX A




PRETIUM RESOURCES INC. ANNUAL INFORMATION FORM FOR THE FISCAL YEAR




ENDED DECEMBER 31, 2014























































ANNUAL INFORMATION FORM





(“AIF”)




of




PRETIUM RESOURCES INC.


(the “Company” or “Pretivm”)


1600 – 570 Granville Street


Vancouver, British Columbia


V6C 3P1




Telephone:  604-558-1784


Facsimile:  604-558-4784


Website:  www.pretivm.com


E-mail:  invest@pretivm.com





For the Year Ended December 31, 2014





Dated:  March 31, 2015



































TABLE OF CONTENTS






PRELIMINARY NOTES
1Effective Date of Information
1Currency
1Note Regarding Forward Looking Statements
1Scientific and Technical Disclosure
3National Instrument 43-101 Definitions
4Cautionary Note to US Investors
4CORPORATE STRUCTURE
6Name, Address and Incorporation
6Intercorporate Relationships
6GENERAL DEVELOPMENT OF THE BUSINESS
6Overview
6Strategy and Objectives
7Acquisition of the Combined Project Assets
7Environmental Assessment and Review
8NARRATIVE DESCRIPTION OF THE BUSINESS
9Details of the Brucejack Project
10DIVIDENDS
34DESCRIPTION OF CAPITAL STRUCTURE
34MARKET FOR SECURITIES
34Trading Price
34Prior Sales
35DIRECTORS AND OFFICERS
35Name and Occupation
35Shareholdings of Directors and Senior Officers
37Cease Trade Orders, Bankruptcies, Penalties or Sanctions
37Conflicts of Interest
38Audit Committee Information
39RISK FACTORS
41LEGAL PROCEEDINGS AND REGULATORY ACTIONS
62INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
64AUDITORS, TRANSFER AGENT AND REGISTRAR
65MATERIAL CONTRACTS
65INTEREST OF EXPERTS
65ADDITIONAL INFORMATION
66APPENDIX I AUDIT COMMITTEE CHARTER
A-1














PRELIMINARY NOTES






Effective Date of Information




This AIF is dated March 31, 2015, and unless otherwise indicated, the information contained herein is current as of such date, other than certain financial information which is current as of December 31, 2014, being the date of the Company’s most recently audited financial year end.




Currency




All dollar amounts are expressed in Canadian dollars unless otherwise indicated.




Note Regarding Forward Looking Information and Forward Looking Statements




This AIF contains “forward-looking information” and “forward looking statements” within the meaning of applicable Canadian and United States securities legislation (collectively herein referred to as “forward-looking information”), including the “safe harbour” provisions of provincial securities legislation and the U.S. Private Securities Litigation Reform Act of 1995, Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and Section 27A of the U.S. Securities Act of 1933, as amended. Forward-looking information may include, but is not limited to, information with respect to our planned exploration and development activities, the adequacy of our financial resources, the estimation of mineral resources, realization of mineral resource estimates, timing of development of the Brucejack Project (as defined below), costs and timing of future exploration, results of future exploration and drilling, production and processing estimates, capital and operating cost estimates, timelines and similar statements relating to the economic viability of the Brucejack Project, timing and receipt of approvals, consents and permits under applicable legislation, our executive compensation approach and practice, and adequacy of financial resources.  Wherever possible, words such as “plans”, “expects”, “projects”, “assumes”, “budgeted”, “strategy”, “scheduled”, “estimates”, “forecasts”, “anticipates”, “believes”, “intends” “modelled” and similar expressions or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved, or the negative forms of any of these terms and similar expressions, have been used to identify forward-looking information.




Statements concerning mineral resource estimates may also be deemed to constitute forward-looking information to the extent that they involve estimates of the mineralization that will be encountered if the property is developed. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance are not statements of historical fact and may be forward-looking information. Forward-looking information is subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those expressed or implied by the forward-looking information, including, without limitation, risks related to:




●
uncertainty as to the outcome of certain class action proceedings in the U.S. and Canada;


●
the exploration, development and operation of a mine or mine property, including the potential for undisclosed liabilities on our mineral projects;





1





·
the fact that we are a relatively new company with no mineral properties in production or development and no history of production or revenue;


·
our ability to obtain adequate financing for our planned exploration and development activities and to complete further exploration programs;


·
dependency on the Brucejack Project for our future operating revenue;


·
our mineral resource estimates, including accuracy thereof and our ability to upgrade such mineral resource estimates and establish mineral reserve estimates;


·
uncertainties relating to the interpretation of drill results and the geology, grade and continuity of our mineral deposits;


·
commodity price fluctuations, including gold price volatility;


·
our history of negative operating cash flow, incurred losses and accumulated deficit;


·
market events and general economic conditions;


·
the inherent risk in the mining industry;


·
the commercial viability of our current and any acquired mineral rights;


·
availability of suitable infrastructure or damage to existing infrastructure;


·
governmental regulations, including environmental regulations;


·
delay in obtaining or failure to obtain required permits, or non-compliance with permits that are obtained;


·
increased costs and restrictions on operations due to compliance with environmental laws and regulations;


·
compliance with emerging climate change regulation;


·
adequate internal control over financial reporting;


·
increased costs of complying with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”);


·
potential opposition from non-governmental organizations;


·
uncertainty regarding unsettled First Nations rights and title in British Columbia;


·
uncertainties related to title to our mineral properties and surface rights;


·
land reclamation requirements;


·
our ability to identify and successfully integrate any material properties we acquire;


·
currency fluctuations;


·
increased costs affecting the mining industry;


·
increased competition in the mining industry for properties, qualified personnel and management;


·
our ability to attract and retain qualified management;


·
some of our directors’ and officers’ involvement with other natural resource companies;


·
potential inability to attract development partners or our ability to identify attractive acquisitions;


·
potential liabilities associated with our acquisition of material properties;


·
our ability to comply with foreign corrupt practices regulations and anti-bribery laws;


·
changes to relevant legislation, accounting practices or increasing insurance costs;


·
our anti-takeover provisions could discourage potentially beneficial third party takeover offers;


·
significant growth could place a strain on our management systems;


·
share ownership by our significant shareholders, their ability to influence our governance and possible market overhang;





2





·
there is no market for our securities other than our Common Shares;


·
the trading price of our Common Shares is subject to volatility due to market conditions;


·
future sales or issuances of our equity securities;


·
certain actions under U.S. federal securities laws may be unenforceable;


·
we do not intend to pay dividends in the near future; and


·
our being treated as a passive foreign investment company for U.S. Federal income tax purposes.




This list is not exhaustive of the factors that may affect any of our forward-looking information. Although we have attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Forward-looking information involves statements about the future and is inherently uncertain, and our actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking information due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to in this AIF under the heading “Risk Factors” and elsewhere in this AIF.




Our forward-looking information is based on the beliefs, expectations and opinions of management on the date the statements are made.  In connection with the forward-looking information contained in this AIF, we have made certain assumptions about our business, including about our planned exploration and development activities; the accuracy of our mineral resource estimates; capital and operating cost estimates; production and processing estimates; the results, costs and timing of future exploration and drilling; timelines and similar statements relating to the economic viability of the Brucejack Project; timing and receipt of approvals, consents and permits under applicable legislation; and the adequacy of our financial resources.  We have also assumed that no significant events will occur outside of our normal course of business. Although we believe that the assumptions inherent in the forward-looking information are reasonable as of the date of this AIF, forward-looking information is not a guarantee of future performance and, accordingly, undue reliance should not be put on such statements due to the inherent uncertainty therein.  We do not assume any obligation to update forward-looking information, whether as a result of new information, future events or otherwise, other than as required by applicable law. For the reasons set forth above, prospective investors should not place undue reliance on forward-looking information.




Scientific and Technical Disclosure




Certain scientific and technical information relating to the Brucejack Project contained in this AIF is derived from, and in some instances is an extract from, the report entitled “Feasibility Study and Technical Report Update on the Brucejack Project, Stewart, BC” with an effective date of June 19, 2014 prepared for us by Tetra Tech and co-authored by Snowden Mining Industry Consultants Inc. (“Snowden”), AMC Mining Consultants (Canada) Ltd. (“AMC”, ERM Rescan, BGC Engineering Inc. (“BGC”), Alpine Solutions Avalanche Services (“Alpine Solutions”) and Valard Construction (“Valard”)(the “Brucejack Report”) in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”).







3





The Brucejack Report is the only current NI 43-101 compliant technical report with respect to the Brucejack Project and supersedes all previous technical reports.




Each co-author of the Brucejack Report listed in the section entitled “Interest of Experts” is a “qualified person” as defined in NI 43-101 and has reviewed, approved and verified certain scientific and technical information in this AIF that is derived from the Brucejack Report.




Scientific and technical information in this AIF not contained in the Brucejack Report has been reviewed, approved and verified by Mr. Kenneth C. McNaughton, M.A.Sc., P.Eng., our Vice President and Chief Exploration Officer and Ian I Chang M.A.Sc., P.Eng., our Vice President, Project Development, each of whom is a “qualified person” as defined in NI 43-101.




Reference should be made to the full text of the Brucejack Report, which has been filed with certain Canadian securities regulatory authorities pursuant to NI 43-101 and is available for review under the Company’s profile on SEDAR at www.sedar.com. Alternatively, copies of the Brucejack Report may be inspected during normal business hours at the Company’s head office.




National Instrument 43-101 Definitions




Canadian reporting requirements for disclosure of mineral properties are governed by NI 43-101.  The definitions given in NI 43-101 are adopted from those given by the Canadian Institute of Mining Metallurgy and Petroleum.





Mineral Resource
The term “mineral resource” refers to a concentration or occurrence of diamonds, natural, solid, inorganic or fossilized organic material including base and precious metals, coal and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction.  The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge.Measured Mineral Resource
The term “measured mineral resource” refers to that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit.  The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.Indicated Mineral Resource
The term “indicated mineral resource” refers to that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit.  The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.Inferred Mineral Resource
The term “inferred mineral resource” refers to that part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity.  The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.Qualified Person
The term “qualified person” refers to an individual who is an engineer or geoscientist with at least five years of experience in mineral exploration, mine development, production activities and project assessment, or any combination thereof, including experience relevant to the subject matter of the project or report and is a member in good standing of a self-regulating organization.




Cautionary Note to US Investors




Technical disclosure contained or incorporated by reference in this AIF has not been prepared in accordance with the requirements of United States securities laws and uses terms that comply with reporting standards in Canada with certain estimates prepared in accordance with NI 43-101.  NI 43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects.  Unless otherwise indicated, all mineral reserve and mineral resource estimates contained in this AIF have been prepared in accordance with NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum Classification System.




Canadian standards, including NI 43-101, differ significantly from the requirements of the Securities and Exchange Commission (“SEC”), and mineral reserve and resource information contained or incorporated by reference in this AIF may not be comparable to similar information disclosed by U.S. companies.  In particular, and without limiting the generality of the foregoing, the term “resource” does not equate to the term “reserves”.










4





Under U.S. standards, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made and volumes that are not “reserves’ should not be disclosed. Among other things, all necessary permits would be required to be in hand or issuance imminent in order to classify mineralized material as reserves under the SEC standards. Accordingly, mineral reserves estimates included in this AIF may not qualify as “reserves” under SEC standards. The SEC’s disclosure standards normally do not permit the inclusion of information concerning “measured mineral resources”, “indicated mineral resources” or “inferred mineral resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” by U.S. standards in documents filed with the SEC.




U.S. investors should also understand that “inferred mineral resources” have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an “inferred mineral resource” will ever be upgraded to a higher category.  Under Canadian rules, estimated “inferred mineral resources” may not form the basis of feasibility or pre-feasibility studies except in rare cases.  Investors are cautioned not to assume that all or any part of an “inferred mineral resource” exists or is economically or legally mineable.  Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC standards as in-place tonnage and grade without reference to unit measures.  In addition, the definitions of “proven mineral reserves” and “probable mineral reserves” under reporting standards in Canada differ in certain respects from the standards of the SEC. Accordingly, information concerning mineral deposits set forth or incorporated by reference herein may not be comparable with information made public by companies that report in accordance with U.S. standards.













5







CORPORATE STRUCTURE




Name, Address and Incorporation




The Company was incorporated under the Business Corporations Act (British Columbia) (the “BCBCA”) on October 22, 2010.  Our head office is located at 1600 – 570 Granville Street, Vancouver, British Columbia, V6C 3P1 and our registered office is located at 2900 – 550 Burrard Street, Vancouver, British Columbia, V6C 0A3.




Intercorporate Relationships




We have two wholly-owned subsidiaries, Pretium Exploration Inc. and 0890696 B.C. Ltd, which hold our interests in the Brucejack Project and the assets related thereto.  Both subsidiaries were incorporated under the BCBCA.




GENERAL DEVELOPMENT OF THE BUSINESS




Overview




We are an exploration and development company that was formed for the acquisition, exploration and development of precious metal resource properties in the Americas.




Our only material mineral project for the purposes of NI 43-101 is the Brucejack Project, an advanced stage exploration project located in north-western British Columbia.  We also have a 100% interest in the Snowfield Project (the “Snowfield Project”), which borders the Brucejack Project to the north.




We intend to focus our exploration and development efforts on the Brucejack Project and, in particular, on advancing engineering studies and permitting on the higher grade underground opportunities at the Brucejack Project and expanding and increasing the quality of mineral resources.




On June 30, 2014, we filed the Brucejack Report, which is a NI 43-101 compliant feasibility study on the Brucejack Project.




The Brucejack Project’s Valley of the Kings Proven and Probable Mineral Reserves as set out in the Brucejack Report are 6.9 million ounces of gold (13.6 million tonnes grading 15.7 grams of gold per tonne) and West Zone Proven and Probable Mineral Reserves are 600,000 ounces of gold (2.9 million tonnes grading 6.9 grams of gold per tonne).




The Brucejack Report set out a base case (US$1,100/ounce gold, US$17/ounce silver and exchange rate of 0.92 C$/US$) estimated pre-tax Net Present Value (5% discount) of US$2.25 billion, with an internal rate of return of 34.7%.




The Brucejack Report contemplates average annual production during the first eight years of 504,000 ounces of gold and during the 18 year Life of Mine (“LOM”) 404,000 ounces of gold, an estimated capital cost, including contingencies, of US$746.9 million and an average processing rate of 2,700 tonnes/day with operating costs of C$163.05 per tonne milled. See “Details of the Brucejack Project — Mineral Resource and Mineral Reserve Estimates”.





6





Strategy and Objectives




Our strategy is grow our business through the exploration and acquisition of quality precious metals projects.




The Brucejack Project is our only material project and we intend to continue to advance engineering studies and permitting on the higher grade underground opportunity as well as continued exploration with a focus on expanding and increasing the quality of resources.




The Snowfield Project represents a longer term gold opportunity for our shareholders.  Although we do not have a development plan as yet for the Snowfield Project, we plan to continue to explore the area and have budgeted for additional environmental studies which will benefit both the Brucejack and Snowfield Projects.




Acquisition of the Project Assets




We acquired the Brucejack Project, along with the Snowfield Project and other associated assets (together, the “Project Assets”), pursuant to an acquisition agreement dated October 28, 2010, as amended, with Silver Standard (the “Acquisition Agreement”), for an aggregate acquisition price of $450 million, consisting of a cash payment of $233,020,000 and the issuance of a total of 36,163,333 common shares (the “Common Shares”) in the capital of the Company (the “Acquisition”).  We financed the cash portion of the Acquisition with part of the proceeds from our initial public offering, which closed concurrently with the acquisition of the Project Assets in December 2010.




We entered into an investor rights agreement dated December 21, 2010 (the “Investor Rights Agreement”) with Silver Standard that provides that, as long as Silver Standard and its affiliates hold at least 10% of our issued and outstanding Common Shares:




•
Silver Standard is entitled to nominate to serve as members of our board of directors (the “Board”) the number of nominees equal to the lesser of (i) one less than the number which constitutes a majority of the Board and (ii) the percentage of issued and outstanding Common Shares and securities convertible or exchangeable into Common Shares held by Silver Standard multiplied by the number of directors comprising the Board (rounded to the nearest whole number);




•
Silver Standard and its affiliates have the right to maintain their proportionate ownership of our Common Shares by participating pro rata in issuances of our Common Shares (save in respect of equity compensation plans); and




•
Silver Standard and its affiliates have the right to sell our Common Shares by participating pro rata in prospectus offerings by us (to a maximum of 20% of any such offering).





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We also entered into a transition services agreement dated December 21, 2010 (the “Transition Services Agreement”) with Silver Standard pursuant to which Silver Standard provided certain administrative services for the purpose of transitioning the ownership of the Project Assets. The Transition Services Agreement terminated according to its terms on December 21, 2011.




Environmental Assessment and Review




Major mining projects in British Columbia are subject to environmental assessment and review prior to certification and issuance of permits to authorize construction and operations.  Environmental assessment (“EA”) is a means of addressing the potential for adverse environmental, social, economic, health, and heritage effects or the potential adverse effects on Aboriginal interests or rights prior to project approval.  Depending on the scope of a project, assessment and permitting of major mines in British Columbia will proceed through the BC Environmental Assessment process (the “BC EA”) pursuant to the BC Environmental Assessment Act (the “BCEAA”) and the Canadian Environmental Assessment Act 2012 (the “CEAA”).




At a provincial level, proposed mining developments that exceed a threshold criterion of 75,000 t/a (or 205 t/d) as specified in the Reviewable Project Regulations are required under the BCEAA to obtain an Environmental Assessment Certificate from the Ministry of Energy Mines and Natural Gas and Ministry of Environment before the issuance of any permits to construct or operate.  The Brucejack Project requires a provincial Environmental Assessment Certificate because its proposed production rate exceeds the specified threshold.




At a federal level, proposed gold mine developments (other than placer mines) that exceed a threshold criterion of 600 t/d as specified under the Regulations Designating Physical Activities are required to complete an Environmental Impact Study (the “EIS”) pursuant to the CEAA.  Completion of an EIS will be necessary for the Brucejack Project since the proposed production rate exceeds the specified threshold.




We have formally entered both the provincial and federal EA processes.  While the provincial and federal decisions are made independently, the two levels of government work together to allow for a coordinated effects assessment process.




In respect of the BC EA process, in December 2012 we submitted the Project Description for the Brucejack Project to the British Columbia Environmental Assessment Office (“BCEAO”).  In February 2013, the BCEAO issued a Section 10 order in respect of the Environmental Assessment Certificate (“EAC”) requirement for the Brucejack Project and a Section 11 order in July 2013 outlining the scope, procedures and methods for the environmental assessment process.




In September 2013, we held our initial meeting with the Working Group comprised of the representatives from provincial and federal government agencies, First Nations and communities participating in the review process.  Participants from the Working Group also visited the Brucejack Project site. In late November 2013, we held public meetings in five communities in northwest British Columbia during the first public comment period.





8





On May 2, 2014, we received a copy of the approved Application Information Requirements from the BCEAO and on June 20, 2014, we filed our EAC application with the BCEAO, which was evaluated for completeness over a 30-day period by BCEAO with the involvement of the Working Group.  On August 13, 2014, our EAC application was accepted for filing by the BCEAO and in September 2014, we held a second round of public meetings in five communities in northern British Columbia during the second public comment period.




As part of the application review process, we have provided responses to both the Working Group and public comments.




The BCEAO has a maximum of 180 days from August 13, 2014, the date of our EAC application, to complete its review and prepare an assessment report for a decision by the Minister of Environment and the Minister of Energy and Mines.  The Ministers then have 45 days following the receipt of the assessment report to make a decision.  On March 26, 2015, the BCEAO announced that the Minister of Environment and Minister of Energy and Mines issued the EAC for the Brucejack Project.




In respect of the federal EA process, we submitted the Project Description for the Brucejack Project to the Canadian Environmental Assessment Agency (“CEA”) in January, 2013.




In May 2013, CEA issued the EIS Guidelines that outline the federal permitting requirements for the Brucejack Project.  We filed our EIS concurrently with our EAC application in August 2014.




NARRATIVE DESCRIPTION OF THE BUSINESS




Unless stated otherwise, the information in this AIF is solely derived from, and in some instances is an extract from, the Brucejack Report.  Reference should be made to the full text of the Brucejack Report, which is available electronically on the SEDAR website at www.sedar.com under our SEDAR profile, as the Brucejack Report contains additional assumptions, qualifications, references, reliances and procedures which are not fully described herein.




The “Resource Estimate” in the Brucejack Report has been prepared in compliance with NI 43-101 and Form 43-101F1 which require that all estimates be prepared in accordance with the “CIM Definition Standards on Mineral Resources and Mineral Reserves as prepared by the CIM Standing Committee on Reserve Definitions” and in effect as of the effective date of the Brucejack Report. The quantity and grade of reported inferred resources in this estimation are uncertain in nature and there has been insufficient exploration to define these inferred resources as an indicated or measured mineral resource and it is uncertain if further exploration will result in upgrading them to an indicated or measured mineral resource category. Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues.





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Details of the Brucejack Project




Project Description and Location




The Brucejack Project (also known as the “Property” in the Brucejack Report) consists of eleven mineral claims totalling 3,199.28 hectares and all claims are in good standing until January 31, 2026.  The Brucejack Project is centred at approximately latitude 56°28’20”N by longitude 130°11’31”W, approximately 950 kilometres northwest of Vancouver, 65 kilometres north-northwest of Stewart, and 21 kilometres south-southeast of the Eskay Creek Mine.




We acquired our 100% outright interest in the Brucejack Project in December 2010, pursuant to the Acquisition Agreement with Silver Standard.  The Brucejack Project is subject to a 1.2% net smelter returns royalty in favour of Franco-Nevada Corporation (“Franco-Nevada”) on production in excess of 503,386 ounces of gold and 17,907,080 ounces of silver.




Property Location Map










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Accessibility, Climate, Local Resources, Infrastructure and Physiography




Accessibility




The Brucejack Project is located in the Boundary Range of the Coast Mountain Physiographic Belt along the western margin of the Intermontane Tectonic Belt.  The terrain is generally steep with local reliefs of 1000 metres from valleys occupied by receding glaciers, to ridges at elevations of 1200 metres above sea-level.  Elevations within the Brucejack Project area range from 1366 metres along Brucejack Lake to 1650 metres at the Bridge Zone.  However, within several areas, the relief is relatively low to moderate.




We have completed construction of our approximately 74 kilometre exploration access road that links the Brucejack Camp to Highway 37 via the Knipple Glacier, Bowser Camp and Wildfire Camp.  Personnel, equipment, fuel and camp provisions are driven to a staging area on the Knipple Glacier before being taken over the glacier to the Brucejack Camp.  The area is easily accessible by helicopter from the town of Stewart, or seasonally from the settlement of Bell II.  The flight time from Stewart is approximately 30 minutes and slightly less from Bell II.




Climate




The climate is typical of north-western British Columbia with cool, wet summers, and relatively moderate but wet winters.  Annual temperatures range from +20°C to -20°C.  Precipitation is high with heavy snowfall accumulations ranging from 10 metres to 15 metres at higher elevations and 2 metres to 3 metres along the lower river valleys.  Snow packs cover the higher elevations from October to May.  The optimum field season is from late June to mid-October.




Local Resources and Infrastructure




There are no local resources other than abundant water for any drilling work.




The nearest infrastructure is the town of Stewart, approximately 65 kilometres to the south, which has limited supplies and personnel.  The towns of Terrace and Smithers are also located in the same general region as the Brucejack Project.  Both are directly accessible by daily air service from Vancouver.




The nearest railway is the Canadian National Railway Yellowhead route, which is located approximately 220 kilometres to the southeast.  This line runs east-west and terminates at the deep water port of Prince Rupert on the west coast of British Columbia.  The most northerly ice-free shipping port in North America, in Stewart, is accessible to store and ship concentrates.




A high voltage, 138-kV transmission line currently services Stewart, BC and has sufficient capacity to provide power to the Brucejack Project.  BC Hydro has started engineering work on a system upgrade to provide for the interconnection of the transmission line that will service the Brucejack Project with the 138kv transmission line servicing the town of Stewart.





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History and Exploration




The exploration history of the area dates back to the 1880s when placer gold was located at Sulphurets and Mitchell Creeks.  Placer mining was intermittently undertaken throughout the early 1900s and remained the main focus of prospecting until the mid-1930s.




In 1935, prospectors discovered copper-molybdenum mineralization on the Sulphurets property in the vicinity of the Main Copper zone, approximately six kilometres northwest of Brucejack Lake; however, these claims were not staked until 1960.  From 1935 to 1959, the area was relatively inactive with respect to prospecting; however, it was intermittently evaluated by a number of different parties and several small copper and gold-silver occurrences were discovered in the Sulphurets-Mitchell Creek area.  In 1960, Granduc and Alaskan prospectors staked the main claim group covering the known copper and gold-silver occurrences, which collectively became known as the Sulphurets property, starting the era of modern exploration.  Various operators explored the area, and an underground program was completed on the West Zone between 1986 and 1991 by the Newcana Joint Venture among Granduc, Newhawk and Lacana Mining Corporation.




In 1999, Silver Standard acquired Newhawk and with it, Newhawk's 60% interest and control of the Brucejack Project.  In 2001, Silver Standard acquired Black Hawk’s 40% direct interest in the Brucejack Project, resulting in 100% interest in the Brucejack Project.




Silver Standard began initial work on the Brucejack Project in 2009 with drilling, rock-chip and channel sampling and re-sampling of historical drill core.  The 2009 program tested five zones with 37 drillholes totalling 18,000 metres.  A total of 12 drillholes were targeted at what would become the Valley of the Kings Zone (the “Valley of the Kings”).




In 2010, Silver Standard’s drill program was designed to continue definition of the bulk tonnage mineralization as well as to determine the nature and continuity of the high-grade mineralization observed at Valley of the Kings.  Approximately one third of the 2010 drilling targeted the Valley of the Kings and included gold intersections of up to 5,840 g/t gold.  The bulk tonnage drilling achieved its intended goal through the definition of more than 20 Moz at Brucejack (8 Moz in Measured and Indicated and 12.5 Moz gold in Inferred, at a 0.3 g/t AuEq cut-off; Ghaffari et al. 2011).  The relatively dense drilling from the bulk tonnage drilling program, with drill spacings of 100 metres by 100 metres to 50 metres by 50 metres, formed the basis upon which the bulk tonnage resource model was built.  Numerous high-grade intersections were defined as part of this drilling, allowing for the initial delineation of high-grade mineralization trends.  In 2010, Silver Standard proceeded with the sale of the Snowfield and Brucejack projects to us.




Our 2011 diamond drill program was focused specifically on defining high grade resources.  In 2011, 178 drillholes were completed totalling 72,805 metres in drillholes SU-110 to SU-288.  This included 97 drillholes (41,219 metres) that targeted the Valley of the Kings, 16 drillholes (7,471 metres) that targeted West Zone, and 21 drillholes (7,220 metres) that targeted the surrounding areas. The remaining drilling was focused on expansion of Shore Zone, testing for structurally controlled high grade mineralization in Galena Hill (now part of the Valley of the Kings) and Bridge Zones, as well as testing new target areas. The West Zone ramp was partially dewatered in late 2011 and early 2012. A geotechnical mapping program and updated survey was completed on the dewatered portion of the mine.





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Our 2012 diamond drill program focused on defining the high grade resource for the Valley of the Kings, specifically targeting geological and structural features believed to be associated with high grade gold mineralization.  Diamond drilling also focused on expanding the known extents of the Valley of the Kings Zone, both west of the Brucejack Fault and along trend to the east of the main mineralized zone.   A total of 301 drillholes were completed, totalling 105,500 metres of drilling during the 2012 drilling program.




An underground exploration program commenced in 2012 which was designed to, amongst other things, access the Valley of the Kings deposit underground, excavate a 10,000 tonne underground bulk sample and demonstrate continuity of the high-grade gold mineralization. The initial phase of the underground program involved widening a portion of the historical West Zone underground workings to five metres by five metres so that the historical West Zone portal and underground workings can be used for access to the Valley of the Kings with production sized mining equipment.  In late December 2012, the widening of the historical West Zone underground workings was completed and excavation commenced of the access ramp from the West Zone workings to the Valley of the Kings.




Our 2013 surface diamond drill program focused on further defining the high grade resource for the Valley of the Kings as well as the geological and structural features believed to be associated with gold mineralization.  A total of 24 surface diamond drillholes (5,200 metres) of the 37 surface drillholes (5,770 metres; drillholes SU-590 to SU-626) completed during the 2013 drilling program were focussed on the Valley of the Kings.




In 2013, we also excavated a bulk sample from within the Valley of the Kings to further evaluate the geological interpretation and Mineral Resource estimate. The location of the proposed bulk sample was selected to be representative of the grade and character of the overall mineralization of the Valley of the Kings.




Underground development reached the bulk sample area in May 2013 and underground drilling to support the bulk sample program began in mid-May. A total of 409 drillholes (38,840 metres) were completed with 200 of these drillholes (16,640 metres) testing the bulk sample area.  The remainder (209 drillholes totalling 22,200 metres) were testing targets outside of the bulk sample area.




The design of the bulk sample was limited by provincial legislation to a maximum allowable bulk sample size of 10,000 tonnes. The bulk sample was collected as a series of nominal 100 tonne rounds in underground development. We elected to process the bulk sample both through a sample tower on site and at a custom mill (Contact Mill) in Montana, USA.  The results of assaying of the samples from the sample tower provided, in Snowden’s opinion, an unacceptable degree of variation in the results.





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In 2014, exploration focused on resource definition in the Valley of the Kings with both surface and underground exploration.




The 2014 surface drill program consisted of infill drilling, exploration drilling at depth and condemnation drilling.  The infill drill program, comprising 5,818 metres in three holes including 14 wedge holes, was successful in confirming the grade and continuity of Indicated and Inferred gold mineralization in an area defined by the 2013 Mineral Resource estimate block model.




The exploration drilling at depth, which consisted of four deep drill holes comprising 3,507 metres, was successful in confirming the continuity of gold mineralization in the Valley of the Kings below the area defined by the 2013 Mineral Resource estimate.  Condemnation drilling for mine site infrastructure consisted of 25 drill holes comprising 2,679 metres.




Underground exploration in the Valley of the Kings has continued to date with mapping and sampling coinciding with the advance of ramping and vent raise excavation.




Geological Setting




The Brucejack Property is located on the eastern limb of the broad McTagg anticlinorium, the northern closure of the Stewart-Iskut culmination.  As a result, rocks on the Brucejack Property are tilted, as well as folded, and generally display a progressive younging towards the east.  Volcanic arc-related rocks of the Triassic Stuhini Group form the core of the anticlinorium, and are successively replaced outwards by volcanic arc-related rocks of the Lower Jurassic Hazleton Group and clastic basin-fill sedimentary rocks of the Middle to Upper Jurassic Bowser Lake Group.




Geology on the Brucejack Property can generally be characterized as a northerly-trending, broadly arcuate, concave-westward structural-stratigraphic belt of variably altered rocks. This belt is bisected on the western side of the Property by a prominent topographic lineament, the Brucejack Fault. This belt is characterised by a broad band of variably but generally intensely quartz-sericite-pyrite altered rocks of up to several hundred metres or more across, and approximately five kilometres in strike extent. The quartz-sericite-pyrite alteration typically contains between two and 20% pyrite, and, depending on the alteration intensity, can preclude protolith recognition. Most of the defined mineral resources on the Property are located within the intensely altered zone.




Mineralization




Gold (± silver) mineralization is hosted in predominantly sub-vertical vein, vein stockwork, and subordinate vein breccia systems of variable intensity, throughout the alteration band.  The stockwork systems display both parallel and discordant relationships to stratigraphy.  The stockwork systems are relatively continuous along strike (several tens of metres to several hundreds of metres).










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Several mineralization zones have been explored to varying degrees, including (from south to north): Bridge Zone, Valley of the Kings Zone, West Zone, Gossan Hill, Shore Zone, and SG Zone (Ireland et al. 2013).  There are numerous relatively unexplored mineralization showings within the alteration band across the Property that are between the main mineralization zones, highlighting the exceptional exploration potential of the Property.




High grade gold mineralization in the Valley of the Kings, the current focus of the Project, occurs in a series of west-northwest (and subordinate west-southwest) trending sub-vertical corridors of structurally reoriented vein stockworks and vein breccias.  Stockwork mineralization displays both discordant and concordant relationships to the volcanic pile stratigraphy.  Gold is typically present as gold-rich electrum within deformed quartz-carbonate (±adularia?) vein stockworks, veins, and subordinate vein breccias, with grades ranging up to 41,582 g/t gold and 27,725 g/t silver over 0.5 m.




Recent underground exploration carried out as a part of the bulk sample program confirmed the location of corridors of stockwork-style mineralization and the lithological contacts in this part of the deposit (within the Valley of the Kings).  In addition the work resulted in the recognition of sub-vertical north-northeasterly trending deformed, curviplanar, and sheared quartz-carbonate veins containing abundant visible electrum.  These structures are interpreted as structurally-controlled fluid conduits that were active during development of the porphyry system and associated volcanic pile in the early Jurassic, and which were reactivated during Cretaceous deformation.




The Valley of the Kings deposit is currently defined over 1,200 metres in east-west extent, 600 metres in north-south extent, and 650 metres in depth.  The West Zone appears to form the northern limb of an anticline that links up with the Valley of the Kings in the south, and the southern limb of a syncline that extends further to the north.  This zone, which is currently defined over 590 metres along its northwest strike, 560 metres across strike, and down to 650 metres in depth, is open to the northwest, southeast, and at depth to the northeast.




Mineralized Zones




The current resources as presented in this AIF are comprised of two different zones on the Brucejack Project, being the Valley of the Kings Zone and the West Zone.




Valley of the Kings Zone




Exploration drilling by Silver Standard (2009, 2010) and the Company (2011 to present), as well as surface mapping, has been successful in outlining a series of corridors of high grade mineralization associated with deformed quartz stockworks and intense quartz-sericite-pyrite alteration in an east-west trending and east-southeast plunging tight syncline developed in almost the full sequence of lower Hazelton Group rocks.




The Valley of the Kings mineralized zone trends approximately west-northwest to east-southeast. Its orientation mirrors that of Electrum Ridge, a pronounced topographic feature near the southern margin of the zone, and drilling to date has extended its strike to over 800 metres. The zone is up to 150 metres wide and was originally thought to be bound to the west by the Brucejack Fault. Recent drilling in the current 2012 drill program, together with the presence of significant intervals of gold mineralization, in the Waterloo Zone, indicates that the Valley of the Kings continues west across the fault, thereby making the zone open to the west, as well as to the east and at depth.





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High-grade gold and silver mineralization within the Valley of the Kings occurs as electrum, which is generally hosted in deformed quartz-carbonate and quartz-adularia veins and vein stockworks. While quartz veining and stockworks are common throughout the zone, the majority of gold intersections are confined to corridors within a zone 75 metres to 100 metres wide on the southern limb of the syncline. The orientation of these corridors is subparallel to the fold axis. Gold to silver ratios within the Valley of the Kings are typically 2:1 or higher.  Variations in this ratio, which could be a function of thermal gradients developed at the time of mineralization, are suggested by a visible increase in the proportion of silvery electrum (at the expense of more gold-coloured electrum) with a concomitant increase in the proportion of vein-hosted adularia towards the eastern parts of the zone. Additional precious metals-bearing minerals found in the Valley of the Kings, typically in trace quantities, include silver sulphides, acanthite, pyrargyrite and tetrahedrite, and associated with base metal-bearing sulphides include sphalerite and galena.




Low grade bulk tonnage mineralization, associated with disseminated anhedral pyrite, forms a halo within the altered rocks, surrounding the high grade mineralization corridors.




West Zone




The West Zone gold-silver deposit is hosted by a northwesterly trending band of intensely altered Lower Jurassic latitic to trachyandesitic volcanic and subordinate sedimentary rocks, as much as 400 metres to 500 metres thick, which passes between two more competent bodies of hornblende plagioclase hornblende phyric flows. The stratified rocks dip moderately to steeply to the northeast and are intensely altered, particularly in the immediate area of the precious metals mineralization. The West Zone appears to form the northern limb of an anticline that links up with the Valley of the Kings to the south, and the southern limb of a syncline that extends further to the north.




The West Zone deposit itself comprises at least 10 quartz veins and mineralized quartz stockwork ore shoots, the longest of which has a strike length of approximately 250 metres and a maximum thickness of about around 6 metres. Most mineralized shoots have vertical extents that are greater than their strike lengths. Veins and stockworks in this zone display clear evidence of post-mineral ductile and brittle deformation. The West Zone is open along strike to the southeast, and at depth to the northeast.




In terms of hydrothermal alteration, the West Zone is marked by a central silicified zone that passes outwards to a zone of sericite ± quartz ± carbonate and then an outer zone of chlorite ± sericite ± carbonate. The combined thickness of the alteration zones across the central part of the deposit is between 100 metres and 150 metres.




Gold in the West Zone occurs principally as electrum in quartz veins and is associated with, in decreasing order of abundance, pyrite, sphalerite, chalcopyrite, and galena. Besides being found with gold in electrum, silver occurs in tetrahedrite, pyrargyrite, polybasite and, rarely, stephanite and acanthite. Gangue mineralogy of the veins is dominated by quartz, with accessory adularia, albite, sericite, and minor carbonate and barite. The increased abundance of silver in the West Zone may suggest that this zone was formed down temperature gradient from the Valley of the Kings.





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Drilling




The input data for the West Zone Mineral Resource estimate consisted of 756 drillholes (63,208 metres) including 439 underground drillholes (24,688 metres), 269 historical surface drillholes (21,321  metres) and 48 surface drillholes (17,199 metres) completed since 2009.




The input data for the Valley of the Kings Mineral Resource estimate comprised 932 drillholes totalling 218,238 metres. The drilling consisted of:




·
9 historic drillholes (579 metres);


·
490 surface drillholes drilled between 2009 and 2012 (173,619 metres);


·
24 surface drillholes drilled in 2013 (5,200 metres); and


·
409 underground drillholes drilled in 2013 (38,840 metres).




Drillhole paths were surveyed at a nominal 50 metre interval using a Reflex EZ single shot instrument. There was no apparent drilling or recovery factor that would materially impact the accuracy and reliability of the drilling results.




The drill collars were surveyed by McElhanney Surveying from Terrace, BC. McElhanney Surveying used a total station instrument and permanent ground control stations for reference and have completed all the surveying on the project since 2009. All underground drill collars were surveyed by Procon.




Historical drill core sizes for surface drillholes were NQ (47.6 millimetre diameter) and BQ (36.5 millimetre diameter). Core size for drillholes collared from an underground exploration ramp at West Zone was AQ (27 millimetre diameter).




Core sizes for our surface collared drillholes are PQ (85 millimetre diameter), HQ (63.5 millimetre diameter) and NQ (47.6 millimetre diameter). Approximately 50% to 60% of the Company’s core is HQ size.  All drillcore collected from the underground drilling in 2013 was HQ size.




Sampling, Analysis, Data Verification and Security




Split PQ samples weigh approximately 10 kilograms. HQ samples are around 6 kilograms, and NQ are 3 kilograms to 4 kilograms. These weights assume a nominal 1.5 metre sample length. In general, the average sample size submitted to the analytical laboratory, ALS Chemex (“ALS”) was 6.5 kilograms.





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Samples at ALS were crushed to 70% passing 2 millimetres, (-10 mesh). Samples were riffle split and 500 g were pulverized to 85% passing 75 μm (-200 mesh). The remaining coarse reject material was returned to us for storage in our Stewart warehouse.




Gold was determined using fire assay on a 30 g aliquot with an atomic absorption finish. In addition, a 33 element package was completed using a four acid digest and ICP-AES analysis, which included the silver. Density determinations were done by ALS using the pycnometer method on pulps from the drilling program.




Snowden analysed the quality assurance and quality control (“QAQC”) for the Brucejack Project.  The Brucejack drillhole and QAQC database is managed by GeoSpark Consulting Inc. (“GeoSpark”), who also manage the routine analysis of the QAQC results for the Company.  GeoSpark supplied Snowden with a QAQC database, in Microsoft Access format, containing the QAQC results for all drilling up to 5 December 2013.




The QAQC protocols included the use of field duplicates, standards and blanks.  The quality control samples were included at a nominal rate of one field duplicate, one standard and one blank for every 20 samples.   Check assays, in the form of pulp duplicates, were also completed by a different laboratory and compared with the primary laboratory.




Procedures undertaken by the Company have been under the supervision and security of our staff, as far as drill core sampling prior to dispatch. Laboratory sample reduction and analytical procedures have been conducted by independent accredited companies with acceptable practices.




We ensure quality control is monitored through the insertion of blanks, certified reference materials and duplicates.




Mineral Processing and Metallurgical Testing




Several metallurgical test programs were carried out to investigate the metallurgical performance of the mineralization. The main test work was completed from 2009 to early 2014. The samples tested were generated from various drilling programs, including the samples tested by the bulk sample processing programs. The metallurgical test programs conducted on the Brucejack mineralization included head sample characteristics, gravity concentration, gold/silver bulk flotation, cyanidation, table concentrate melting and the determination of various process related parameters. The early test work focused on developing the flowsheet for gravity concentration, bulk flotation, and flotation concentrate cyanidation. The test work also studied the metallurgical responses of the samples to the gravity concentration flowsheet for gravity concentration followed by whole ore leaching. The later test work concentrated on the gravity-flotation concentration flowsheet.







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In general, the Valley of the Kings Zone and West Zone mineralization is moderately hard. The mineral samples tested responded well to the conventional combined gravity and flotation flowsheet. The gold in the mineralization was amenable to centrifugal gravity concentration. On average, 40 to 50% of the gold in the samples were recovered by the gravity concentration. The flotation tests results indicated that bulk flotation can effectively recover the gold remained in the gravity concentration tailings using potassium amyl xanthate as a collector at the natural pH. Two stages of cleaner flotation would significantly upgrade rougher flotation concentrate. The gold in the mineralization showed better metallurgical performance, compared to silver. On average, approximately 96 to 97% of the gold and 91 to 92% of the silver were recovered to the gravity concentrate and bulk flotation concentrate at the grind size of 80% passing approximately 70 to 80 μm. There was a significant variation in metallurgical performances among the samples tested. This may be a result of the nugget gold effect. The industrial runs on the 10,000-t bulk sample for the 2013 bulk sample processing program and the 1,200-t high-grade Cleo mineralization conducted in 2014 showed that the gravity/flotation process flowsheet as designed for the Brucejack mineralization suited the treatment of the bulk sample. The results also showed that the gravity/flotation flowsheet adapted well for the varying mineralization and the wide range feed grades that were experienced during processing of the bulk sample.




Cyanide leach tests were also conducted to investigate the gold and silver extractions from various samples, including head samples, flotation concentrates, flotation tailings and gravity concentrates. In general, most of the sample responded reasonably well to direct cyanidation, excluding a few of samples containing higher contents of graphite (carbon), arsenic, or electrum. Cyanide leach process was not recommended for the feasibility study.




The test results suggest that the gold and silver recovery flowsheet for the mineralization should include gravity concentration, bulk rougher and scavenger flotation, rougher and scavenger concentrate regrinding, followed by cleaner flotation.




Mineral Processing




The process flowsheet developed for the Brucejack mineralization is a combination of conventional bulk sulphide flotation and gravity concentration to recover gold and silver. The processing plant will produce a gold-silver bearing flotation concentrate and gold-silver doré that will be produced by melting the gravity concentrate produced from the gravity concentration circuits. Based on the LOM average, the recovery process is estimated to produce approximately 5,600 kg of gold and 1,900 kg of silver as doré per year and 44,000 t of gold-silver bearing flotation concentrate per year from the mill feed, grading 14.1 g/t gold and 57.7 g/t silver. The estimated gold recoveries to the doré and flotation concentrate are 43.3% and 53.4%, respectively, totalling 96.7%. The estimated silver recoveries reporting to the doré and flotation concentrate are 3.5% and 86.5%, respectively, totalling 90.0%. The LOM average gold and silver contents of the flotation concentrate are anticipated to be approximately 157 g/t gold and 1,000 g/t silver. The flotation concentrate will be shipped off site to a smelter for further treatment to recover the gold and silver.





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The process plant will consist of:




·
one stage of crushing (located underground);


·
a surge bin with a live capacity of 2,500 t on surface;


·
a semi-autogeneous grinding (SAG) mill and ball mill primary grinding circuit integrated with gravity concentration;


·
rougher flotation and rougher/scavenger flotation followed by rougher flotation concentrate regrinding; and


·
cleaner flotation processes.




A gravity concentration circuit will also be incorporated in the bulk concentrate regrinding circuit. The final flotation concentrate will be dewatered, bagged, and trucked to the transload facility in Terrace, British Columbia. It is expected that the flotation concentrate will be loaded in bulk form into rail cars for shipping to a smelter located in eastern Canada. The gravity concentrate will be refined in the gold room on site to produce gold-silver doré.




A portion of the flotation tailings will be used to make paste for backfilling the excavated stopes in the underground mine, and the balance will be stored in Brucejack Lake. The water from the thickener overflows will be recycled as process make-up water. Treated water from the water treatment plant will be used for mill cooling, gland seal service, reagent preparation, and make-up water.





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Simplified Process Flowsheet









Mining Method




The underground mine design is largely unchanged from the previous feasibility study, supporting the extraction of 2,700 t/d of ore via transverse long hole open stoping (“LHOS”) and longitudinal LHOS. Paste backfill and modern trackless mobile equipment will be used. Mine access will be by a main decline from a surface portal close to the concentrator. A second decline will be dedicated to conveying crushed ore directly to the concentrator via two conveyors with a combined length of 800 m. There will be a two-year pre-production development period, with steady-state production being reached by the end of Year 2 of an 18-year LOM. The development and production sequence prioritizes high-grade areas while ramping up overall mine tonnage to the steady state, averaging approximately 980,000 t/a through to Year 16.




Geotechnical designs and recommendations are based on the results of site investigations, and geotechnical assessments that include rock mass characterization, structural geology interpretations, excavation and pillar stability analyses, and ground support design.




The groundwater flow system was conceptualized to provide inflow estimates to mine workings. These estimates referenced results of site investigations and hydrogeologic testing and were used to size dewatering equipment and as input to the process water balance.





21





Underground manpower will consist of technical staff, mining crews, mechanics, electricians, and other support personnel. Pre-production manpower will be supplied by a contractor, except personnel required for maintenance and technical support. Total manpower required for full production is 351, with up to 176 personnel on site at any given time.




The ventilation system is designed to meet British Columbia regulations. Permanent surface fans will be located at the portals of the twin, intake declines. All intake air entering the mine will be heated above freezing point.




Paste fill distribution design is based on a dual pumping system. A positive displacement pump in the paste fill plant will provide paste to all of the West Zone and the lower zones of the Valley of the Kings. The paste plant pump will also feed a booster pump located near the main access point to the Valley of the Kings area located on 1,320 Level.




Ore will be trucked from working areas to an underground crusher and then transferred to surface via two, 1.07 metres wide conveyors. Waste rock will be disposed in the underground mine whenever possible, with the balance trucked to surface for disposal in Brucejack Lake.




The mine will be dewatered using a dirty water system of sumps and pumps. Submersible and centrifugal pumps will be used for development and permanent mine operations. Solids captured in the main collection sump will be pumped to the mill for residual gold recovery. For underground worker safety, both permanent and portable refuge stations are planned. The emergency warning system will include phones, cap lamp warning system, and stench gas.




The total project initial mining capital during the pre-production period, including a 10% contingency, is estimated at $240 million. Sustaining mining capital of $280 million has been estimated for the production period. The total underground operating cost over the LOM is estimated to be $1,512 million, at an average LOM cost of $91.34/t.




Mineral Resource and Mineral Reserve Estimates




The West Zone resource estimate remains unchanged from the Mineral Resource estimate announced April 3, 2012, and filed on SEDAR April 30, 2012 (see Table 2 below).




In December 2013, Snowden completed a Mineral Resource estimate for the Valley of the Kings Zone of the Brucejack Project.




This December 2013 estimate was an update of the previous November 2012 Mineral Resource estimate and included over 40,000 metres of additional drilling, including 24 surface drillholes (5,200 metres) and 409 underground drillholes (38,840 metres) drilled in support of the underground bulk sample.  In addition to the drilling, a 10,000 tonne bulk sample was processed through a mill and detailed test work has been carried out to both validate the previous Mineral Resources and refine the estimation process for the updated Mineral Resource.





22





The result of the test work is an improved confidence in both the geological model and the grade estimate, with the definition of Measured Resources as part of the December 2013 Mineral Resource.




Bulk Sample Test Work




In 2013, Pretivm excavated a bulk sample from within the Valley of the Kings to further evaluate the geological interpretation and provide a comparison with the results from the Mineral Resource estimate. The location of the proposed bulk sample was selected to be representative of the grade and character of the typical mineralization in the Valley of the Kings.




The design of the bulk sample was limited by provincial legislation to a maximum allowable bulk sample size of 10,000 t. The bulk sample was collected as a series of nominal 100-t rounds in underground development. Pretivm elected to process the bulk sample both through a sample tower on site and at a custom mill (Contact Mill) in Montana, U.S.A. In Snowden’s opinion, the results of assaying of the samples from the sample tower provided an unacceptable degree of variation in the results due to the coarse gold nature of the mineralization and this information was not used further.




Prior to the December 2013 Mineral Resource estimate, the mill results from the underground bulk sample processing were used to investigate the local accuracy of the November 2012 Mineral Resource estimate within the Valley of the Kings, and to determine whether the estimation methodology could be improved for the December 2013 Mineral Resource estimate.




A series of statistical tests were run to determine whether any bias exists between the surface diamond drilling, underground diamond drilling, underground channel samples, and chip samples. No significant difference/bias, based on the statistical analysis, was evident between the different sample types.




However, additional test work in the estimation did display some bias caused by directional drilling in the area of the bulk sample. The underground drilling had been aligned in a north-south orientation which is consistent with the orientation of some high-grade mineralization identified in the bulk sample, resulting in under sampling of this mineralization. Removal of the underground drillholes resulted in an increase in the grade of the local estimate.




While there is no bias evident between the channel samples and the drilling, the location of numerous channel samples in the centre of some of the higher-grade mineralization does result in a local overestimation around the bulk sample crosscuts. Consequently, the decision was made not to use the channel samples for the final mineral resource estimate.










23





bulk sample packages are around 100 t), and the grade is not homogenous throughout any block. In other words, the grade can vary from a high-grade side of the block to a low-grade side of the block, whereas the block grade represents an average of the whole block. If the bulk sample happens to take a high-grade part of the block, then the comparison will look like the resource estimate under-estimated the grade, and conversely if the bulk sample takes a low-grade part of the block, then the comparison will look like the resource estimate over-estimated the grade in the block. Whilst it is not entirely valid to compare the results of the bulk sample with the resource estimate (given the different sample support) locally, it does provide the best opportunity to fine-tune the estimate to some hard data. The reader should be warned that the results are only used to give some local perspective to the grade estimates.




The results indicated that the November 2012 Mineral Resource underestimated the total metal content in the bulk sample by about 10%. In more detail, the November 2012 Mineral Resource estimated high-grade into lower-grade areas, and low-grade into the high-grade areas, a result of extrapolating the high-grade values around the high-grade core. This extrapolation of high-grade values was based on the nature of the mineralization and the interpreted continuity of the high grades.




Based on the bulk sample comparisons, Snowden concluded that the November 2012 Mineral Resource was a good representation of the contained metal within the Valley of the Kings deposit and satisfactory for mining studies based around bulk underground mining, but that it was not locally accurate at the 10 metre block scale. As a result further test work was undertaken to adjust the estimation method for the December 2013 Mineral Resource, to produce an estimate that is more responsive to the local scale grade variations.




Mineral Resource Estimate




The mineralization in the Valley of the Kings exists as steeply dipping semi-concordant (to stratigraphy) and discordant pod-like zones hosted in stockwork vein systems within the volcanic and volcaniclastic sequence.  High grade mineralization zones appear to be spatially associated, at least in part, with intensely silicified zones resulting from local silica flooding and over-pressure caprock formation.  High grade mineralization occurs both in the main east-west trending vein stockwork system, as well as in the rarer north-south trending part of the system.  Snowden notes that the Company has taken these various observations into consideration in its interpretation of the mineralization domains for the Valley of the Kings.




A threshold grade of 0.3 g/t Au was found to generally identify the limits to the broad zones of mineralization as represented in the drill cores at West Zone and the Valley of the Kings.  In the Valley of the Kings, a 1 g/t Au to 3 g/t Au threshold grade was used together with the Company’s interpretation of the lithological domains, to interpret high grade corridors within the broader mineralized zones, and define a series of mineralized domains for estimation.










24





All data was composited to the dominant sample length of 1.5 meter prior to analysis and estimation. Statistical analysis of the gold and silver data was carried out by lithological domain (at the Valley of the Kings) and mineralized domain. Review of the statistics indicated that the grade distributions for the mineralization within the different lithologies are very similar and as a result these were combined for analysis.  This is in agreement with field observations which indicate that the stockwork mineralization is superimposed on the stratigraphic sequence.  The summary statistics of composite samples from all domains exhibit a strong positive skewness with high coefficient of variation and some extreme grades.




Because of the extreme positive skew in the histograms of the gold and silver grades within the high grade domains, Snowden elected to use a non-linear approach to estimation, employing the use of indicator and truncated distribution kriging. In this approach, the proportion of high grade in a block was modelled, as was the grade of the high grade portion, and the grade of the low grade portion.




The high grade population, which contains a significant number of samples with extreme grades, required indicator kriging methods for grade estimation. The low grade population was estimated using ordinary kriging on the truncated (low grade; <5 g/t Au and <50 g/t Ag) part of the grade distribution.




Density was estimated using simple kriging of specific gravity measurements determined on sample pulps by ALS Chemex.




Grade estimates and models were validated by: undertaking global grade comparisons with the input drillhole composites; visual validation of block model cross sections; grade trend plots; and comparing the results of the model to the bulk sample cross cuts.




The resource classification definitions (Measured, Indicated, Inferred) used for this estimate are those published by the Canadian Institute of Mining, Metallurgy and Petroleum in their document “CIM Definition Standards”.




In order to identify those blocks in the block model that could reasonably be considered as a Mineral Resource, the block model was filtered by a cut-off grade of 5 g/t AuEq. The gold-equivalent calculation used is: AuEq = Au + (Ag/53). These blocks were then used as a guide to develop a set of wireframes defining coherent zones of mineralization which were classified as Measured, Indicated or Inferred and reported (Table 1 and Table 2).




Classification was applied based on geological confidence, data quality and grade variability.  Areas classified as Measured Resources at West Zone are within the well-informed portion where the resource is informed by 5 meter by 5 meter or 5 meter by 10 meter spaced drilling.  Measured Resources within Valley of the Kings are informed by 5 meter by 10 meter to 10 meter by 10 meter underground fan drilling and restricted to the vicinity of the underground bulk sample.




Areas classified as Indicated Resources are informed by drilling on a 20 meter by 20 meter to 20 meter by 40 meter grid within West Zone and Valley of the Kings.  In addition, some blocks at the edge of the areas with 20 meter by 20 meter to 20 meter by 40 meter drilling, were downgraded to Inferred where the high grades appear to have too much influence.  The remainder of the Mineral Resource is classified as Inferred Resources where there is some drilling information (and within around 100 metres of drilling) and the blocks occur within the mineralized interpretation.





Areas where there is no informing data and/or the lower grade material is outside of the mineralized interpretation are not classified as a part of the Mineral Resource.





25





Resource Reporting




The Mineral Resources are reported above a cut-off grade of 5 g/t gold equivalent (AuEq) which reflects the potential economics of a high grade underground mining scenario.  The AuEq value for each block is consistent with the November 2012 Mineral Resource.  In that evaluation, the AuEq value was calculated according to the formula (AuEq = Au + Ag/53) based upon prices of US$1,590/oz and US$30/oz for gold and silver respectively.  Recoveries for gold and silver are assumed to be similar.




High grade Mineral Resources for the Valley of the Kings and the West Zone are summarized in Table 1 and Table 2 respectively (below).




Table 1


Valley of the Kings Mineral Resource estimate


based on a cut-off grade of 5 g/t AuEq – December 2013(1)(4)(5)




Category
Tonnes

(millions)
Gold

(g/t)
Silver

(g/t)
Contained(3)Gold

(Moz)
Silver

(Moz)Measured
2.0
19.3
14.4
1.2
0.9Indicated
13.4
17.4
14.3
7.5
6.1M + I
15.3
17.6
14.3
8.7
7.0Inferred(2)
5.9
25.6
20.6
4.9
3.9




(1)
Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability. The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, marketing, or other relevant issues. The Mineral Resources in this AIF were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council.




(2)
The quantity and grade of reported Inferred resources in this estimation are uncertain in nature and there has been insufficient exploration to define these Inferred Resources as an Indicated or Measured Mineral Resource and it is uncertain if further exploration will result in upgrading them to an Indicated or Measured Mineral Resource category.




(3)
Contained metal and tonnes figures in totals may differ due to rounding.




(4)
The Mineral Resource estimate stated in Table 1 and Table 2 is defined using 5 metre by 5 by 5 metre blocks in the well drilled portion of West Zone (5 metre by 10 metre drilling or better) and 10 metre by 10 metre by 10 metre blocks in the remainder of West Zone and in Valley of the Kings.




(5)
The gold equivalent value is defined as AuEq = Au + Ag/53.





26




Table 2


West Zone Mineral Resource estimate


based on a cut-off grade of 5 g/t AuEq – April 2012 (1)(4)(5)




Category
Tonnes

(millions)
Gold

(g/t)
Silver

(g/t)
Contained(3)Gold

(Moz)
Silver

(Moz)Measured
2.4
5.85
347
0.5
26.8Indicated
2.5
5.86
190
0.5
15.1M+I
4.9
5.85
267
0.9
41.9Inferred(2)
4.0
6.44
82
0.8
10.6




(1), (2), (3), (4) and (5) - See footnotes to Table 1.




Mineral Reserve Estimates




The mine design and Mineral Reserve estimate have been completed to a level appropriate for feasibility studies.  The Mineral Reserve estimate stated herein is consistent with CIM Standards on Mineral Resources and Mineral Reserves.  As such, the Mineral Reserves are based on Measured and Indicated Resources and do not include any Inferred Resources.




The Mineral Reserves were developed from the resource model “bjbm_1313_v11_cut”, which was provided to AMC by Snowden, on behalf of Pretivm, in February 2014.




A net smelter return (NSR) cut-off grade of $180/t of ore was used to define the Mineral Reserves (as used in previous studies).  The NSR for each block in the resource model was calculated as the payable revenue for gold and silver, less refining, concentrate treatment, transportation, and insurance costs.  The metal price assumptions are US$1,100/oz gold and US$17/oz silver.  Costs assume a C$ to US$ exchange rate of 0.92.




The NSR contributions for both flotation concentrate and doré were calculated individually, combined, and assigned to each block in the resource model.




Dilution and Recovery Estimates




In the evaluation of Mineral Reserves, modifying factors were applied to the tonnages and grade of all mining shapes (both stoping and development) to account for the dilution and ore losses that are experienced at all mining operations.




Ore dilution includes overbreak into the design hanging wall and design footwall, and also into adjacent backfilled stopes.  Diluting materials are assumed to carry no metal values in the estimation of Mineral Reserve grades.





27





The largest component of dilution at Brucejack will be paste backfill due to its inherently weaker strength compared to the hanging wall and footwall rock masses for any given dimensions of exposure.




Ore losses (recovery factors) are related to the practicalities of extracting ore under varying conditions, including difficult mining geometry, problematic rock conditions, losses in fill, and blasting issues.




The dilution factors were calculated from standard overbreak assumptions that are based on AMCs experience and benchmarking of similar long-hole open stope operations.




·
Longhole stopes (primary, secondary, tertiary) carry 1.0 metre of dilution from paste or country rock overbreak into the design hanging wall and design footwall, and 0.3 metre of backfill dilution from the floor.


·
Secondary or tertiary stopes carry an additional 1.0 metres of backfill dilution on each wall that exposes a primary stope.


·
Sill pillar stopes are treated as secondary stopes, given the additional backfill dilution that can be expected from the roof.


·
Ore cross-cuts carry 0.5 metre of dilution from rock overbreak into the design hanging wall and design footwall.


·
Production slashing of secondary stopes carries 0.5 metres of backfill dilution on each wall that exposes a primary stope.




Mineral Reserves




Mineral Reserves tabulated by zone and by reserve category are presented below.




The mining blocks divide the Mineral Reserves into logical parcels consistent with the mining sequence, and form the basis of the LOM development and production schedule.




Brucejack Mineral Reserves* by Zone and by Reserve Category (June 19, 2014)




Zone
Ore

Tonnes

(Mt)
Grade
MetalAu

(g/t)
Ag

(g/t)
Au

(Moz)
Ag

(Moz)Valley of the Kings Zone
Proven
2.1
15.6
12
1.1
0.8Probable
11.5
15.7
10
5.8
3.9Total
13.6
15.7
11
6.9
4.6West Zone
Proven
1.4
7.2
383
0.3
17.4Probable
1.5
6.5
181
0.3
8.6Total
2.9
6.9
279
0.6
26.0Total Mine
Proven
3.5
12.2
161
1..4
18.2Probable
13.0
14.7
30
6.1
12.5Total
16.5
14.1
58
7.5
30.7


Note: *Rounding of some figures may lead to minor discrepancies in totals. Based on C$180/t cut-off grade, US$1,100/oz gold price, US$17/oz silver price, C$/US$ exchange rate = 0.92.





28




Brucejack Mineral Reserves* by Mining Block (June 19, 2014)




Mining Block
Ore

Tonnes

(Mt)
NSR

($/t)
Grade
Contained MetalAu

(g/t)
Ag

(g/t)
Au

(Moz)
Ag

(Moz)Valley of the Kings Upper
4.3
578
16.9
12
2.3
1.6Valley of the Kings Middle
5.7
503
14.9
10
2.7
1.9Valley of the Kings Lower
3.7
530
15.5
9
1.8
1.1Valley of the Kings
13.6
534
15.7
11
6.9
4.6WZ Upper
0.6
304
4.2
407
0.1
8.0WZ Lower
2.3
350
7.6
245
0.6
18.1WZ
2.9
340
6.9
279
0.6
26.0Mining Block Total
16.5
500
14.1
58
7.5
30.7


Note: *Rounding of some figures may lead to minor discrepancies in totals.  Based on C$180/t cut-off grade, US$1,110/oz gold price, US$17/oz silver price, C$/US$ exchange rate = 0.92.




Project Infrastructure




The Brucejack Project will require the development of a number of infrastructure items. The locations of project facilities and other infrastructure items were selected to take advantage of local topography, accommodate environmental considerations, and ensure efficient and convenient operation of the mine haul fleet.




Project infrastructure will include:




·
a 79 km access road at Highway 37 and travelling westward to Brucejack Lake with the last 12 km of access road to the mine site traversing the main arm of the Knipple Glacier;


·
internal site roads and pad areas;


·
grading and drainage;


·
avalanche hazard assessment;


·
mill building and process plant;


·
mine site operation camp;


·
transmission line and substation;


·
ancillary facilities;


·
water supply and distribution;


·
water treatment plant;


·
waste disposal;


·
tailings delivery system;


·
Brucejack Lake outlet control;


·
communications;


·
power supply and distribution;


·
fuel supply and distribution; and


·
off-site infrastructure including the Bowser Airstrip and Camp and the Knipple Transfer Station facilities.


29





Avalanche Hazard Assessment




An avalanche hazard assessment has been completed for the Brucejack Project. Mine site facilities and access routes are exposed to approximately 14 avalanche paths or areas, and the preliminary transmission line alignment crosses several avalanche paths. Avalanche magnitude and frequency varies depending on location. Potential consequences of avalanches reaching the Brucejack mine facilities, transmission line, worksites, and roads include damage to infrastructure, worker injury (or fatality), and project delays. Potential consequences of static snow loads on transmission towers include damage to towers and foundations, and potential loss of electrical service to the mine. Without mitigation to the effects of avalanches and static snow loading, there is a high likelihood of some of the above consequences affecting operations on an annual basis.




Avalanche mitigation for the Brucejack Project includes location planning, in order to avoid placement of facilities in avalanche hazard areas. For areas where personnel and infrastructure may be exposed, an avalanche management program will be implemented for mine operations during avalanche season (October through June). The program will utilize an Avalanche Technician team to determine periods of elevated avalanche hazard and provide recommendations for closures of hazard areas. The options for reducing control include explosive control, or waiting for natural settlement. Areas that are expected to have increased frequency of hazard and consequences will be evaluated for the installation of the remote avalanche control system (“RACS”) in order to allow for avalanche explosive control during reduced visibility (darkness and during storms). An allowance has been made in the capital and operating cost estimates for six RACSs.




Transmission Line




For the Brucejack transmission line, we retained Valard to review potential routes and develop an initial design for the transmission line to the Brucejack Project site, based on Valard’s current experience in the area. To this end, Valard reviewed potential routes and determined the preferred route to be an extension from an existing transmission line from a hydro generation facility to the south (near Stewart, British Columbia) to the Brucejack Project site. Based on the terrain and the expected construction conditions, single steel monopole towers are recommended for the design.





Site review indicates that the hazards in the area can be avoided through diligent siting of the tower structures and any structures exposed to hazards are expected to be designed to accommodate impact pressures. Worker risks are expected to be controlled by way of an active snow avalanche risk program.




Tailings Delivery System




Approximately one half of the tailings produced by mine operations will be stored underground as paste backfill and approximately one half will be placed on the bottom of Brucejack Lake. Tailings will be pumped from the tailings thickener at the process plant by slurry pipeline to the lake in a manner which will minimize suspended solids concentrations at the lake outlet. Fine particulate solids may also be suspended in the lake surface layer if fine waste rock is placed in the lake. Investigations on minimizing or eliminating this source of suspended solids in the lake outflow are underway.







30





Environmental




We are committed to operating the mine in a sustainable manner and according to our guiding principles. Every reasonable effort will be made to minimize long-term environmental impacts and to ensure that the Brucejack Project provides lasting benefits to local communities while generating substantial economic and social advantages for shareholders, employees, and the broader community. We respect the traditional knowledge of the Aboriginal peoples who have historically occupied or used the Brucejack Project area.




The Brucejack Project area ecosystem is relatively undisturbed by human activities. Our objective is to retain the current ecosystem integrity as much as possible during the construction and operation of the Brucejack Project. Upon closure and reclamation of the Brucejack Project, the intent will be to return the disturbed areas to a level of productivity equal to or better than that which existed prior to project development, and for the end configuration to be consistent with pre-existing ecosystems to the extent possible.




Capital Costs




The total estimated initial capital cost for the design, construction, installation, and commissioning of the Brucejack Project is US$746.9 million. A summary breakdown of the initial capital cost, including direct costs, indirect costs, owner’s costs, and contingency is provided below.




Summary of Initial Capital Cost




Major

Area
Area Description
Capital Cost

(US$ million)Direct Costs11
Mine Site
21.521
Mine Underground
179.531
Mine Site Process
53.832
Mine Site Utilities
30.533
Mine Site Facilities
53.534
Mine Site Tailings
3.535
Mine Site Temporary Facilities
33.436
Mine Site (Surface) Mobile Equipment
14.684
Off Site Infrastructure
89.1Subtotal Direct Costs
479.491
Indirect Costs
127.598
Owner’s Costs
71.099
Contingency
69.0Total Initial Capital Cost
746.9Note:      Numbers may not add due to rounding.





The purpose of this capital cost estimate is to provide feasibility-level input to the Brucejack Project financial model.







31





This is a Class 3 feasibility cost estimate prepared in accordance with the standards of the Association for the Advancement of Cost Engineering International (the “AACE”). The estimated degree of project definition meets or exceeds 30%. The accuracy of this estimate is deemed to be -15%/+20%. There was no deviation from the AACE’s recommended practices in the preparation of this estimate.




This feasibility estimate was prepared with a base date of Q2 2014 and does not include any escalation beyond this date. The quotations used for this feasibility study estimate were obtained in Q2 2014, and have a validity period of 90 days.




The capital cost estimate uses U.S. dollars as the base currency. Foreign exchange rates were applied as required. Duties and taxes and taxes are not included in the estimate. This estimate is divided into four general sections (direct costs, indirect costs, owners’ costs and contingency) and was developed based largely on first principles from a design, planning, and cost basis.




Operating Costs




The total LOM average operating cost for the Brucejack Project is estimated at $163.05/t ore milled which includes for:




·
mining;


·
process;


·
general and administration (G&A);


·
surface services;


·
backfill, including paste preparation; and


·
water treatment.




The operating costs exclude sustaining capital costs, off-site costs (such as shipping and smelting costs), taxes, or other government imposed costs, unless otherwise noted.




A total of 593 personnel are projected to be required for the Brucejack Project. The unit cost estimates are based on the LOM ore production and a mine life of 18 years. The currency exchange rate used for the estimate is 1.00:0.92 (C$/US$). The operating cost for the Brucejack Project has been estimated in Canadian dollars within an accuracy range of ±15%.




Economic Analysis




Tetra Tech prepared an economic evaluation of the Brucejack Project based on a pre-tax financial model. For the 18-year LOM and 16.55 Mt of mine plan tonnage, the following pre-tax financial parameters were calculated:




·
34.7% internal rate of return (“IRR”);


·
2.7-year payback on the US$746.9 million initial capital; and


·
US$2,251 million net present value (NPV) at a 5% discount rate.





32





A post-tax economic evaluation of the Brucejack Project was prepared with the inclusion of applicable taxes. The following post-tax financial parameters were calculated:




·
28.5% IRR;


·
2.8-year payback on the US$746.9 million initial capital; and


·
US$1,445 million NPV at a 5% discount rate.




The base case metal prices and exchange rate used for the Brucejack Technical Report are as follows:




·
gold – US$1,100/oz


·
silver – US$17.00/oz


·
exchange rate – 0.92:1.00 (US$:C$).




Project Execution Plan




The Brucejack Project will take approximately 33 months to complete from the start of basic engineering, through construction, to introduction of first material into the mill. A further two months is planned for commissioning and production ramp-up. The Brucejack Project execution schedule was developed to a Level 2 detail of all activities required to complete the Brucejack Project.




The Brucejack Project will transition from the study phase to basic engineering during the third quarter of 2014 and will move forward in the following phases:




·
Stage l – early works including mine development, the EAC application, permitting, access road upgrades, preliminary power transmission line right-of-way, basic engineering, and the procurement of long-lead equipment.




·
Stage ll – full project execution (following permit approval), including detailed engineering, procurement, construction team mobilization, construction, and commissioning.





33




DIVIDENDS AND DISTRIBUTIONS




We have not, since the date of incorporation, declared or paid any dividends on our Common Shares, and do not currently have a policy with respect to the payment of dividends. For the foreseeable future, we anticipatethat we will retain future earnings and other cash resources for the operation and development of our business.The payment of dividends in the future will depend on the earnings, if any, and our financial condition and such other factors as our directors consider appropriate.




DESCRIPTION OF CAPITAL STRUCTURE




Our authorized share capital consists of an unlimited number of Common Shares, without par value, and an unlimited number of Preferred Shares, without par value, issuable in series.  As at the date of this AIF, there were 132,582,397 Common Shares and no Preferred Shares issued and outstanding.




All of our Common Shares rank equally as to voting rights, participation in a distribution of the assets of the Company on a liquidation, dissolution or winding-up of the Company and entitlement to any dividends declared by the Company. The holders of the Common Shares are entitled to receive notice of, and to attend and vote at, all meetings of shareholders (other than meetings at which only holders of another class or series of shares are entitled to vote). Each Common Share carries the right to one vote. In the event of the liquidation, dissolution or winding-up of the Company, the holders of the Common Shares will be entitled to receive, on a pro rata basis, all of the assets remaining after the payment by the Company of all of its liabilities. The holders of Common Shares are entitled to receive any dividends declared by the Company in respect of the Common Shares, subject to the rights of holders of other classes ranking in priority to the Common Shares with respect to the payment of dividends, on a pro rata basis.  Any alteration of the rights attached to the Common Shares must be approved by at least two-thirds of the Common Shares voted at a meeting of our shareholders.




MARKET FOR SECURITIES




Trading Price and Volume




Our Common Shares trade on the TSX and the NYSE under the symbol “PVG”.  Our Common Shares commenced trading on the TSX on December 21, 2010 and on the NYSE on January 12, 2012.




The following table sets out the price ranges (high, low and close) and trading volume of our Common Shares as quoted on the TSX for each month our most recently completed financial year:




Period
High ($)
Low ($)
Close ($)
Volume (Shares)January, 2014
7.26
5.20
7.15
7,960,152February, 2014
7.85
6.23
7.68
6,923,432March, 2014
8.31
6.20
7.54
5,691,241April, 2014
7.45
6.01
7.26
3,179,677May, 2014
8.36
6.80
8.08
5,028,166
   34
  Period
High ($)
Low ($)
Close ($)
Volume (Shares)
 June, 2014
8.88
6.76
8.83
6,290,140July, 2014
9.43
7.36
9.27
9,614,696August, 2014
8.08
7.11
8.08
4,924,425September, 2014
7.98
5.83
7.84
6,122,187October, 2014
6.97
4.60
6.76
5,464,187November, 2014
7.07
4.69
6.99
6,132,175December, 2014
7.38
5.58
7.05
13,738,488




The closing price of our Common Shares on the TSX and the NYSE on March 30, 2015, the last trading day before the date hereof, was C$6.49 and US$5.11 per Common Share, respectively.




Prior Sales




We did not issue any securities in our most recent financial year that are of a class that is not listed or quoted for trading on a marketplace.






The following table summarizes information about incentive stock options that were issued during 2014:




Date Granted

Number


Exercise PriceMarch 10, 2014


360,000


$
7.26May 16, 2014


150,000


$
7.86October 15, 2014


421,500


$
6.55December 16, 2014


60,000


$
6.23





We adopted a Restricted Share Unit Plan (“RSUs”) during 2014 to allow our Board of Directors to grant our employees and consultants non-transferable share units based on the value of our share price at the date of grant.  The awards have a graded vesting schedule over a three-year period and are cash-settled immediately upon vesting.  During 2014, a total of 330,992 RSUs were issued with a market value of $6.84 per RSU.




DIRECTORS AND OFFICERS




Name, Occupation and Security Holding




The following table sets forth the name of each of our directors and executive officers, their province or state and country of residence, their position(s) with the Company, their principal occupation during the preceding five years and the date they first became a director of the Company and the number of Common Shares held or controlled, directly or indirectly by such officer or director as of the date of this AIF.  Each director’s term will expire immediately prior to the next annual meeting of shareholders.








35


Name and Residence
Position(s) with

the Company
Principal Occupation

During Past Five Years
Director Since
Number of Common SharesRobert A. Quartermain

British Columbia,

Canada
President and Chief Executive Officer and Director
President and Chief Executive Officer of the Company from October 2010 to present.

Retired from January 2010 to October 2010.
October 22, 2010
2,657,353

Common SharesJoseph J. Ovsenek

British Columbia,

Canada
Executive Vice President, Chief Development Officer and Director
Executive Vice President and Chief Development Officer of the Company from March 2014 to present.

Vice President, Chief Development Officer of the Company from January 2011 to March 2014.

Senior Vice President, Corporate Development of Silver Standard from September 2009 to January 2011.
December 21, 2010
125,575

Common SharesChristopher Noel Dunn(1)(2)

Massachusetts,

USA
Director
Managing Partner of Ero Resource Partners LLC from February 2014 to present.

Managing Director of Liberty Mining & Metals, a subsidiary of Liberty Mutual Investments from September 2011 to December 2013.

Partner of Niantic Advisors LLC from April 2009 to October 2011.
October 22, 2010
50,000

Common SharesRoss Mitchell(1)(2)

British Columbia,

Canada
Director
Retired from July, 2007 to present.
October 22, 2010
105,000

Common SharesTom S.Q. Yip

British Columbia,

Canada
Chief Financial Officer and Director
Chief Financial Officer of the Company from January 2015 to present.

Chief Financial Officer of International Tower Hill Mines Ltd. from September 2011 to December 31, 2014.

Vice President, Finance and Chief Financial Officer of Silver Standard from July 2007 to August 2011.
February 15, 2011
55,000

Common SharesGeorge Paspalas(2)

British Columbia,

Canada
Director
President and Chief Executive Officer of MAG Silver Corp. from October 2013 to present.

President and Chief Executive Officer of Aurizon Mines Ltd from August 2011 to June 2013.

Chief Operating Officer of Silver Standard Resources Inc. from June 2007 to December 2011.
May 10, 2013
8,000

Common SharesPeter Birkey(1)

Minnesota,

USA
Director
Consultant since October 2013.

Executive Vice President at Liberty Mutual Asset Management from June 2004 to October 2013.
May 14, 2014
40,000 Common SharesShaoyang Shen

British Columbia,

Canada
Director
Managing Director for Overseas Development of Zijin Mining Group from May 2014 to present.

Chief Operating Officer and Vice President of Silvercorp Metals Inc. from 2009 to April 2014.
January 16, 2015
10,000 Common SharesKenneth McNaughton

British Columbia,

Canada
Vice President, Chief Exploration Officer
Vice President, Chief Exploration Officer of the Company from January 2011 to present.

Vice President, Exploration of Silver Standard from July 1991 to January 2011.
N/A
510,500

Common SharesJames Currie

British Columbia,

Canada
Vice President

Chief Operating Officer
Vice President, Chief Operating Officer of the Company from March 2014 to present.

Chief Operating Officer for Elgin Mining Inc. from August 2012 to October, 2013.

Chief Operating Officer for Kimber Resources Inc. from January 2012 to July 2012.

Executive Vice President and Chief Operating Officer for New Gold Inc. from August 2008 to November 2011.
N/A
Nil
  36
  Name and Residence
Position(s) with

the Company
Principal Occupation

During Past Five Years
Director Since
Number of Common Shares
 Ian I Chang

British Columbia,

Canada
Vice President,

Project Development
Vice President, Project Development for the Company, from April 2011 to present.

Project Director and Head of Project Management for Fluor Canada Limited from February 2008 to April 2011.
N/A
2,553

Common SharesMichelle Romero

British Columbia,

Canada
Vice President

Corporate Relations
Vice President, Corporate Relations for the Company from August 2013 to present.

Director, Corporate Relations for the Company from February 2011 to August 2013.

Director, Investor Relations of Silver Standard from June 2004 to February 2011.
N/A
37,300

Common Shares


Notes:


(1)
Member of the Audit Committee.


(2)
Member of the Compensation and Corporate Governance Committee.




Shareholdings of Directors and Senior Officers




Our directors and executive officers, as a group, beneficially own, control or direct, directly or indirectly, 3,601,281 Common Shares representing approximately 2.72% of the issued and outstanding Common Shares and hold options to acquire an additional 8,867,000 Common Shares, representing approximately 8.60% of the Common Shares on a fully-diluted basis.




Cease Trade Orders, Bankruptcies, Penalties or Sanctions




None of our directors or executive officers is, as at the date hereof, or was within 10 years before the date hereof, a director, chief executive officer or chief financial officer of any company (including the Company) that (a) was subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant issuer access to any exemption under securities legislation, that was in effect for a period or more than 30 consecutive days (a “Cease Trade Order”) that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer of such issuer, or (b) was subject to a Cease Trade Order that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer.










37





None of our directors or executive officers, nor, to our knowledge, any shareholder holding a sufficient number of our securities to affect materially the control of the Company (a) is, as at the date hereof, or has been within the 10 years before the date hereof, a director or executive officer of any company (including ours) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, or (b) has, within the 10 years before the date hereof, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of such director, executive officer or shareholder.




None of our directors or executive officers, nor, to our knowledge, any shareholder holding a sufficient number of our securities to affect materially the control of the Company, has been subject to (a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority, or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.




Conflicts of Interest




To the best of our knowledge, there are no known existing or potential conflicts of interest between the Company and any of our directors or officers as a result of such individual’s outside business interests at the date hereof. However, certain of our directors and officers are, or may become, directors or officers of other companies with businesses which may conflict with our business.  Accordingly, conflicts of interest may arise which could influence these individuals in evaluating possible acquisitions or in generally acting on behalf of the Company. Pursuant to the BCBCA, directors are required to act honestly and in good faith with a view to the best interests of the Company. As required under the BCBCA and our Articles:




A director or executive officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or executive officer of the Company, must promptly disclose the nature and extent of that conflict.




A director who holds a disclosable interest (as that term is used in the BCBCA) in a contract or transaction into which the Company has entered or proposes to enter may generally not vote on any directors’ resolution to approve the contract or transaction.




Generally, as a matter of practice, directors or executive officers who have disclosed a material interest in any transaction or agreement that our Board is considering will not take part in any Board discussion respecting that contract or transaction. If on occasion such directors do participate in the discussions, they will abstain from voting on any matters relating to matters in which they have disclosed a material interest. In appropriate cases, we will establish a special committee of independent directors to review a matter in which directors, or management, may have a conflict.





38





Audit Committee Information




Under National Instrument 52-110 (“NI 52-110”) companies are required to provide disclosure with respect to their audit committee including the text of the audit committee’s charter, the composition of the audit committee and the fees paid to the external auditor.  The text of the Company’s audit committee’s charter is attached as Appendix 1 to this AIF.




The Company’s current audit committee is comprised of Ross Mitchell (Chair), Christopher Noel Dunn and Peter Birkey.  All committee members are independent and financially literate as such terms are defined in NI 52-110.




The education and experience of each Audit Committee member that is relevant to the performance of his responsibilities as a member of the Audit Committee are as follows:




Ross Mitchell is a Chartered Accountant who has over thirty years of experience holding senior finance positions in both mining and mineral exploration companies. He was Vice President, Finance of Westmin Resources Inc. from 1989 to 1995. In 1996, he became Vice President, Finance of Silver Standard and held this position until his retirement in 2007.  He earned a Bachelor of Commerce degree from the University of British Columbia in 1971 and a Chartered Accountant designation from the Institute of Chartered Accountants of British Columbia in 1973.




Christopher Noel Dunn is the Managing Partner of Ero Resource Partners LLC.  Mr. Dunn was the Managing Director of Liberty Mining & Metals, a subsidiary of Liberty Mutual Investments, focused on investing in early stage mining companies, from 2011 to 2013.  He was a limited partner of Niantic Partners LLC, a private equity partnership investing in commercial real estate from April 2009 to October 2011.  Prior to these posts, Mr. Dunn was at JP Morgan from May 2008 to February 2009 and at Bear Stearns from May 2001 to May 2008, as a leader of their respective investment banking practices in mining and metals.  From September 1988 to May 1999, Mr. Dunn was a Managing Director of Goldman Sachs, managing a capital underwriting business in London. Mr. Dunn holds a Master of Arts degree from the University of Edinburgh and a Master of Science degree from the University of Durham.




Peter Birkey is an Investment Executive who has over twenty years of experience investing in the financial markets and advising both public and private companies. Mr. Birkey was an Executive Vice President for Liberty Mutual Asset Management responsible for all Strategy, Public Markets, Risk Management, Real Estate and Special Situations until October 2013.  Prior to this, he was a Senior Vice President for AmerUs Capital Management (now Aviva USA) and a Portfolio Manager for AEGON USA. Mr. Birkey earned a MBA in Finance and Marketing with the highest honors from the University of Chicago. He is also a Charted Financial Analyst and holds a Bachelors degree in Economics and Business Administration from Coe College.





39





Pre-approval Policy




The Audit Committee meets with the CEO and CFO of the Company and the independent auditors to review and inquire into matters affecting financial reporting, the system of internal accounting and financial controls and procedures and the audit procedures and audit plans. The Audit Committee also recommends to the Board the auditors to be appointed, subject to shareholder approval. In addition, the Audit Committee reviews and recommends to the Board for approval the annual financial statements, the annual report and certain other documents required by regulatory authorities.




The chair of the Audit Committee is generally responsible for overseeing the Audit Committee in its responsibilities as outlined in the Audit Committee Charter. The chair’s duties and responsibilities include presiding at each meeting of the Audit Committee, referring specific matters to the Board in the case of a deadlock on any matter or vote, receiving and responding to all requests for information from the Company or the independent auditors, leading the Audit Committee in discharging its tasks and reporting to the Board on the activities of the Audit Committee.




External Auditor Service Fees




The aggregate fees billed by the Company’s external auditors in respect of the last two financial years are as follows:




2013


2014Audit Fees(1)

$
75,000


$
86,500Audit-Related Fees(2)

$
40,500


$
95,400Tax Fees(3)

Nil


NilAll Other Fees

Nil


Nil




(1)
Audits of the Company’s consolidated financial statements, meetings with the Audit Committee and management with respect to quarterly filings, consulting and accounting standards and transactions, issuance of consent in connection with Canadian and United States securities filings.


(2)
Audit-related fees were paid for assurance and related services by the auditors that were reasonably related to the performance of the audit or the review of the Company’s financial statements that are not included in Audit Fees.


(3)
Tax compliance, taxation advice and tax planning.





40







RISK FACTORS




Investing in the securities is speculative and involves a high degree of risk due to the nature of our business and the present stage of exploration of our mineral properties. The following risk factors, as well as risks currently unknown to us, could materially adversely affect our future business, operations and financial condition and could cause them to differ materially from the estimates described in forward-looking information relating to the Company, or our business, property or financial results, each of which could cause purchasers of securities to lose part or all of their investment. You should carefully consider the following risk factors along with other risk factors included elsewhere in the AIF.




Risks Related to the Business of the Company




The Company is subject to lawsuits that could divert its resources and result in the payment of significant damages and other remedies.




The Company is engaged as a defendant in several class action lawsuits filed by certain shareholders of the Company.Litigation resulting from these claims could be costly and time-consuming and could divert the attention of management and key personnel from our business operations. We cannot assure that we will succeed in defending any of these claims and those judgments will not be entered against us with respect to the litigation resulting from such claims. If we are unsuccessful in our defense of these claims or unable to settle the claims in manner satisfactory to us, we may be faced with significant monetary damages or injunctive relief against us that could have a material adverse effect on our business and financial condition.




As of the date hereof, we are aware of legal proceedings in Ontario and in New York, as more particularly described in the section entitled “Legal Proceedings” on page 63 of this AIF.




We have no mineral properties in production or under development and even if the development of any of our properties is found to be economically feasible, we will be subject to all of the risks associated with establishing new mining operations.




We do not currently have mineral properties under development. Even if the future development of any of our properties is found to be economically feasible, and the development of which is approved by the Board, such development will require the construction and operation of mines, processing plants and related infrastructure. As a result, we are and will continue to be subject to all of the risks associated with establishing new mining operations, including:




•
the timing and cost, which can be considerable, of the construction of mining and processing facilities;




•
the availability and cost of skilled labour, mining equipment and principal supplies needed for operations;




•
the availability and cost of appropriate smelting and refining arrangements;





41







•
the need to obtain necessary environmental and other governmental approvals and permits and the timing of the receipt of those approvals and permits;




•
the availability of funds to finance construction and development activities;




•
potential opposition from non-governmental organizations, First Nations, environmental groups, local groups or other stakeholders which may delay or prevent development activities; and




•
potential increases in construction and operating costs due to changes in the cost of labour, fuel, power, materials and supplies.




The costs, timing and complexities of developing our projects may be greater than anticipated because the majority of such property interests are not located in developed areas, and, as a result, our property interests may not be served by appropriate road access, water and power supply and other support infrastructure. Cost estimates may increase as more detailed engineering work is completed on a project. It is common in new mining operations to experience unexpected costs, problems and delays during construction, development and mine start-up. Accordingly, we cannot provide assurance that our activities will result in profitable mining operations at our mineral properties.




We are an exploration stage company that has no history of production and no revenue from operations. We cannot provide assurance that we will generate any operating revenues at our mineral properties in the future.




We are an exploration company and all of our properties are in the exploration stage. We have a very limited history of operations and to date have generated no revenue from operations. As such, we are subject to many risks common to such enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial and other resources and lack of revenues. Mineral exploration involves significant risk, since few properties that are explored contain bodies of ore that would be commercially economic to develop into producing mines.




We anticipate that we will continue to incur exploration and development costs without realizing any revenues for the foreseeable future. We expect to continue to incur losses unless and until such time as one or more of our mineral properties enters into commercial production and generates sufficient revenues to fund our continuing operations. If we are unable to generate significant revenues at the Brucejack Project, we will not be able to earn profits or continue operations. We cannot provide investors with any assurance that we will ever develop a mine at the Brucejack Project.




We may not have sufficient funds to develop our mineral properties or to complete further exploration programs.




We are an exploration company with limited financial resources. We currently generate no operating revenue, and must primarily finance exploration activity and the development of mineral properties by other means. In the future, our ability to continue exploration, and development and production activities, if any, will depend on our ability to obtain additional external financing. Any unexpected costs, problems or delays could severely impact our ability to continue exploration and development activities.





42





The sources of external financing that we may use for these purposes include project or bank financing, or public or private offerings of equity and debt. In addition, we may enter into one or more strategic alliances or joint ventures, decide to sell certain property interests, or utilize one or a combination of all of these alternatives. The financing alternative we choose may not be available on acceptable terms, or at all. If additional financing is not available, we may have to postpone the further exploration or development of, or sell, one or more of our principal properties. Furthermore, even if we raise sufficient additional capital, there can be no assurance that we will achieve profitability or positive cash flow. In addition, any future equity offering will further dilute your equity interest in us and any future debt financing will require us to dedicate a portion of our cash flow to payments on indebtedness and will limit our flexibility in planning for or reacting to changes in our business.




We are dependent on the Brucejack Project for our future operating revenue.




Our only material property for the purposes of NI 43-101 is the Brucejack Project, which has a limited life based on mineral resource estimates.  Mineral resources are not mineral reserves and do not have demonstrated economic viability.  In order to be able to develop a mine and commence production, we will be required to replace and expand our mineral resources and obtain mineral reserves. In the absence of additional mineral projects, the Company will be solely dependent upon the Brucejack Project for its revenue and profits, if any. In addition, development costs are difficult to predict and may render the development of the Brucejack Project financially unfeasible.  Should the development of the Brucejack Project turn out to be not possible or practicable, for political, engineering, technical, economic, legal or other reasons, our business and financial position will be significantly and adversely affected.




Mineral resource and reserve calculations are only estimates.




Any figures presented for mineral resources in this AIF, any figures for mineral resources which may be presented in the future or any figures for mineral reserves that may be presented by us in the future are and will only be estimates. There is a degree of uncertainty attributable to the calculation of mineral reserves and mineral resources. Until mineral reserve estimates or mineral resource estimates are actually mined and processed, the quantity of metal and grades must be considered as estimates only and no assurances can be given that the indicated levels of metals will be produced. In making determinations about whether to advance any of our projects to development, we must rely upon estimated calculations as to the mineral resources and grades of mineralization on our properties.




The estimating of mineral reserves and mineral resources is a subjective process that relies on the judgment of the persons preparing the estimates. The process relies on the quantity and quality of available data and is based on knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. By their nature, mineral resource estimates are imprecise and depend, to a certain extent, upon analysis of drilling results and statistical inferences that may ultimately prove to be inaccurate.





43





Estimated mineral reserves or mineral resources may have to be recalculated based on changes in mineral prices, further exploration or development activity or actual production experience. This could materially and adversely affect estimates of the volume or grade of mineralization, estimated recovery rates or other important factors that influence mineral reserve or resource estimates. The extent to which resources may ultimately be reclassified as proven or probable mineral reserves is dependent upon the demonstration of their profitable recovery. Any material changes in mineral resource estimates and grades of mineralization will affect the economic viability of placing a property into production and a property’s return on capital. We cannot provide assurance that mineralization can be mined or processed profitably.




Our mineral resource estimates have been determined and valued based on assumed future metal prices, cut-off grades, operating costs and other assumptions that may prove to be inaccurate. Extended declines in market prices for gold and silver may render portions of our mineralization uneconomic and result in reduced reported mineral resources, which in turn could have a material adverse effect on our results of operations or financial condition.  We cannot provide assurance that mineral recovery rates achieved in small scale tests will be duplicated in large scale tests under on-site conditions or in production scale. In addition, if our projects produce concentrate for which there is no market, specifically, with respect to concentrate containing rhenium, this may have an impact on the economic model for the Brucejack Project. A reduction in any resources that may be estimated by us in the future could have an adverse impact on our future cash flows, earnings, results of operations and financial condition.




No assurances can be given that any mineral resource estimates for the Brucejack Project will ultimately be reclassified as proven or probable mineral reserves. The failure to establish proven and probable mineral reserves could restrict our ability to successfully implement our strategies for long-term growth and may impact future cash flows, earnings, results of operation and financial condition.




Uncertainty exists related to mineral resources.




There is a risk that inferred mineral resources referred to in this AIF cannot be converted into measured or indicated mineral resources as there may be limited ability to assess geological continuity. In addition, there is no assurance that any mineral resources will, as a result of continued exploration, be determined to have sufficient geological continuity so as to be upgraded to constitute proven and probable mineral reserves.







44





Changes in the market price of gold and other metals, which in the past have fluctuated widely, may materially and adversely affect our revenues and the value of our mineral properties.
 
 Our profitability and long-term viability will depend, in large part, on the market price of gold and silver. The market prices for these metals are volatile and are affected by numerous factors beyond our control, including:





•
global or regional consumption patterns;




•
the supply of, and demand for, these metals;




•
speculative activities;




•
the availability and costs of metal substitutes;




•
expectations for inflation; and




•
political and economic conditions, including interest rates and currency values.




We cannot predict the effect of these factors on metal prices. A decrease in the market price of gold and other metals could affect our ability to finance the exploration and development of any of our mineral properties. The market price of gold and other metals may not remain at current levels. In particular, an increase in worldwide supply, and consequent downward pressure on prices, may result over the longer term from increased gold production from mines developed or expanded as a result of current metal price levels. A sustained period of declining gold and other metal prices would adversely affect our financial performance, financial position and results of operations.




We have a history of negative operating cash flow and a significant accumulated deficit. We may continue to incur losses and to experience negative operating cash flow for the foreseeable future.




We have incurred net losses in each fiscal year since our inception. For the year ended December 31, 2014, we had a net loss of $12.4 millionand at December 31, 2014, we had an accumulated deficit of $75.8 million.  We expect to incur losses unless and until such time as our mineral projects generate sufficient revenues to fund continuing operations.  We have increased our exploration expenses in recent periods and we plan further increases in the future as cash flows allow.  The planned increases in exploration expenses may result in larger losses in future periods.




The exploration and development of our mineral properties will require the commitment of substantial financial resources that may not be available. The amount and timing of expenditures will depend on a number of factors, including the progress of ongoing exploration and development, the results of consultants’ analyses and recommendations, the rate at which operating losses are incurred, the execution of any joint venture agreements with strategic partners and the acquisition of additional property interests, some of which are beyond our control. Our business strategies may not be successful and we may not be profitable in any future period. Our operating results have varied in the past and they may continue to fluctuate in the future. In addition, our operating results may not follow any past trends.




The Company had negative operating cash flow for the financial years ended December 31, 2014 and December 31, 2013.  The Company anticipates that it will continue to have negative cash flow until such time, if at all, that profitable commercial production is achieved.  We cannot provide assurance that we will ever achieve profitability. To the extent that the







45





Company has negative cash flow in future periods, the Company may need to allocate a portion of its cash reserves to fund such negative cash flow. The Company may also be required to raise additional funds through the issuance of equity or debt securities. There can be no assurance that additional capital or other types of financing will be available when needed or that these financings will be on terms favourable to the Company.




General market events and conditions may adversely affect our business and industry.




In 2007 and into 2008, the U.S. credit markets began to experience serious disruption due to a deterioration in residential property values, defaults and delinquencies in the residential mortgage market (particularly, sub-prime and non-prime mortgages) and a decline in the credit quality of mortgage-backed securities. These problems led to a slow-down in residential housing market transactions, declining housing prices, delinquencies in non-mortgage consumer credit and a general decline in consumer confidence. These conditions continued and worsened in 2008 and early 2009, causing a loss of confidence in the U.S. and global credit and financial markets and resulting in the collapse of, and government intervention in, major banks and other financial institutions and insurers, and creating a climate of greater volatility, less liquidity, widening of credit spreads, a lack of price transparency, increased credit losses and tighter credit conditions. Notwithstanding various actions by the U.S. and other governments, concerns about the general condition of the capital markets, financial instruments, banks, investment banks, insurers and other financial institutions caused the broader credit markets to further deteriorate and stock markets to decline substantially. Since such time, there has been no broad and consistent improvement in general economic indicators, including employment levels, announced corporate earnings, economic growth and consumer confidence. Recent economic events have created further uncertainty in global financial and equity markets. If the current crisis persists or worsens, it could lead to increased political uncertainty and financial turmoil. Any or all of these market events and conditions may adversely affect our business and industry.




General economic conditions may adversely affect our growth, profitability and ability to obtain financing.




The unprecedented events in global financial markets in the past several years have had a profound impact on the global economy. Many industries, including the gold mining industry, are impacted by these market conditions. Some of the key impacts of the current financial market turmoil include contraction in credit markets resulting in a widening of credit risk, devaluations, high volatility in global equity, commodity, foreign exchange and precious metal markets and a lack of market confidence and liquidity. A continued or worsened slowdown in the financial markets or other economic conditions, including but not limited to, consumer spending, employment rates, business conditions, inflation, fuel and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates and tax rates, may adversely affect our growth and profitability. A number of issues related to economic conditions could have a material adverse effect on our financial condition and results of operations, specifically:





46




•
the global credit/liquidity crisis could impact the cost and availability of financing and our overall liquidity;




•
the volatility of gold and other metal prices would impact our revenues, profits, losses and cash flow;




•
continued recessionary pressures could adversely impact demand for our production;




•
volatile energy, commodity and consumables prices and currency exchange rates would impact our production costs; and




•
the devaluation and volatility of global stock markets would impact the valuation of our equity and other securities.




Mining is inherently risky and subject to conditions or events beyond our control.




The development and operation of a mine or mine property is inherently dangerous and involves many risks that even a combination of experience, knowledge and careful evaluation may not be able to overcome, including:




•
unusual or unexpected geological formations;




•
metallurgical and other processing problems;




•
metal losses;




•
environmental hazards;




•
power outages;




•
labour disruptions;




•
industrial accidents;




•
periodic interruptions due to inclement or hazardous weather conditions;




•
flooding, explosions, fire, rockbursts, cave-ins and landslides;




•
mechanical equipment and facility performance problems;




•
avalanches; and




•
the availability of materials and equipment.




These risks could result in damage to, or destruction of, mineral properties, production facilities or other properties, personal injury or death, including to our employees, environmental damage, delays in mining, increased production costs, asset write downs, monetary losses and possible legal liability. We may not be able to obtain insurance to cover these risks at economically feasible premiums, or at all. Insurance against certain environmental risks, including potential liability for pollution and other hazards as a result of the disposal of waste products occurring from production, is not generally available to companies within the mining industry. We may suffer a material adverse impact on our business if we incur losses related to any significant events that are not covered by our insurance policies.





47





We cannot provide assurance that we currently hold or will successfully acquire commercially mineable mineral rights.




Exploration for and development of gold properties involves significant financial risks which even a combination of careful evaluation, experience and knowledge may not eliminate.  While the discovery of an ore body may result in substantial rewards, few properties which are explored are ultimately developed into producing mines. Major expenses may be required to establish mineral reserves by drilling, constructing mining and processing facilities at a site, developing metallurgical processes and extracting gold from ore.  We cannot ensure that our current exploration and development programs will result in profitable commercial mining operations.




The economic feasibility of development projects is based upon many factors, including the accuracy of mineral resource and mineral reserve estimates; metallurgical recoveries; capital and operating costs; government regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting and environmental management and protection; and gold prices, which are highly volatile. Development projects are also subject to the successful completion of feasibility studies, issuance of necessary governmental permits and availability of adequate financing.




Most exploration projects do not result in the discovery of commercially mineable ore deposits, and no assurance can be given that any anticipated level of recovery of ore reserves, if any, will be realized or that any identified mineral deposit will ever qualify as a commercially mineable (or viable) ore body which can be legally and economically exploited. Estimates of mineral reserves, mineral resources, mineral deposits and production costs can also be affected by such factors as environmental permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties, the metallurgy of the mineralization forming the mineral deposit, unusual or unexpected geological formations and work interruptions. If current exploration programs do not result in the discovery of commercial ore, we may need to write-off part or all of our investment in existing exploration stage properties.




Material changes in ore reserves, if any, grades, stripping ratios or recovery rates may affect the economic viability of any project. Our future growth and productivity will depend, in part, on our ability to develop commercially mineable mineral rights at our existing properties or identify and acquire other commercially mineable mineral rights, and on the costs and results of continued exploration and potential development programs. Mineral exploration is highly speculative in nature and is frequently non-productive. Substantial expenditures are required to:




•
establish ore reserves through drilling and metallurgical and other testing techniques;




•
determine metal content and metallurgical recovery processes to extract metal from the ore; and


•
construct, renovate or expand mining and processing facilities.


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In addition, if we discover ore, it would take several years from the initial phases of exploration until production is possible. During this time, the economic feasibility of production may change. As a result of these uncertainties, there can be no assurance that we currently hold or will successfully acquire commercially mineable (or viable) mineral rights.




Suitable infrastructure may not be available or damage to existing infrastructure may occur.




Mining, processing, development and exploration activities depend, to one degree or another, on adequate infrastructure.  Reliable roads, bridges, power sources and water supply are important determinants for capital and operating costs.  The lack of availability on acceptable terms or the delay in the availability of any one or more of these items could prevent or delay exploitation or development of our projects.  If adequate infrastructure is not available in a timely manner, we cannot assure you that the exploitation or development of our projects will be commenced or completed on a timely basis, or at all, or that the resulting operations will achieve the anticipated production volume, or that the construction costs and operating costs associated with the exploitation and/or development of our projects will not be higher than anticipated.  In addition, unusual weather phenomena, sabotage, government, First Nations or other interference in the maintenance or provision of such infrastructure could adversely affect our operations and profitability.  In addition, there are risks associated with the construction of an underground mining project relating to, among other things, supervision of the contractors, cost estimating, delivery and operation of equipment, and disposal of waste rock.




We are subject to significant governmental regulations.




Our exploration activities are subject to extensive federal, provincial and local laws, regulations and policies governing various matters, including:




•
environmental protection;




•
the management and use of toxic substances and explosives;




•
management of tailings and other wastes;




•
the management of natural resources and land;




•
the exploration and development of mineral properties;




•
mine construction;




•
mine production and post-closure reclamation;




•
exports;




•
price controls;





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•
taxation and mining royalties;




•
labour standards and occupational health and safety, including mine safety; and




•
historic and cultural preservation.




Failure to comply with applicable laws and regulations may result in civil or criminal fines or penalties or enforcement actions, including orders issued by regulatory or judicial authorities enjoining or curtailing operations or requiring corrective measures, installation of additional equipment or remedial actions, any of which could result in significant expenditures. We may also be required to compensate private parties suffering loss or damage by reason of a breach of such laws, regulations or permitting requirements. It is also possible that future laws and regulations, or more stringent enforcement of current laws and regulations by governmental authorities, could cause us to incur additional expense or capital expenditure restrictions or suspensions of our activities and delays in the exploration and development of our properties.




We require further rights and permits in order to conduct current and anticipated future operations, and delays in obtaining or failure to obtain such rights and permits, or a failure to comply with the terms of any such permits that we have obtained, could adversely affect our business.




Our current and anticipated future operations, including further exploration, development and commencement of production on our mineral properties, require permits from various governmental authorities. Obtaining or renewing governmental permits is a complex and time-consuming process. The duration and success of efforts to obtain and renew permits are contingent upon many variables not within our control. Shortages of personnel in various levels of government could result in delays or inefficiencies. Backlog within permitting agencies affected by the number of other large-scale projects currently in a more advanced stage of development could slow down the review process and adversely affect the permitting timeline of our projects. Negative public and stakeholder opinion is another factor that could affect the permitting timeline. As well, the specific permitting requirements that will ultimately apply to any project are difficult to correctly assess at the exploration and development stage. In addition, our future development plans may require us to obtain the necessary surface rights from the owners of such rights in order to complete the development of our projects.




We cannot provide assurance that all rights and permits that we require for our operations, including any for construction of mining facilities or conduct of mining, will be obtainable or renewable on reasonable terms, or at all. In particular, we will require environmental assessments under federal and provincial legislation and specific permits and authorizations, including for the disposal of tailings from the Brucejack Project into Brucejack Lake. Delays or a failure to obtain such required permits, or the expiry, revocation or failure to comply with the terms of any such permits that we have obtained, would adversely affect our business.





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Our activities are subject to environmental laws and regulations that may increase our costs and restrict our operations.




All of our exploration, development and production activities are subject to regulation by governmental agencies under various environmental laws. These laws address emissions into the air, discharges into water, management of waste, management of hazardous substances, protection of natural resources, antiquities and endangered species and reclamation of lands disturbed by mining operations. Environmental legislation is evolving and the general trend has been towards stricter standards and enforcement, increased fines and penalties for noncompliance, more stringent environmental assessments of proposed projects and increasing responsibility for companies and their officers, directors and employees. Compliance with environmental laws and regulations may require significant capital outlays on our behalf and may cause material changes or delays in our intended activities. Future changes in these laws or regulations could have a significant adverse impact on some portion of our business, requiring us to re-evaluate those activities at that time.




Environmental hazards may exist on our properties that are unknown to us at the present time and have been caused by previous owners or operators or that may have occurred naturally. We may be liable for remediating such damage.




Failure to comply with applicable environmental laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities, causing operations to cease or be curtailed. Such enforcement actions may include the imposition of corrective measures requiring capital expenditure, installation of new equipment or remedial action.




Compliance with emerging climate change regulations could result in significant costs and the effects of climate change may present physical risks to our operations.




Climate change refers to any changes in climate over time that is directly or indirectly attributable to human activity.  This includes changes in weather patterns, frequency of extreme weather events, temperatures, sea levels and water availability.  We recognize that climate change is an international and community concern which may affect our business and operations directly or indirectly as described below.




Governments at all levels may be moving towards enacting legislation to address climate change concerns, such as requirements to reduce emission levels and increase energy efficiency.  Where legislation has already been enacted, such regulations may become more stringent, which may result in increased costs of compliance.  There is no assurance that compliance with such regulations will not have an adverse effect on our results of operations and financial condition.




Extreme weather events (such as increased periods of snow and increased frequency and intensity of storms) have the potential to disrupt our exploration and development plans.  Where appropriate, our facilities have developed emergency plans for managing extreme weather conditions; however, extended disruptions could have adverse effects on our results of operations and financial condition.





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We may be subject to claims and legal proceedings that could materially adversely impact our financial position, financial performance and results of operations.


Due to the nature of the Company’s business, we may be subject to a variety of regulatory investigations, claims, lawsuits and other proceedings in the ordinary course of the Company’s business. The results of these legal proceedings cannot be predicted with certainty due to the uncertainty inherent in litigation, including the effects of discovery of new evidence or advancement of new legal theories, the difficulty of predicting decisions of judges and juries and the possibility that decisions may be reversed on appeal. There can be no assurances that these matters will not have a material adverse effect on our business.




We may fail to maintain adequate internal control over financial reporting pursuant to the requirements of the Sarbanes-Oxley Act.




During our 2014, 2013 and 2012 fiscal years, we documented and tested our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act (“SOX”).  SOX requires an annual assessment by management of the effectiveness of our internal control over financial reporting and, for fiscal years commencing with our fiscal year ended December 31, 2012, an attestation report by our independent auditors addressing the effectiveness of internal control over financial reporting.  We may fail to maintain the adequacy of our internal control over financial reporting as such standards are modified, supplemented or amended from time to time, and we may not be able to conclude, on an ongoing basis, that we have effective internal control over financial reporting in accordance with Section 404 of SOX.  Our failure to satisfy the requirements of Section 404 of SOX on an ongoing, timely basis could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price or the market value of our securities.  In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations.  Future acquisitions of companies, if any, may provide us with challenges in implementing the required processes, procedures and controls in our acquired operations. No evaluation can provide complete assurance that our internal control over financial reporting will detect or uncover all failures of persons within our Company to disclose material information otherwise required to be reported.  The effectiveness of our processes, procedures and controls could also be limited by simple errors or faulty judgments.  In addition, as we continue to expand, the challenges involved in implementing appropriate internal control over financial reporting will increase and will require that we continue to monitor our internal control over financial reporting.  Although we intend to expend substantial time and incur substantial costs, as necessary, to ensure ongoing compliance, we cannot be certain that we will be successful in complying with Section 404 of SOX.




We are subject to increased regulatory compliance costs relating to the Dodd-Frank Act.




In July 2010, the Dodd-Frank Act was enacted, representing an overhaul of the framework for regulation of U.S. financial markets.  The Dodd-Frank Act calls for various regulatory agencies, including the SEC and the Commodities Futures Trading Commission, to establish regulations for implementation of many of the provisions of the Dodd-Frank Act.  If we fail to comply with new laws, regulations and standards, regulatory authorities may initiate legal proceedings against us and our business may be harmed. For example, in December 2011, the SEC approved amendments to require companies in the mining industry to disclose in their periodic reports filed with the SEC substantial additional information about safety issues relating to their mining operations. This heightened scrutiny could generate negative publicity for the mining industry, increase the cost of compliance with mining regulations or result in the passage of new laws and regulations, any of which could negatively affect our business results. We may also need to incur additional costs and invest additional resources, including management’s time, in order to comply with new regulations and additional reporting and disclosure obligations.





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We face potential opposition from non-governmental organizations.




In recent years, communities and non-governmental organizations (“NGOs”) have become more vocal and active with respect to mining activities at or near their communities.  These communities and NGOs have taken such actions as road closures, work stoppages, and law suits for damages.  These actions relate not only to current activities but often in respect of decades old mining activities by prior owners of mining properties.  Such actions by communities and NGOs may have a material adverse effect on our results of operations or financial condition.




There is uncertainty related to unsettled First Nations rights and title in British Columbia and this may create delays in project approval or interruptions in project progress.




The nature and extent of First Nations rights and title remains the subject of active debate, claims and litigation in British Columbia. First Nations in British Columbia have made claims of aboriginal rights and title to substantial portions of land and water in the province, including areas where the Company’s operations are situated, creating uncertainty as to the status of competing property rights. The Supreme Court of Canada has held that aboriginal groups may have a spectrum of aboriginal rights in lands that have been traditionally used or occupied by their ancestors. Such aboriginal rights and title are not absolute and may be infringed by government in furtherance of a legislative objective, subject to meeting a justification test. The effect of such claims on any particular area of land will not be determinable until the exact nature of historical use, occupancy and rights to such property have been clarified by a decision of the Courts or definition in a treaty. First Nations in the province are seeking settlements including compensation from governments with respect to these claims, and the effect of these claims cannot be estimated at this time. The federal and provincial governments have been seeking to negotiate settlements with aboriginal groups throughout British Columbia in order to resolve many of these claims. Any settlements that may result from these negotiations may involve a combination of cash, resources, grants of conditional rights to undertake traditional pursuits (like hunting, gathering, trapping and fishing) on public lands, and some rights of self-government. The issues surrounding aboriginal title and rights are not likely to be resolved in the near future.




In a landmark decision in 2004, the Supreme Court of Canada determined that there is a duty on government to consult with and, where appropriate, accommodate First Nations where government decisions may impact on claimed, but as yet unproven, aboriginal rights or title. This decision also provided much needed clarification of the duties of consultation and accommodation. This decision was re-enforced in a 2010 decision of the Supreme Court of Canada, in which the Court re-affirmed and re-stated the test for determining when the duty to consult arises. The Court has made clear that third parties are not responsible for consultation or accommodation of aboriginal interests and that this responsibility lies with government. However, government permits, including environmental and mine permits, will not be granted by provincial and federal agencies unless they are satisfied that the duty to consult and accommodate has been fully met. In 2005, the Supreme Court of Canada confirmed that this duty exists with respect to claimed treaty rights.







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Additional uncertainty has arisen due to the recent decision of the Supreme Court of Canada in Tsilhqot’in Nation v. British Columbia (2014 SCC 44), which recognized the Tsilhqot’in Nation as holding Aboriginal Title to approximately 1,900 square kilometers of territory in the interior of British Columbia.  This decision represents the first successful claim for Aboriginal Title in Canada and may lead other First Nations in British Columbia to pursue Aboriginal Title in their traditional land-use areas.




A portion of the Brucejack Project lies within traditional First Nation territory and in the Nass Area, as defined in the final Agreement between the Nisga’a First Nation and the federal and provincial governments, which came into effect on May 11, 2000 (the “Final Agreement”). However, there may be overlapping claims by other First Nations. Given the unsettled nature of land claims and treaty rights in British Columbia, as well as the rights of the Nisga’a under the Nisga’a Final Agreement, there can be no guarantee that there will not be delays in project approval, unexpected interruptions in project progress, requirements for First Nations consent, cancellation of permits and licences, or additional costs to advance the Company’s projects.




In order to facilitate mine permitting, construction and the commencement of mining activities, the Company may deem it necessary and prudent to try to obtain the cooperation and approval of the local First Nations groups. Any cooperation and approval may be predicated on our committing to take measures to limit the adverse impacts on local First Nations groups and ensuring that some of the economic benefits of the construction and mining activity will be enjoyed by the local First Nations groups. There can be no guarantee that any of our efforts to secure such cooperation or approval would be successful or that the assertion of First Nations rights and title, or claims of insufficient consultation or accommodation, will not create delays in project approval or unexpected interruptions in project progress, requirements for First Nations consent, cancellation of permits and licences, or result in additional costs to advance our projects.




Our properties may be subject to uncertain title.




We cannot provide assurance that title to our properties will not be challenged. We hold mineral claims which constitute our property holdings. We may not have, or may not be able to obtain, all necessary surface rights to develop a mineral property. Title insurance is generally not available for mineral properties and our ability to ensure that we have obtained a secure claim to individual mining properties may be severely constrained. We have not conducted surveys of all of the claims in which we hold direct or indirect interests. A successful claim contesting our title to a property could cause us to lose our rights to explore and, if warranted, develop that property or undertake or continue production thereon. This could also result in our not being compensated for our prior expenditures relating to such property.





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Land reclamation requirements for our exploration properties may be burdensome.




Land reclamation requirements are generally imposed on mineral exploration companies (as well as companies with mining operations) in order to minimize long term effects of land disturbance. Reclamation may include requirements to treat ground and surface water to drinking water standards, control dispersion of potentially deleterious effluent and reasonably re-establish pre-disturbance land forms and vegetation. In order to carry out reclamation obligations imposed on us in connection with exploration, development and production activities, we must allocate financial resources that might otherwise be spent on further exploration and development programs. The actual costs of reclamation and mine closure are uncertain and planned expenditures may differ from the actual expenditures required. Therefore, the amount that we are required to spend may be materially higher than our estimates. Any additional amounts we are required to spend on reclamation and mine closure may have a material adverse effect on our financial performance, financial condition and results of operations.




We may fail to identify attractive acquisition candidates or may fail to successfully integrate acquired material properties.




We may actively pursue the acquisition of exploration, development and production assets consistent with our acquisition and growth strategy. The identification of attractive candidates and integration of acquired properties, assets or entities involve inherent risks, including but not limited to:




•
accurately assessing the value, strengths, weaknesses, contingent and other liabilities and potential profitability of acquisition candidates;




•
ability to achieve identified and anticipated operating and financial synergies;




•
unanticipated costs;




•
diversion of management attention from existing business;




•
potential loss of our key employees or key employees of any business acquired;




•
unanticipated changes in business, industry or general economic conditions that affect the assumptions underlying the acquisition; and




•
decline in the value of acquired properties, companies or securities.




Any one or more of these factors or other risks could cause us not to realize the anticipated benefits of an acquisition of properties or companies, and could have a material adverse effect on our financial condition.   We may not be able to successfully overcome these risks and other problems associated with acquisitions, and this may adversely affect our business, financial condition or results of operations.





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In connection with any future acquisitions, we may incur indebtedness or issue equity securities, resulting in increased interest expense or dilution of the percentage ownership of existing shareholders. Acquisition costs, additional indebtedness or issuances of securities in connection with such acquisitions, may adversely affect the price of our common stock and negatively affect our results of operations.




We may be adversely affected by future fluctuations in foreign exchange rates.




Our potential profitability is exposed to the financial risk related to the fluctuation of foreign exchange rates. The minerals that could be produced from our projects are priced in U.S. dollars but, since our only projects are located in Canada, the majority of our estimated expenditures are in Canadian dollars. A significant change in the currency exchange rates between the Canadian dollar relative to the U.S. dollar will have an effect on the potential profitability of our projects and therefore our ability to continue to finance our operations. To the extent that the actual Canadian dollar to U.S. dollar exchange rate is less than or more than the rate estimated in any future development plans, the profitability of our projects will be affected. Accordingly, our prospects may suffer due to adverse currency fluctuations.




High metal prices in recent years have encouraged increased mining exploration, development and construction activity, which has increased demand for, and cost of, exploration, development and construction services and equipment.




The relative strength of metal prices over the past five years has encouraged increases in mining exploration, development and construction activities around the world, which has resulted in increased demand for, and cost of, exploration, development and construction services and equipment. While recent market conditions have had a moderating effect on the costs of such services and equipment, increases in such costs may continue with the resumption of an upward trend in metal prices. Increased demand for services and equipment could result in delays if services or equipment cannot be obtained in a timely manner due to inadequate availability, and may cause scheduling difficulties due to the need to coordinate the availability of services or equipment, any of which could materially increase project exploration, development and/or construction costs.




The mining industry is very competitive.




We compete with other exploration and producing companies, many of which are better capitalized, have greater financial resources, operational experience and technical capabilities or are further advanced in their development or are significantly larger and have access to greater mineral reserves, for the acquisition of mineral claims, leases and other mineral interests as well as for the recruitment and retention of qualified employees and other personnel. If we require and are unsuccessful in acquiring additional mineral properties or qualified personnel, we will not be able to grow at the rate we desire, or at all.





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Our competitors may be able to devote greater resources to the expansion and efficiency of their operations or respond more quickly to new laws and regulations or emerging technologies than we can. We may not be able to compete successfully against current and future competitors, and any failure to do so could have a material adverse effect on our business, financial condition or results of operations.




We may experience difficulty attracting and retaining qualified management to grow our business.




We are dependent on the services of key executives and other highly skilled and experienced personnel to advance our corporate objectives as well as the identification of new opportunities for growth and funding.  Robert A. Quartermain, Joseph J. Ovsenek, Kenneth McNaughton, James Currie and Tom Yip are currently our key executives. It will be necessary for us to recruit additional skilled and experienced management and personnel. Our inability to do so, or the loss of Mr. Quartermain or any of our key executives, or our inability to attract and retain suitable replacements for such executives or the additional highly skilled employees required for our activities, would have a material adverse effect on our business and financial condition.




Some of our directors and officers have conflicts of interest as a result of their involvement with other natural resource companies.




Certain of our directors and officers also serve as directors or officers, or have significant shareholdings in, other companies involved in natural resource exploration and development or mining-related activities. To the extent that such other companies may participate in ventures that we may also participate in, or in ventures that we may seek to participate in, our directors and officers may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. In all cases where our directors and officers have an interest in other companies, such other companies may also compete with us for the acquisition of mineral property investments. Such conflicts of our directors and officers may result in a material and adverse effect on our profitability, results of operation and financial condition. As a result of these conflicts of interest, we may miss the opportunity to participate in certain transactions, which may have a material adverse effect on our financial position.




We may be unable to attract development partners.




The Company may seek to develop some or all of its projects in partnership with one or more third parties in a corporate or contractual joint venture, or otherwise, or to dispose of some part or of its project to another party, retaining a royalty interest therein. The Company may be unable to find such partners or to negotiate satisfactory terms therewith, in which case the Company will be obliged to either postpone development of such project or proceed alone with the costs of further development.




Potential liabilities associated with the Acquisition.




We conducted due diligence with respect to the Brucejack Project and the other Project Assets prior to our acquisition of such assets in December 2010; however, there is no certainty that our due diligence procedures revealed all of the risks and liabilities associated with the Acquisition. Silver Standard provided limited representations in the Acquisition Agreement with respect to the Brucejack Project and other Project Assets and those representations were limited by the knowledge of the persons giving such representations. The survival period of those representations has since expired.  Also, under the Acquisition Agreement the Company agreed to assume all environmental liabilities with respect to the Brucejack Project and other Project Assets. There may be material environmental or other material liabilities that we are not aware of and, accordingly, the potential monetary cost of such liabilities is also unknown.





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Failure to comply with the U.S. Foreign Corrupt Practices Act (“FCPA”), as well as the anti-bribery laws of the nations in which we conduct business (such as the UK’s Bribery Act or the Corruption of Foreign Public Officials Act of Canada (“CFPOA”)), could subject us to penalties and other adverse consequences.




Our business is subject to the FCPA which generally prohibits companies and company employees from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. The FCPA also requires companies to maintain accurate books and records and internal controls, including at foreign-controlled subsidiaries. In addition, we are subject to other anti-bribery laws of the nations in which we conduct business that apply similar prohibitions as the FCPA (such as the UK’s Bribery Act, the CFPOA and the OECD Anti-Bribery Convention). Our employees or other agents may, without our knowledge and despite our efforts, engage in prohibited conduct under our policies and procedures and the FCPA or other anti-bribery laws that we may be subject to for which we may be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.




Legislative actions, potential new accounting pronouncements, and higher insurance costs are likely to impact our future financial position or results of operations.




Future changes in financial accounting standards may cause adverse, unexpected revenue fluctuations and affect our financial position or results of operations. New pronouncements and varying interpretations of pronouncements have occurred with greater frequency and are expected to occur in the future. Compliance with changing regulations of corporate governance and public disclosure may result in additional expenses. All of these uncertainties are leading generally toward increasing insurance costs, which may adversely affect our business, results of operations and our ability to purchase any such insurance, at acceptable rates or at all, in the future.




Anti-takeover provisions could discourage a third party from making a takeover offer that could be beneficial to our shareholders.




Some of the provisions in our articles could delay or prevent a third party from acquiring us or replacing members of our Board, even if the acquisition or the replacements would be beneficial to our shareholders. Such provisions include the following:




·
shareholders cannot amend our articles unless at least two-thirds of the shares entitled to vote approve the amendment; and




·
our Board can, without shareholder approval, issue preferred shares having any terms, conditions, rights and preferences that the Board determines.




These provisions could also reduce the price that certain investors might be willing to pay for our securities and result in the market price for our securities, including the market price for our Common Shares, being lower than it would be without these provisions.





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A period of significant growth can place a strain on management systems.




If we experience a period of significant growth in the number of our personnel this could place a strain upon our management systems and resources. Our future will depend in part on the ability of our officers and other key employees to implement and improve our financial and management controls, reporting systems and procedures on a timely basis and to expand, train and manage our employee workforce. There can be no assurance that we will be able to effectively manage such growth. Our failure to do so could have a material adverse effect upon our business, prospects, results of operation and financial condition.




Significant shareholders of the Company could influence our business operations and sales of our Common Shares by such significant shareholders could influence our common share price.




To the best of our knowledge, Silver Standard holds approximately 13.06% of our outstanding Common Shares. For as long as Silver Standard maintains a significant interest in the Company, it may be in a position to affect our governance and operations. Pursuant to the Investor Rights Agreement, Silver Standard is entitled to nominate to serve as members of our Board such number of nominees as is equal to the lesser of (i) one less than the number which constitutes a majority of the Board and (ii) the percentage of the Common Shares held by Silver Standard and securities convertible or exchangeable into Common Shares multiplied by the number of directors comprising the Board (rounded to the nearest whole number of nominees). In addition, Silver Standard may have significant influence over the passage of any resolution of our shareholders (such as would be required, to amend our constating documents or take certain other corporate actions) and may, for all practical purposes, be able to ensure the passages of any such resolution by voting for it or prevent the passage of any such resolution by voting against it. The effect of this influence by Silver Standard may be to limit the price that investors are willing to pay for our Common Shares. In addition, the potential that Silver Standard may sell its Common Shares in the public market (commonly referred to as “market overhang”), as well as any actual sales of such Common Shares in the public market, could adversely affect the market price of the Common Shares.




Pursuant to a subscription agreement between Liberty Metals & Mining Holding, LLC (“Liberty”) and the Company dated April 22, 2013, for so long as Liberty and their affiliates hold at least 4.75% of our issued and outstanding Common Shares, Liberty is entitled to nominate one individual to serve on our Board and Liberty has the right to maintain its and its affiliates proportionate ownership of our Common Shares by participating pro rata in issuances of our Common Shares (subject to certain exceptions). As of the date of this AIF, Liberty and its affiliates held approximately 6.28% of our issued and outstanding Common Shares.




Pursuant to a subscription agreement between XinXing Global Limited (“XinXing”) and the Company dated December 8, 2014, for so long as XinXing and their affiliates hold at least 4.75% of our issued and outstanding Common Shares, XinXing is entitled to nominate one individual to serve on our Board and XinXing has the right to maintain its and its affiliates proportionate ownership of our Common Shares by participating pro rata in issuances of our Common Shares (subject to certain exceptions). As of the date of this AIF, XinXing and its affiliates held approximately 9.68% of our issued and outstanding Common Shares.





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Risks Related to our Securities




Future sales or issuances of debt or equity securities could decrease the value of any existing Common Shares, dilute investors’ voting power and reduce our earnings per share.




We may sell or issue additional debt or equity securities in offerings to finance our operations, exploration, development, acquisitions or other projects.




We cannot predict the size of future sales and issuances of debt or equity securities or the effect, if any, that future sales and issuances of debt or equity securities will have on the market price of the Common Shares.




Sales, including any possible sales by Silver Standard, or issuances of a substantial number of equity securities, or the perception that such sales could occur, may adversely affect prevailing market prices for the Common Shares. With any additional sale or issuance of equity securities, investors will suffer dilution of their voting power and may experience dilution in the Company’s earnings per share.




Our Common Share price has experienced volatility and may be subject to fluctuation in the future based on market conditions.




The market prices for the securities of mining companies, including our own, have historically been highly volatile. The market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of any particular company.  In addition, because of the nature of our business, certain factors such as our announcements and the public’s reaction, our operating performance and the performance of competitors and other similar companies, fluctuations in the market prices of our resources, government regulations, changes in earnings estimates or recommendations by research analysts who track our securities or securities of other companies in the resource sector, general market conditions, announcements relating to litigation, the arrival or departure of key personnel and the factors listed under the heading “Cautionary Note Regarding Forward-Looking Statements” can have an adverse impact on the market price of our Common Shares.




Any negative change in the public’s perception of our prospects could cause the price of our securities, including the price of our Common Shares, to decrease dramatically. Furthermore, any negative change in the public’s perception of the prospects of mining companies in general could depress the price of our securities, including the price of our Common Shares, regardless of our results. Following declines in the market price of a company’s securities, securities class-action litigation is often instituted. Litigation of this type, if instituted, could result in substantial costs and a diversion of our management’s attention and resources.




Future issuances of equity securities by us or sales by our existing shareholders may cause the price of our securities to fall.




The market price of our equity securities could decline as a result of issuances of securities by us or sales by our existing shareholders of Common Shares in the market, or the perception that these sales could occur, during the currency of our short form base shelf prospectus dated July 16, 2014. Sales of our Common Shares by shareholders might also make it more difficult for us to sell equity securities at a time and price that we deem appropriate. With an additional sale or issuance of equity securities, investors will suffer dilution of their voting power and may experience dilution in earnings per share.





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You may be unable to enforce actions against us, certain of our directors and officers, or the experts named in this AIF under U.S. federal securities laws.




We are a company incorporated under the laws of the Province of British Columbia.  Most of our directors and officers, as well as the experts named in this AIF, reside principally in Canada. Because all or a substantial portion of our assets and the assets of these persons are located outside of the United States, it may not be possible for you to effect service of process within the United States upon us or those persons. Furthermore, it may not be possible for you to enforce against us or those persons in the United States, judgments obtained in U.S. courts based upon the civil liability provisions of the U.S. federal securities laws or other laws of the United States. There is doubt as to the enforceability, in original actions in Canadian courts, of liabilities based upon U.S. federal securities laws and as to the enforceability in Canadian courts of judgments of U.S. courts obtained in actions based upon the civil liability provisions of the U.S. federal securities laws.  Therefore, it may not be possible to enforce those actions against us, certain of our directors and officers or the experts named in this AIF.




We do not intend to pay any cash dividends in the foreseeable future.




We have not declared or paid any dividends on our Common Shares. We intend to retain future earnings, if any, to finance the growth and development of our business and do not intend to pay cash dividends on the Common Shares in the foreseeable future. Any return on an investment in the securities will come from the appreciation, if any, in the value of the Common Shares. The payment of future cash dividends, if any, will be reviewed periodically by the Board and will depend upon, among other things, conditions then existing including earnings, financial condition and capital requirements, restrictions in financing agreements, business opportunities and conditions and other factors. See “Dividend Policy”.




We may be treated as a “passive foreign investment company” under the U.S. Internal Revenue Code, which could result in adverse U.S. federal income tax consequences for U.S. investors.




U.S. investors should be aware that they could be subject to certain adverse U.S. federal income tax consequences in the event that we are classified as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes. The determination of whether we are a PFIC for a taxable year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations, and the determination will depend on the composition of our income, expenses and assets from time to time and the nature of the activities performed by our officers and employees. Prospective investors should carefully read the tax discussion in any applicable prospectus supplement for more information and consult their own tax advisers regarding the likelihood and consequences of the Company being treated as a PFIC for U.S. federal income tax purposes, including the advisability of making certain elections that may mitigate certain possible adverse U.S. federal income tax consequences but may result in an inclusion in gross income without receipt of such income.





61




LEGAL PROCEEDINGS AND REGULATORY ACTIONS




During the last financial year, we have not been subject to any penalties or sanctions imposed by a regulatory body in respect of securities legislation or regulatory requirements or any penalty or sanction that would likely to be considered important to a reasonable investor in making an investment decision. We have not entered into any settlement agreement in respect of securities legislation or regulatory requirements.




The Company is aware of the following legal proceedings:




a) Canadian Class Actions




On October 29, 2013, David Wong, a shareholder of the Company, filed a proposed class action against the Company, Robert Quartermain (a director, the President and the CEO of the Company) and Snowden (the “Wong Action”). A similar proposed class action was filed by Roksana Tahzibi, a shareholder of the Company, on November 1, 2013 (the “Tahzibi Action”).The defendants in the Tahzibi Action are the Company, Mr. Quartermain, Joseph Ovsenek (an officer and director of the Company), Kenneth McNaughton (an officer of the Company), Ian Chang (an officer of the Company) and Snowden. The Wong Action and Tahzibi Action (together, the “Ontario Actions”)were filed in the Ontario Superior Court of Justice.




The plaintiffs in the Ontario Actions seek certification of a class action on behalf of a class of persons, wherever they reside, who acquired the Company’s common shares commencing on November 22, 2012 and ending on October 22, 2013 (in the case of the Wong Action) or commencing on July 23, 2013 and ending on October 21, 2013 (in the case of the Tahzibi Action). The plaintiffs in the Ontario Actions allege that certain of the Company’s disclosures contained material misrepresentations or omissions regarding the Brucejack Project, including statements with respect to probable mineral reserves and future gold production at the Brucejack Project. The plaintiffs further allege that until October 22, 2013, the Company failed to disclose alleged reasons provided by Strathcona Mineral Services Ltd. (“Strathcona”) for its resignation as an independent qualified person overseeing the bulk sample program. The Tahzibi Action also includes a claim for unjust enrichment as against Mr. McNaughton.




The plaintiffs allege that certain of our continuous disclosure documents filed in Canada contained material misrepresentations or omissions regarding our Brucejack Project, including statements with respect to probable mineral reserves and future gold production at Brucejack, and failed to communicate alleged information from Strathcona.  The plaintiffs allege these misrepresentations and omissions are actionable as negligent misrepresentations or misrepresentations under various provincial Securities Acts.  The plaintiffs seek general damages of $60 million (in the Wong Action) and $250 million (in the Tahzibi Action) as well as pre- and post-judgment interest and costs.










62





program once all data, including the assay results from sample tower and the 16,789 metres of completed underground drilling, had been compiled. The report was expected to reconcile the assay results from the sample tower against a local resource estimate prepared by Snowden based on the program drilling, which would provide an empirical grade prediction variance for a stope-sized tonnage that could be related to and used for resource classification. Strathcona’s report on the program was expected in early 2014.




Strathcona withdrew from the program on October 8, 2013 before any results from the processing of the bulk sample were available. In withdrawing from the program, Strathcona advised the Company that “...there are no valid gold mineral resources for the Valley of the Kings Zone, and without mineral resources there can be no mineral reserves, and without mineral reserves there can be no basis for a Feasibility Study.” They also advised that “...statements included in all recent press releases [by Pretivm] about probable mineral reserves and future gold production [from the Valley of the Kings Zone] over a 22-year mine life are erroneous and misleading.” Snowden maintained its stance that its November 2012 Mineral Resource estimate remained valid, and had taken steps to involve a third party peer review in its up-coming mineral resource update.




In addition, Strathcona advised that “The infrequent high-grade intercepts reported in the press releases have been shown in the underground exposures of the bulk sample program to usually be of very narrow width (0.5 metres) and associated with narrow geological structures that occasionally have mineable continuity as in the case of the Cleopatra Vein.” We noted at the time that the results from the Valley of the Kings program drilling had been, from the outset, consistent with results from prior exploration drilling in the Valley of the Kings. Drilling had frequently intersected extreme grade mineralization over narrow widths, with 47 intersections grading greater than 1,000 grams of gold per tonne from underground drilling (on average there is one in every 550 metres of 2013 drilling) and 125 intersections in total to date grading greater than 1,000 grams of gold per tonne for the Valley of the Kings. The program was initiated, amongst other reasons, to determine the bulk mineability of the Valley of the Kings mineralization. These reasons and the form of mineralization had been discussed with Strathcona prior to their engagement.




When it withdrew, Strathcona advised Pretivm that it had previously asserted similar views critiquing the Snowden resource model for the Valley of the Kings, accompanied with “recommendations” for public disclosure of the preliminary bulk sample data supporting their conclusions. At one point, these assertions, conclusions and “recommendations” were made on the basis of approximately 20% of the underground drilling results, no assay results from the sample tower and no results from production.




Snowden consistently and repeatedly advised in response to all comments from Strathcona that the true test of the resource estimate would only come from the reconciliation results between the ultimate grade of the bulk sample (as defined by produced metal and metal accounting) and the grade of the resource estimate for the same volume. Strathcona resigned before Snowden had an opportunity to formally respond to their assertions.





63





Both Pretivm’s management and Snowden shared a number of significant concerns with respect to Strathcona’s conclusions. They contended that the Strathcona conclusions were based on: (a) the interpretation of preliminary data, (b) the interpretation of too few data, and (c) the incorrect interpretation and application of preliminary local data for comparison to the resource estimate model. Pretivm management and Snowden also shared significant concerns that the sampling tower approach for the Valley of the Kings deposit may be flawed.




The Wong Action claims $60 million in general damages. The Tahzibi Action claims $250 million in general damages.




The plaintiffs in the Ontario Actions have asked for the appointment of a case management judge. There have been no further steps in the Ontario Actions.  The Company believes that the allegations made against it in Ontario Actions are meritless and will vigorously defend them, although no assurance can be given with respect to the ultimate outcome of the Ontario Actions.




b) United States Class Actions




Between October 2013 and November 2013, five putative class action complaints were filed in the United States against the Company and certain of its officers and directors, alleging that the defendants violated the U.S. securities laws by misrepresenting or failing to disclose material information concerning the Brucejack Project. All five actions were filed in the United States District Court for the Southern District of New York.




In January 2014, the Court ordered that these actions be consolidated into a single action, styled In re Pretium Resources Inc. Securities Litigation, Case No. 13-CV-7552. The Court has appointed as lead plaintiffs in the consolidated action three individuals who are suing on behalf of a putative class of shareholders who purchased the Company’s common shares between November 20, 2012 and October 21, 2013.




In March 2014, the plaintiffs filed a consolidated amended class action complaint, which we moved to dismiss in May 2014.  In July 2014, the plaintiffs filed a second consolidated amended class action complaint (“Second Amended Complaint”).  We moved to dismiss the Second Amended Complaint on September 5, 2014 and the plaintiffs filed their Opposition to our Motion to Dismiss on October 20, 2014.  On November 19, 2014, we filed a reply to the plaintiffs’ Opposition to our Motion to Dismiss.  The Court has not yet issued a decision on the motion.




We believe the allegations made against us in these actions are meritless and will vigorously defend the matter, although no assurance can be given with respect to the ultimate outcome of such proceedings.




INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS




Other than disclosed elsewhere in this AIF, no director, executive officer or shareholder that beneficially owns, or controls or directs, directly or indirectly, more than 10% of the issued Common Shares, or any of their respective associates or affiliates of such persons, has any material interest, direct or indirect, in any transaction which has materially affected or is reasonably expected to materially affect the Company within the three most recent financial years preceding the date of this AIF.





64




AUDITORS, TRANSFER AGENT AND REGISTRAR




Our auditors are PricewaterhouseCoopers LLP, Chartered Accountants, having an address at Suite 700, 250 Howe Street, Vancouver, British Columbia, Canada V6C 3S7.




The transfer agent and registrar for the Common Shares of the Company in Canada is Computershare Investor Services Inc., at its principal offices in Vancouver, British Columbia and Toronto, Ontario.  The transfer agent and registrar for the Common Shares of the Company in the United States is Computershare Trust Company, N.A, at its principal offices in Golden, Colorado.




MATERIAL CONTRACTS




Except for contracts entered into in the ordinary course of business, as of date of this AIF, the only material contracts which the Company has entered into are set out below.  Copies of such agreements are available under the Company’s profile on SEDAR at www.sedar.com.




1.
the Acquisition Agreement; and




2.
the Investor Rights Agreement.




INTEREST OF EXPERTS




Each of the co-authors of Brucejack Report listed below is a “qualified person” for the purposes of NI 43-101.  Each qualified person, as applicable, has reviewed and approved certain scientific and technical information relating to the Brucejack Project contained or incorporated by reference in this AIF or has supervised the preparation of information upon which such scientific and technical information is based as detailed in the Brucejack Report.




Disclosure
Authors
Qualified PersonBrucejack Report
Tetra Tech
David Ireland, C.Eng., P.Eng.

Ali Farrah, P.Eng.

Wayne E. Scott, P.Eng.

Michael Chin, P.Eng.

Sabry Abdel Hafez, Ph.D., P.Eng.

Harvey Wayne Stoyko, P.Eng.

Jianhui (John) Huang, Ph.D., P.Eng.Snowden Mining Industry Consultants Inc.
Lynn Olssen, MAusIMM(CP)AMC Mining Consultants (Canada) Ltd.
Colm Keogh, P.Eng.

George Zazzi, P.Eng.ERM Rescan
Paul Greisman, Ph.D., P.Eng.

Pierre Pelletier, P.Eng.
    65
  BGC Engineering Inc.
Trevor Crozier, M.Eng., P.Eng.

Sharon Blackmore, M.Sc., P.Geo.

Brent McAfee, P.Eng.

Catherine Schmid, M.Sc., P.Eng.

Hamish Weatherly, M.Sc., P.Geo.Alpine Solutions Avalanche Services
Brian Gould, P.Eng.Valard Construction
Michael Paul Wise, P.Eng.“General Development of the Business” and “Narrative Description of the Business”
Ian I. Chang M.A.Sc., P.Eng

Kenneth C. McNaughton, M.A.Sc., P.Eng.




None of the aforementioned companies, partnerships or persons, each of whom are named in this AIF as having prepared reports or having been responsible for reporting exploration results relating to our mineral properties and whose profession or business gives authority to such reports, or any director, officer, partner, or employee thereof, as applicable, received or has received a direct or indirect interest in our property or of any of our associates or affiliates.  As at the date hereof, such persons, and the directors, officers, partners and employees, as applicable, of each of the aforementioned companies and partnerships beneficially own, directly or indirectly, in the aggregate, less than one percent of the securities of the Company.




None of such persons, or any director, officer or employee, as applicable, of any of the aforementioned companies or partnerships, has any interest in any securities or other property of the Company or any of our associates or affiliates or is currently expected to be elected, appointed or employed as a director, officer or employee of the Company or of any of our associates or affiliates, except for Kenneth C. McNaughton, who is our Vice President and Chief Exploration Officer and who holds 510,500 Common Shares and 1,600,000 options to purchase Common Shares, and Ian I Chang, who is our Vice President Project Development and who holds 2,553 Common Shares and 445,000 options.




Our auditors, PricewaterhouseCoopers LLP, report that they are independent of the Company in accordance with the rules of professional conduct of the Institute of Chartered Accountants of British Columbia and with the rules and regulations of the SEC as at the date of their audit report.




ADDITIONAL INFORMATION




Additional information relating to the Company is available on SEDAR at www.sedar.com. Additional information with respect to directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities and securities authorized for issuance under equity compensation plans is contained in the management information circular for our most recent meeting of shareholders.




Additional financial information is provided in the Company's financial statements and MD&A for its most recently completed financial year, also filed on SEDAR.  In addition, copies of these documents may be obtained from the Company by contacting the Company at Suite 1600, 570 Granville Street, Vancouver, British Columbia V6C 3P1, telephone: (604) 558-1784, fax: (604) 558-4784.





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APPENDIX 1




PRETIVM RESOURCES INC.




AUDIT COMMITTEE CHARTER




As Adopted by the Board of Directors on December 9, 2010




I.           Purpose of Audit Committee of Pretivm Resources Inc. (the “Company”)




The purpose of the Audit Committee (the “Committee”) is to:




1
Assist the Board of Directors of the Company (the “Board”) in fulfilling its oversight responsibilities relating to:




(a)
the quality and integrity of the Company’s financial statements, financial reporting process and systems of internal controls and disclosure controls regarding risk management, finance, accounting, and legal and regulatory compliance;




(b)
the independence and qualifications of the Company’s independent accountants and review of the audit efforts of the Company’s independent accountants; and




(c)
the development and implementation of policies and processes regarding corporate governance matters.




2
Provide an open avenue of communication between the independent accountants, the Company’s financial and senior management and the Board.




3
Prepare any reports required to be prepared by the Committee pursuant to the rules of any stock exchange on which the Company’s shares are listed and pursuant to the rules of any securities commission or other regulatory authority having jurisdiction, whether for inclusion in the Company’s annual proxy statement or otherwise.




The Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in Section VII below of this Charter.




While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits, or to determine that the Company’s financial statements are complete and accurate or are in accordance with generally accepted accounting principles, accounting standards, or applicable laws and regulations. This is the responsibility of management of the Company and the Company’s independent accountants, as well as any advisors employed by the Committee. Because the primary function of the Committee is oversight, the Committee shall be entitled to rely on the expertise, skills and knowledge of management and the Company’s independent accountants and the integrity and accuracy of information provided to the Committee by such persons in carrying out its oversight responsibilities. Nothing in this Charter is intended to change the responsibilities of management and the independent accountants.











II.           Composition




The Committee shall be composed of at least three directors, each of whom the Board has determined has no material relationship with the Company which could, in the view of the Board, be reasonably expected to interfere with the exercise of such director’s independent judgement, and who otherwise satisfies the definition of “independent” as set forth by National Instrument 52-110 – Audit Committees (“NI 52-110”) and any other applicable securities laws, rules or requirements of any stock exchange upon which the Company’s securities are listed as in effect from time to time.




All members of the Committee must be financially literate, meaning that he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements or must become.  A director committee who is not financially literate may be appointed to the committee provided that such director becomes financially literate within a reasonable period of time following such appointment.




If any member of the Committee ceases to be “independent”, as defined by the applicable securities laws and exchange requirements, including NI 52-110, for reasons outside that member’s reasonable control, that person may remain an audit committee member until the earlier of the next annual meeting of the shareholders or the date that is six months from the occurrence of the event that caused the member to no longer be independent.




III.         Authority




The Committee shall have the authority to (i) retain (at the Company’s expense) its own legal counsel, accountants and other advisors that the Committee believes, in its sole discretion, are needed to carry out its duties and responsibilities; (ii) conduct investigations that it believes, in its sole discretion, are necessary to carry out its responsibilities; and (iii) take whatever actions that it deems appropriate to foster an internal culture that is committed to maintaining quality financial reporting, sound business risk practices and ethical behaviour within the Company. In addition, the Committee shall have the authority to request any officer, director, employee or consultant of the Company, the Company’s outside legal counsel and the independent accountants to meet with the Committee and any of its advisors and to respond to their inquiries. The Committee shall have full access to the books, records and facilities of the Company in carrying out its responsibilities. Finally, the Board shall adopt resolutions which provide for appropriate funding, as determined by the Committee, for (i) services provided by the independent accountants in rendering or issuing an audit report, (ii) services provided by any adviser employed by the Committee which it believes, in its sole discretion, are needed to carry out its duties and responsibilities, or (iii) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties and responsibilities.




The Committee shall be responsible for establishing procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters and (ii) the confidential, anonymous submissions by employees of the Company regarding questionable accounting or auditing matters.




The Committee shall review the reports of the Chief Executive Officer and Chief Financial Officer (in connection with their required certifications for the Company’s filings with the Securities and Exchange Commission) regarding any significant deficiencies or material weaknesses in the design of operation of internal controls and any fraud that involves management or other employees of the Company who have a significant role in managing or implementing the Company’s internal controls. During this review, the Committee should evaluate whether the internal control structure, as created and as implemented, provides reasonable assurances that transactions are recorded as necessary to permit the Company’s external auditors to reconcile the Company’s financial statements in accordance with applicable securities laws.





-A3-





The Committee, in its capacity as a committee of the Board, is directly responsible for the appointment, compensation, retention and oversight of the work of the independent accountants engaged (including resolution of disagreements between the Company’s management and the independent accountants regarding financial reporting) for the purpose of preparing and issuing an audit report or performing other audit, review or attest services for the Company.




The independent accountants shall submit to the Audit Committee annually a formal written statement delineating all relationships between the independent accountants and the Company and its subsidiaries, addressing the non-audit services provided to the Company or its subsidiaries and the matters set forth in or required by the rules and regulations of all relevant regulatory authorities.




The independent accountants shall submit to the Audit Committee annually a formal written statement of the fees billed for each of the following categories of services rendered by the independent accountants: (i) the audit of the Company’s annual financial statements for the most recent fiscal year and any reviews of the financial statements; (ii) information technology consulting services for the most recent fiscal year, in the aggregate and by each service (and separately identifying fees for such services relating to financial information systems design and implementation); and (iii) all other services rendered by the independent accountants for the most recent fiscal years, in the aggregate and by each service.




IV.         Appointing Members




The members of the Committee shall be appointed or re-appointed by the Board on an annual basis. Each member of the Committee shall continue to be a member thereof until such member’s successor is appointed, unless such member shall resign or be removed by the Board or such member shall cease to be a director of the Company. Where a vacancy occurs at any time in the membership of the Committee, it may be filled by the Board and shall be filled by the Board if the membership of the Committee is less than three directors as a result of the vacancy or the Committee no longer has a member who is an “audit committee financial expert” as a result of the vacancy.




V.           Chairperson




The Board, or in the event of its failure to do so, the members of the Committee, must appoint a Chairperson from the members of the Committee. If the Chairperson of the Committee is not present at any meeting of the Committee, an acting Chairperson for the meeting shall be chosen by majority vote of the Committee from among the members present. In the case of a deadlock on any matter or vote, the Chairperson shall refer the matter to the Board. All requests for information from the Company or the independent accountants shall be made through the Chairperson.







-A4-





VI.         Meetings




The time and place of meetings of the Committee and the procedure at such meetings shall be determined from time to time by the members thereof provided that:




1
A quorum for meetings shall be two members, present in person or by telephone or other telecommunication device that permit all persons participating in the meeting to speak and hear each other;




2
The Committee shall meet at least quarterly (or more frequently as circumstances dictate); and




3
Notice of the time and place of every meeting shall be given in writing or facsimile communication to each member of the Committee and the external auditors of the Company at least 48 hours prior to the time of such meeting.




While the Committee is expected to communicate regularly with management, the Committee shall exercise a high degree of independence in establishing its meeting agenda and in carrying out its responsibilities. The Committee shall submit the minutes of all meetings of the Committee to, or discuss the matters discussed at each Committee meeting with, the Board.




VII.           Specific Duties




In meeting its responsibilities, the Committee is expected to:




1
Select and recommend to the Board the independent accountants for the Company, considering independence and effectiveness, approve all audit and non-audit services in advance of the provision of such services and the fees and other compensation to be paid to the independent accountants, and oversee the services rendered by the independent accountants (including the resolution of disagreements between management and the independent accountants regarding preparation of financial statements) for the purpose of preparing or issuing an audit report or related work, and the independent accountants shall report directly to the Committee;




2
To pre-approve any non-audit services to be provided to the Company by the external auditor and the fees for those services;




3
Review the performance of the independent accountants, including the lead partner of the independent accountants, and, in its sole discretion, approve any proposed discharge of the independent accountants when circumstances warrant, and appoint any new independent accountants;




4
Periodically review and discuss with the independent accountants all significant relationships the independent accountants have with the Company to determine the independence of the independent accountants, including a review of service fees for audit and non-audit services;




5
Review and approve the issuer’s hiring policies from time to time regarding partners, employees and former partners and employees of the present and former external auditor of the issuer;




6
Inquire of management and the independent accountants and evaluate the effectiveness of the Company’s process for assessing significant risks or exposures and the steps management has taken to monitor, control and minimize such risks to the Company. Obtain annually, in writing, the letters of the independent accountants as to the adequacy of such controls;




7
Consider, in consultation with the independent accountants, the audit scope and plan of the independent accountants;






-A5-




8
Review with the independent accountants the coordination of audit effort to assure completeness of coverage, and the effective use of audit resources;




9
Consider and review with the independent accountants, out of the presence of management:




(a)
the adequacy of the Company’s internal controls and disclosure controls including the adequacy of computerized information systems and security;




(b)
the truthfulness and accuracy of the Company’s financial statements; and




(c)
any related significant findings and recommendations of the independent accountants together with management’s responses thereto;




10
Following completion of the annual audit, review with management and the independent accountants:




(a)
the Company’s annual financial statements and related footnotes;




(b)
the independent accountants’ audit of the financial statements and the report thereon;




(c)
any significant changes required in the independent accountants’ audit plan; and




(d)
other matters related to the conduct of the audit which are to be communicated to the committee under generally accepted auditing standards;




11
Following completion of the annual audit, review separately with each of management and the independent accountants any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information;




12
Establish regular and separate systems of reporting to the Committee by each of management and the independent accountants regarding any significant judgments made in management’s preparation of the financial statements and the view of each as to appropriateness of such judgments;




13
In consultation with the independent accountants, review any significant disagreement among management and the independent accountants in connection with the preparation of the financial statements, including management’s responses;




14
Consider and review with management:




(a)
significant findings during the year and management’s responses thereto; and




(b)
any changes required in the planned scope of their audit plan;






-A6-




15
Review, prior to publication, all filings with regulatory authorities and any other publicly disclosed information containing the Company’s financial statements, including Management’s Discussion & Analysis, any certification, report, opinion or review rendered by the independent accountants, any press releases announcing earnings (especially the use of “pro forma” or “adjusted” information not prepared in compliance with generally accepted accounting principles) and all financial information and earnings guidance intended to be provided to analysts and the public or to rating agencies, and consider whether the information contained in these documents is consistent with the information contained in the financial statements;




16
Facilitate the preparation and inclusion of any report from the Committee or other disclosures as required by applicable laws and regulations in the Company’s annual proxy statement or other filings of all regulatory authorities having jurisdiction;




17
Review with management the adequacy of the insurance and fidelity bond coverages, reported contingent liabilities, and management’s assessment of contingency planning. Review management’s plans regarding any changes in accounting practices or policies and the financial impact of such changes, any major areas in management’s judgment that have a significant effect upon the financial statements of the Company, and any litigation or claim, including tax assessments, that could have a material effect upon the financial position or operating results of the Company;




18
Review with management and the independent accountants each annual, quarterly and other periodic report prior to its filing with the relevant regulators or prior to the release of earnings;




19
Review policies and procedures with respect to officers’ expense accounts and perquisites, including their use of corporate assets, and consider the results of any review of these areas by the independent accountants;




20
Review, with the Company’s counsel, any legal, tax or regulatory matter that may have a material impact on the Company’s financial statements, operations, related Company compliance policies, and programs and reports received from regulators;




21
Evaluate and review with management the Company’s guidelines and policies governing the process of risk assessment and risk management;




22
Meet with the independent accountants and management in separate executive sessions to discuss any matters that the Committee or these groups believe should be discussed privately with the Committee;




23
Report Committee actions to the Board with such recommendations as the Committee may deem appropriate;




24
Maintain, review and update the procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters, as set forth in Annex A attached to this Charter;




25
Review, assess and update this Charter on an annual basis and recommend any proposed changes to the Board for approval, in accordance with the requirements of the all applicable laws; and




26
Perform such other functions consistent with this Charter, the Company’s Articles and governing law, as the Committee deems necessary or appropriate.











ANNEX A




PROCEDURES FOR THE SUBMISSION OF


COMPLAINTS AND CONCERNS REGARDING


ACCOUNTING, INTERNAL ACCOUNTING CONTROLS OR


AUDITING MATTERS




1
Pretivm Resources Inc. (the “Company”) has designated its Audit Committee of its Board of Directors (the “Committee”) to be responsible for administering these procedures for the receipt, retention, and treatment of complaints received by the Company or the Committee directly regarding accounting, internal accounting controls, or auditing matters.




2
Any employee or consultant of the Company may on a confidential and anonymous basis submit concerns regarding questionable accounting controls or auditing matters to the Committee by setting forth such concerns in a letter addressed directly to the Committee with a legend on the envelope such as “Confidential” or “To be opened by Committee only”. If an employee or consultant would like to discuss the matter directly with a member of the Committee, the employee or consultant should include a return telephone number in his or her submission to the Committee at which he or she can be contacted. All submissions by letter to the Committee can be sent to:




Pretivm Resources Inc.


c/o Audit Committee


Attn:  Chair


Ross Mitchell




3
Any complaints received by the Company that are submitted as set forth herein will be forwarded directly to the Committee and will be treated as confidential if so indicated.




4
At each meeting of the Committee, or any special meetings called by the Chairperson of the Committee, the members of the Committee will review and consider any complaints or concerns submitted by employees as set forth herein and take any action it deems necessary in order to respond thereto.





5
All complaints and concerns submitted as set forth herein will be retained by the Committee for a period of seven (7) years.









































APPENDIX B




FINANCIAL STATEMENTS OF PRETIUM RESOURCES INC., INCLUDING MANAGEMENT’S REPORT TO SHAREHOLDERS AND THE AUDITORS’ REPORTS









































PRETIUM RESOURCES INC.
 
 
 
 
 
 CONSOLIDATED FINANCIAL STATEMENTS
 YEAR ENDED DECEMBER 31, 2014
 (Expressed in Canadian Dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
 1600 - 570 Granville Street
 Vancouver, BC V6C 3P1
 
 Phone: 604-558-1784
 Email: invest@pretivm.com
  1
 
 Management’s Responsibility for Financial Reporting
 
 The accompanying consolidated financial statements of the Company have been prepared by management in accordance with International Financial Reporting Standards, and within the framework of the summary of significant accounting policies in these consolidated financial statements.
 
 A system of internal accounting control is maintained in order to provide reasonable assurance that assets are safeguarded and that transactions are properly recorded and executed in accordance with management’s authorization. This system includes established policies and procedures, the selection and training of qualified personnel and an organization providing for appropriate delegation of authority and segregation of responsibilities.
 
 The Audit Committee of the Board of Directors meets periodically with management and the Company’s independent auditors to review the scope and results of their annual audit and to review the consolidated financial statements and related financial reporting matters prior to submitting the consolidated financial statements to the Board of Directors for approval.
 
 The consolidated financial statements have been audited by PricewaterhouseCoopers LLP on behalf of the shareholders and their report follows.
 
 “Robert A. Quartermain”
“Tom S. Q. Yip”Robert A. Quartermain
Tom S. Q. YipChief Executive Officer
Chief Financial Officer
 
 March 3, 2015
 
  2
  Management’s Report on Internal Control over Financial Reporting
 
 Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting under Rule 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934. The Securities Exchange Act of 1934 defines this as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
 
 ·
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
 ·
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
 ·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that may have a material effect on the consolidated financial statements.
 
 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
 Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (1992).
 
 Based upon our assessment and those criteria, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2014.
 
 PricewaterhouseCoopers LLP, our independent auditors, has issued an audit report on internal control over financial reporting for the Company as of December 31, 2014, which is included herein.
  “Robert A. Quartermain”
“Tom S. Q. Yip”Robert A. Quartermain
Tom S. Q. YipChief Executive Officer
Chief Financial Officer
 
 March 3, 2015
 
  3
 
 
 Independent Auditor’s Report
 
 To the Shareholders of Pretium Resources Inc.
 We have completed integrated audits of Pretium Resources Inc.’s (the Company) December 31, 2014 and December 31, 2013 consolidated financial statements and its internal control over financial reporting as at December 31, 2014. Our opinions, based on our audits are presented below.
 
 Report on the consolidated financial statements
 We have audited the accompanying consolidated financial statements of Pretium Resources Inc., which comprise the consolidated statements of financial position as at December 31, 2014 and December 31, 2013 and the consolidated statements of loss and comprehensive loss, cash flows and changes in equity for the years then ended, and the related notes, which comprise a summary of significant accounting policies and other explanatory information.
 
 Management’s responsibility for the consolidated financial statements
 Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
 
 Auditor’s responsibility
 Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. Canadian generally accepted auditing standards also require that we comply with ethical requirements.
  An audit involves performing procedures to obtain audit evidence, on a test basis, about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting principles and policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
  We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion on the consolidated financial statements.
 
 Opinion
 In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Pretium Resources Inc. as at December 31, 2014 and December 31, 2013 and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
  4
 
 
 Report on internal control over financial reporting
 We have also audited Pretium Resources Inc. internal control over financial reporting as at December 31, 2014, based on criteria established in Internal Control - Integrated Framework (1992), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
 
 Management’s responsibility for internal control over financial reporting
 Management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Controls over Financial Reporting.
 
 Auditor’s responsibility
 Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
  An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control, based on the assessed risk, and performing such other procedures as we consider necessary in the circumstances.
  We believe that our audit provides a reasonable basis for our audit opinion on the Company’s internal control over financial reporting.
 
 Definition of internal control over financial reporting
 A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
 
 Inherent limitations
 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
  5
 
 
 Opinion
 In our opinion, Pretium Resources Inc. maintained, in all material respects, effective internal control over financial reporting as at December 31, 2014, based on criteria established in Internal Control - Integrated Framework (1992) issued by COSO.
 
 signed “PricewaterhouseCoopers LLP”
 CharteredAccountants
 Vancouver, British Columbia March 3, 2015
 
               
  6
  PRETIUM RESOURCES INC.
 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
 (Expressed in Canadian Dollars)
 
 Year ended December 31,Note


2014


2013ASSETSCurrent assetsCash and cash equivalents




$
34,495,175


$
11,575,090Receivables and other

6



12,551,947



8,029,05347,047,122



19,604,143Non-current assetsRestricted cash

7



1,697,250



1,208,000Property, plant and equipment

10



8,833,945



8,658,520Mineral interests

7



759,237,949



696,790,071769,769,144



706,656,591Total Assets




$
816,816,266


$
726,260,734LIABILITIESCurrent liabilitiesAccounts payable and accrued liabilities




$
13,276,852


$
8,385,603Non-current liabilitiesDecommissioning and restoration provision





2,096,377



1,900,013Deferred income tax

13



22,212,028



17,936,12137,585,257



28,221,737EQUITYShare capital

8



795,034,595



707,547,196Share based payment reserve

8



59,969,633



53,820,248Deficit





(75,773,219
)


(63,328,447
)779,231,009



698,038,997Total Equity and Liabilities




$
816,816,266


$
726,260,734Contingencies

14Subsequent events

15
 
 
 These consolidated financial statements were authorized for issue by the Board of Directors on March 3, 2015.
 
 On behalf of the Board:“Ross A. Mitchell”

“C. Noel Dunn”Ross A. Mitchell

(Chairman of Audit Committee)

C. Noel Dunn

(Director)
 
 The accompanying notes are an integral part of these consolidated financial statements.
  7
  
 PRETIUM RESOURCES INC.
 CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
 (Expressed in Canadian Dollars)
 
 Year ended December 31,Note


2014


2013EXPENSESAccretion of decommissioning andrestoration provision




$
35,478


$
30,664Amortization





70,053



66,133Consulting





95,751



65,008General and administrative





1,137,268



871,696Insurance





344,543



305,931Investor relations





1,105,584



884,249Listing fees





264,450



559,716Professional fees





983,068



386,711Salaries





1,893,494



1,715,595Share-based compensation

8



2,847,849



5,431,093Travel and accommodation





220,392



250,574Interest income





(405,671
)


(460,142
)Foreign exchange gain





(343,728
)


-Loss before tax





8,248,531



10,107,228Deferred income tax expense

13



4,196,241



6,476,458Net loss and comprehensive loss for the year




$
12,444,772


$
16,583,686Basic and diluted loss per common share




$
0.11


$
0.16Weighted average number of common shares outstanding





111,308,353



101,104,575
 
 
 
 
 
 
 
 
 
 
 
 
 
 The accompanying notes are an integral part of these consolidated financial statements.
  8
  PRETIUM RESOURCES INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Expressed in Canadian Dollars)
 
 Year ended December 31,Note


2014


2013CASH FLOWS FROM OPERATING ACTIVITIESNet loss for the year




$
(12,444,772
)

$
(16,583,686
)Items not affecting cash:Accretion of decommissioning and restoration provision





35,478



30,664Amortization





70,053



66,133Deferred income tax expense

13



4,196,241



6,476,458Share-based compensation

8



2,847,849



5,431,093Changes in non-cash working capital items:Receivables and other





(620,969
)


288,864Accounts payable and accrued liabilities





610,929



(824,119
)Net cash used in operating activities





(5,305,191
)


(5,114,593
)CASH FLOWS FROM FINANCING ACTIVITIESCommon shares issued

8



93,784,182



88,423,403Share issuance costs





(6,217,117
)


(2,487,063
)Net cash generated by financing activities





87,567,065



85,936,340CASH FLOWS FROM INVESTING ACTIVITIESExpenditures on mineral interests

7



(66,794,675
)


(92,718,243
)Mineral recoveries

7



9,871,995



-Purchase of property, plant and equipment

10



(1,929,859
)


(5,451,020
)Restricted cash

7



(489,250
)


(69,000
)Net cash used in investing activities





(59,341,789
)


(98,238,263
)Change in cash and cash equivalents for the year





22,920,085



(17,416,516
)Cash and cash equivalents, beginning of year





11,575,090



28,991,606Cash and cash equivalents, end of year




$
34,495,175


$
11,575,090
 
 See also Note 11.
 
 
 
 
 
 
 
 The accompanying notes are an integral part of these consolidated financial statements.
  9
  PRETIUM RESOURCES INC.
 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 (Expressed in Canadian Dollars)
 
 Note


Number of

common shares


Amount


Share-based

payments

reserve


Deficit


TotalBalance – December 31, 2012





94,827,636


$
623,469,609


$
44,529,084


$
(46,744,761
)

$
621,253,932Shares issued under flow through- arrangement





3,374,550



35,914,742



-



-



35,914,742Shares issued under private placement





6,849,864



49,999,993



-



-



49,999,993Share issue costs





-



(2,487,063
)


-



-



(2,487,063
)Deferred income tax on share issuance costs





-



649,915



-



-



649,915Value assigned to options vested





-



-



9,291,164



-



9,291,164Net loss and comprehensive loss for the year





-



-



-



(16,583,686
)


(16,583,686
)Balance – December 31, 2013





105,051,050


$
707,547,196


$
53,820,248


$
(63,328,447
)

$
698,038,997Shares issued underflow-through agreement

8



3,425,327



26,306,513



-



-



26,306,513Shares issued under marketed offering

8



7,855,650



61,868,051



-



-



61,868,051Shares issued under private placement

8



496,054



3,916,111



-



-



3,916,111Share issue costs





-



(6,217,117
)


-



-



(6,217,117
)Deferred income tax on share issuance costs





-



1,613,841



-



-



1,613,841Value assigned to options vested





-



-



6,149,385



-



6,149,385Loss for the year





-



-



-



(12,444,772
)


(12,444,772
)Balance – December 31, 2014





116,828,081


$
795,034,595


$
59,969,633


$
(75,773,219
)

$
779,231,009
 
 
 
 
 The accompanying notes are an integral part of these consolidated financial statements.
  10
  PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2014 and 2013
 (Expressed in Canadian Dollars)
 
 1.
NATURE OF OPERATIONS
 
 Pretium Resources Inc. (the "Company") was incorporated under the laws of the Province of British Columbia, Canada on October 22, 2010. The address of the Company’s registered office is 1600 – 570 Granville St., Vancouver, BC, V6C 3P1.
 
 The Company owns the Brucejack and Snowfield Projects (the “Projects”) located in Northwest British Columbia, Canada. The Company is in the process of advancing the Brucejack Project, which has been determined to contain economically recoverable mineral reserves as communicated through our National Instrument 43-101 compliant “Feasibility Study and Technical report for the Brucejack Project” and exploring the Snowfield Project. The Company’s continuing operations and the underlying value and recoverability of the amount shown for the mineral interests are entirely dependent upon the existence of economically recoverable mineral reserves and resources, the ability of the Company to obtain the necessary financing to complete the exploration and development of the Projects, the ability to obtain the necessary permits to mine, and on future profitable production or proceeds from the disposition of the Projects.
  
 2.
BASIS OF PREPARATION
 
 These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
 
 These consolidated financial statements have been prepared on the historical cost basis and include the accounts of the Company and its wholly owned subsidiaries (note 9). Inter-company balances and transactions are eliminated on consolidation. The presentation and functional currency of the Company is the Canadian dollar.
 
 
 3.
SIGNIFICANT ACCOUNTING POLICIES
 
 Cash and cash equivalents
 
 Cash and cash equivalents comprise cash holdings in business and savings accounts held at major financial institutions with an original maturity date of three months or less.
 
 Financial instruments
 
 Financial assets
 
 Financial assets held are cash and cash equivalents, receivables and restricted cash. These financial assets have fixed or determinable payments and are not quoted in an active market and accordingly are classified as loans and receivables. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. Interest income is recognized by applying the effective interest rate, except for short-term receivables, when the recognition of interest would be immaterial.
  11
  PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2014 and 2013
 (Expressed in Canadian Dollars)
 
 3.
SIGNIFICANT ACCOUNTING POLICIES(Cont’d)
 
 Financial liabilities
 
 The Company has the following financial liabilities: accounts payable and accrued liabilities. Such financial liabilities are recognized initially at fair value net of any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are held at amortized cost using the effective interest method.
 
 Impairment of financial assets
 
 Financial assets are assessed for indicators of impairment at the end of each reporting year. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been adversely impacted.
 
 For all financial assets, objective evidence of impairment could include:
 ·
significant financial difficulty of the issuer or counterparty; or
 ·
default of delinquency in interest or principal payments; or
 ·
it becoming probable that the borrower will enter bankruptcy or financial re-organization.
 
 Property, plant and equipment
 
 Property, plant and equipment are carried at cost, less accumulated amortization and accumulated impairment losses. Cost comprises the fair value of consideration given to acquire an asset and includes the direct charges associated with bringing the asset to the location and condition necessary for putting it into use along with the future cost of dismantling and removing the asset. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
 
 Plant and equipment are amortized over the estimated useful life of the assets using the straight line method. The Company reviews residual value amortization methods and useful lives annually. Any changes in estimates that arise from this review are accounted for prospectively.
 
 Exploration and evaluation expenditures
 
 Exploration and evaluation expenditures include the costs of acquiring licenses and costs associated with exploration and evaluation activity. Exploration and evaluation expenditures are capitalized. Mineral property acquisition costs are capitalized. Exploration and evaluation costs incurred before the Company has obtained the legal rights to explore an area are expensed.
 
 Once the technical feasibility and commercial viability of the extraction of mineral reserves or resources from a particular mineral property has been determined, expenditures are reclassified to development assets within property, plant and equipment and are carried at cost until the properties to which the expenditures relate are sold, abandoned or determined by management to be impaired in value.
  12
  PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2014 and 2013
 (Expressed in Canadian Dollars)
 
 3.
SIGNIFICANT ACCOUNTING POLICIES(Cont’d)
 
 The establishment of technical feasibility and commercial viability of a mineral property is assessed based on a combination of factors, such as:
 
 ·
The extent to which mineral reserves or mineral resources as defined in National Instrument 43-101 have been identified through a feasibility study or similar document;
 ·
The results of optimization studies and further technical evaluation carried out to mitigate project risks identified in the feasibility study;
 ·
The status of environmental permits, and
 ·
The status of mining leases or permits.
 
 Exploration and evaluation assets are tested for impairment immediately prior to reclassification to development assets.
 
 Impairment of non-financial assets
 
 At the end of each reporting year, and when relevant triggering events and circumstances occur, the carrying amounts of the Company’s non-financial assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and the value in use. Fair value is determined as the price that would be paid to sell an asset or to transfer a liability in an orderly transaction between market participants at the measurement date. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the year. Impairment is normally assessed at a level of cash-generating units, which is identified as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.
 
 Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
 
 Share capital
 
 Common shares are classified as equity. Transaction costs directly attributable to the issue of common shares and share options are recognized as a deduction from equity, net of any tax effects.
 
 
 
  13
  PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2014 and 2013
 (Expressed in Canadian Dollars)
 
 3.
SIGNIFICANT ACCOUNTING POLICIES(Cont’d)
 
 Income taxes
 
 Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.
 
 Deferred tax is provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences are not provided for the initial recognition of assets or liabilities that affect neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates at the end of the reporting year applicable to the year of expected realization.
 
 A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.
 
 Mineral exploration tax credits
 
 Mineral exploration tax credits on eligible mineral exploration expenditures incurred are treated as a reduction of the capitalized exploration costs of the mineral properties. The credits are recorded when the amount is reliably measurable and it is considered probable that the tax credit will be recovered.
 
 Decommissioning and restoration provision
 
 An obligation to incur decommissioning and environmental costs arises when environmental disturbance is caused by the exploration or development of a mineral property interest. Such costs are estimated and discounted to their net present value and capitalized to the carrying amount of the related asset along with the recording of a corresponding liability, as soon as the obligation to incur such costs arises. Discount rates using a pre-tax rate that reflect risks specific to the liability are used to calculate the net present value. The liability is adjusted each year for the unwinding of the discount rate, changes to the current market-based discount rate, and for the amount or timing of the underlying cash flows needed to settle the obligation.
 
 Loss per share
 
 The Company presents basic and diluted loss per share data for its common shares, calculated by dividing the loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the year. Diluted loss per share is determined by adjusting the loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all dilutive potential common shares.
 
 Mineral recoveries
 
 The incidental proceeds from the sale of gold recovered from activities conducted during the exploration and evaluation stage are offset against the carrying value of the associated mineral interests.
 
  14
  PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2014 and 2013
 (Expressed in Canadian Dollars)
 
 3.
SIGNIFICANT ACCOUNTING POLICIES(Cont’d)
 
 Flow-through shares
 
 The issuance of flow-through common shares results in the tax deductibility of the qualifying resource expenditures funded from the proceeds of the sale of such shares being transferred to the purchasers of the shares. Under IFRS, on the issuance of such shares, the Company bifurcates the flow-through shares into: a flow-through share premium, equal to the estimated premium that investors pay for the flow-through feature, which is recognized as a liability, and share capital. As the related exploration expenditures are incurred, the Company derecognizes the premium liability and recognizes a related income tax recovery.
 
 Share-based payment transactions
 
 The Company’s equity settled share-based option plan is measured at fair value at the date of grant and is recognized as an expense with a corresponding increase in share-based payments reserve in equity. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee. Equity-settled share-based payment transactions with non-employees are measured at the fair value of the goods or services received. However, if the fair value cannot be estimated reliably, the share-based payment transaction is measured at the fair value of the equity instruments granted at the date the non-employee receives the goods or the services.
 
 Cash-settled payment transactions such as Restricted Share Units (“RSU’s”) are initially measured at fair value at the date of grant and recognized as an expense with a corresponding accrued liability with subsequent remeasurement to fair value at each reporting date.
 
 The fair value at grant date of all share-based payments is recognized as compensation expense over the period for which benefits of services are expected to be derived, with a corresponding credit to shareholders’ equity or accrued liabilities depending on whether they are equity-settled or cash-settled. We estimate the fair value of stock options granted using the Black-Scholes option pricing model. The fair value of RSU’s is estimated based on the quoted market price of our common shares. When awards are forfeited, the expense previously recognized is proportionately reversed. When share-based payments are granted in exchange for services directly related to specific exploration or development projects, the expense is capitalized against that asset.
  15
  PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2014 and 2013
 (Expressed in Canadian Dollars)
 
 4.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
 
 Key sources of judgment and estimation uncertainty
 
 The preparation of financial statements requires management to use judgment in applying its accounting policies and estimates and assumptions about the future. Estimates and other judgments are regularly evaluated and are based on management’s experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. The following discusses the most significant accounting judgments and estimates that the Company has made in the preparation of the financial statements that could result in a material effect in the next financial year on the carrying amounts of assets and liabilities:
 
 ·
Impairment
 
 The application of the Company’s accounting policy for impairment of non-financial assets requires judgment to determine whether indicators of impairment exist including factors such as, the period for which the Company has the right to explore, expected renewals of exploration rights, whether substantive expenditures on further exploration and evaluation of resource properties are budgeted and results of exploration and evaluation activities on the exploration and evaluation assets. Management has assessed impairment indicators on the Company’s mineral interests and has concluded that no impairment indicators existed as of December 31, 2014.
 
 ·
Determination of commercial viability and technical feasibility of the Brucejack Project
 
 The application of the Company’s accounting policy for exploration and evaluation expenditures requires judgment to determine whether technical feasibility and commercial viability of the Brucejack Project is demonstrable. The Company considered the application status of key environmental permits and concluded that capitalized expenditures related to the Brucejack Project are appropriately classified as an exploration and evaluation asset.
 
 
 5.
NEW ACCOUNTING STANDARDS AND RECENT PRONOUNCEMENTS
 
 New standards, amendments and interpretations to existing standards adopted by the Company
 
 The Company has applied the following new and revised IFRS in these audited financial statements:
 
 ·
IFRS 10, Consolidated Financial Statements, requires an entity to consolidate an investee when it has power over the investee, is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Under existing IFRS, consolidation is required when an entity has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. IFRS 10 replaces SIC 12, Consolidation – Special Purpose Entitiesand parts of IAS 27, Consolidated and Separate Financial Statements.
 
  16
  PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2014 and 2013
 (Expressed in Canadian Dollars)
 
 5.
NEW ACCOUNTING STANDARDS AND RECENT PRONOUNCEMENTS(Cont’d)
 
 Changes in accounting standards not yet effective
 
 There are a number of new standards and amendments to standards and interpretations that have been issued but are not yet effective. None of these are expected to have a significant effect on our consolidated financial statements except the following:
 
 ·
IFRS 9, Financial Instruments,replaces IAS 39 – Financial Instruments: Recognition and Measurementand applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted.
 ·
Annual Improvements; the IASB issued the Annual Improvements 2011-2013cycle effective for annual periods beginning on or after July 1, 2014 and the Annual Improvements 2012-2014cycle effective for annual periods beginning on or after January 1, 2016. These Annual Improvementsmade amendments to existing IFRS’s which are not expected to have a material impact on the Company.
 
 There are no other IFRS’s or IFRIC interpretations that are not yet effective that are expected to have a material impact on the Company.
 
 
 6.
RECEIVABLES AND OTHER
 
 2014


2013Taxes receivable

$
1,651,138


$
1,206,492BC Mineral Exploration Tax Credit receivable


9,739,990



6,800,690Gold sales receivable


513,706



-Prepayments and deposits


525,999



21,871Other receivables


121,114



-Outstanding, December 31

$
12,551,947


$
8,029,053
 
  17
  PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2014 and 2013
 (Expressed in Canadian Dollars)
 
 7.
MINERAL INTERESTS
 
 The Company’s mineral interests consist of gold/copper/silver exploration projects located in northwest British Columbia.
  Year ended December 31, 2014Brucejack


Snowfield


TotalAcquisitionBalance, beginning of year

$
143,109,910


$
309,067,638


$
452,177,548Additions in the year


180,782



-



180,782Balance, end of year

$
143,290,692


$
309,067,638


$
452,358,330ExplorationBalance, beginning of year

$
243,190,077


$
1,422,446


$
244,612,523Costs incurred in the yearCamp and surface activities


22,949,473



-



22,949,473Engineering and permitting


19,779,073



291,367



20,070,440Underground and surface exploration


15,317,508



-



15,317,508Road and transportation


11,731,335



-



11,731,335Share based compensation and other


5,523,341



-



5,523,341Recoveries


(13,325,001
)


-



(13,325,001
)Balance, end of year

$
305,165,806


$
1,713,813


$
306,879,619Balance, December 31, 2014

$
448,456,498


$
310,781,451


$
759,237,949
 
 Year ended December 31, 2013Brucejack


Snowfield


TotalAcquisitionBalance, beginning of year

$
142,949,319


$
309,067,638


$
452,016,957Additions in the year


160,591



-



160,591Balance, end of year

$
143,109,910


$
309,067,638


$
452,177,548ExplorationBalance, beginning of year

$
143,602,828


$
539,057


$
144,141,885Costs incurred in the yearCamp and surface activities


22,858,043



-



22,858,043Engineering and permitting


9,997,091



883,389



10,880,480Underground and surface exploration


39,518,256



-



39,518,256Road and transportation


22,296,550



-



22,296,550Share based compensation and other


12,720,617



-



12,720,617Recoveries


(7,803,308
)


-



(7,803,308
)Balance, end of year

$
243,190,077


$
1,422,446


$
244,612,523Balance, December 31, 2013

$
386,299,987


$
310,490,084


$
696,790,071
 
 Recoveries consist of BC Mineral Exploration Tax Credits receivable from the Government of Canada and incidental proceeds from the sale of gold recovered.
  18
  PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2014 and 2013
 (Expressed in Canadian Dollars)
 
 7.
MINERAL INTERESTS(Cont’d)
 
 Snowfield and Brucejack Projects
 
 In relation to the Brucejack Project, the Company has $1,697,250 of restricted cash which includes $1,315,000 in the form of Guaranteed Investment Certificates (“GIC’s”) as security deposits with various government agencies in relation to close down and restoration provisions for the Projects.
 
 The Brucejack Project is subject to a 1.2% net smelter returns royalty on production in excess of 503,386 ounces of gold and 17,907,080 ounces of silver.
 
 
 8.
CAPITAL AND RESERVES
 
 Authorized Share Capital
 
 At December 31, 2014, the authorized share capital consisted of an unlimited number of common shares without par value and an unlimited number of preferred shares with no par value.
 
 In the first quarter of 2014, the Company closed a private placement of 568,182 Investment Tax Credit flow-through common shares at a price of $8.80 per flow-through share and 2,857,145 Canadian Exploration Expense flow-through common shares at a price of $8.05 per flow-through share for aggregate proceeds of $28 million. The Company bifurcated the gross proceeds between share capital of $26,306,513 (before share issue costs of $1,816,330) and flow-through share premium of $1,693,507.
 
 On July 29, 2014, the Company closed a marketed offering of 8,280,000 common shares at a price of US$7.25 per share with the Company receiving gross proceeds of US$49,524,750 for the sale of 6,831,000 common shares. The remaining 1,449,000 common shares were sold by Silver Standard Resources Inc. (“Silver Standard”) in a secondary offering pursuant to its existing registration rights to participate in offerings of securities by the Company in an amount equal to the total number of common shares being offered multiplied by their current ownership percentage. On August 15, 2014, the Company closed the over-allotment option of 1,242,000 common shares at a price of US$7.25 per share pursuant to the marketed offering that closed on July 29, 2014. The Company received gross proceeds of approximately US$7,400,000 for the sale of 1,024,650 additional shares. The remaining 217,350 additional shares were sold by Silver Standard. On August 15, 2014, the Company also closed a private placement of 496,054 common shares at a price of US$7.25 per share for gross proceeds of approximately US$3,596,000 to a holder who wished to maintain their respective pro rata interest in the Company.
 
 In the fourth quarter of 2014, the Company announced that it had entered into an agreement to issue 12,836,826 common shares at $6.30 per share for gross proceeds of $80,872,004 resulting in the acquirer owing approximately 9.9% of the Company’s issued and outstanding shares. This agreement was subsequently completed as announced on January 16, 2015. As a result of this agreement, the Company entered into additional subscription agreements with holders who wished to maintain their respective pro rata interest in the Company. Thus, the Company agreed to issue an additional 2,897,490 common shares at $6.30 per share for gross proceeds of $18,254,187. These pro rata agreements were subsequently completed as announced on January 21, 2015. The combined gross proceeds of these two offerings was approximately $99 million.
 
  19
  PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2014 and 2013
 (Expressed in Canadian Dollars)
 
 8.
CAPITAL AND RESERVES(Cont’d)
 
 Share Option Plan
 
 The Company has adopted an incentive stock option plan which provides that the Board of Directors of the Company may from time to time, in their discretion, and in accordance with Toronto Stock Exchange requirements, grant to its directors, officers, employees and consultants of the Company, non-transferable options to purchase common shares, provided that the number of common shares reserved for issue does not exceed 10% of the number of then outstanding common shares. Such options can be exercisable for a maximum of five years from the date of grant. The exercise price of each share option is set by the Board of Directors at the time of grant but cannot be less than the market price. Vesting of share options is at the discretion of the Board of Directors at the time the options are granted.
 
 The following table summarizes the changes in stock options for the year ended December 31:
  2014


2013Number of options


Weighted average exercise price


Number of options


Weighted average exercise priceOutstanding, January 1


9,841,950


$
8.63



8,541,950


$
9.13Granted


991,500



7.02



1,635,000



6.11Forfeited/expired


(22,500
)


(13.06
)


(335,000
)


(8.83
)Outstanding, December 31


10,810,950


$
8.48



9,841,950


$
8.63
 
 The following table summarizes information about stock options outstanding and exercisable at December 31, 2014:
 
 Stock options outstanding


Stock options exercisableExercise prices


Number of options outstanding


Weighted average years to expiry


Number of options exercisable


Weighted average exercise price$5.85 – $7.99



6,666,500



2.19



5,710,375


$
6.10$8.00 - $9.99



528,750



2.02



506,250



9.41$10.00 - $11.99



2,015,700



1.72



2,015,700



11.53$12.00 - $13.99



1,380,000



2.92



1,380,000



13.69$14.00 - $15.99



95,000



2.35



95,000



14.70$16.00 - $17.99



125,000



2.08



125,000



16.48Outstanding, December 31, 2014



10,810,950



2.19



9,832,325


$
8.66
 
 The total stock option expense for the year ended December 31, 2014 was $6,149,384 (2013 - $9,291,164) of which $2,820,821 (2013 - $5,431,093) has been expensed in the statement of loss and $3,328,563 (2013 - $3,860,071) has been capitalized to mineral interests.
 
  20
  PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2014 and 2013
 (Expressed in Canadian Dollars)
 
 8.
CAPITAL AND RESERVES(Cont’d)
 
 The following are the weighted average assumptions employed to estimate the fair value of options granted for the year ended December 31, 2014 and year ended December 31, 2013 using the Black-Scholes option pricing model:
  
 2014
2013Risk-free interest rate
1.43%
1.48%Expected volatility
67.2%
58.4%Expected life
5 years
5 yearsExpected dividend yield
Nil
Nil
 
 Option pricing models require the input of subjective assumptions including the expected price volatility, and expected option life. Changes in these assumptions may have a significant impact on the fair value calculation.
 
 Restricted Share Unit (“RSU”) Plan
 
 The Company has adopted an RSU Plan to allow the Board of Directors to grant its employees and consultants, non-transferable share units based on the value of our share price at the date of grant. The awards have a graded vesting schedule over a three-year period and are cash-settled immediately upon vesting.
 
 RSU’s are cash-settled instruments and are recognized as a liability with fair value remeasurement at each reporting date. The associated compensation cost is recorded in compensation expense unless directly attributable to our Projects.
 
 The following table summarizes the changes in stock options for the year ended December 31:
  2014Number of RSU’s


Weighted average fair valueOutstanding, January 1


-


$
-Granted


330,992



6.84Forfeited/expired


-



-Outstanding, December 31


330,992


$
6.84
 
 At December 31, 2014, an accrued liability of $61,799 (2013 - $Nil) was outstanding. For the year ended December 31, 2014, $27,028 (2013 - $Nil) has been recorded to share based compensation expense and $34,771 (2013 - $Nil) has been capitalized to mineral interests.
  21
  
 PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2014 and 2013
 (Expressed in Canadian Dollars)
  9.
RELATED PARTIES
 
 Transactions with directors and key management personnel
 
 Directors and key management compensation:
 For the year ended

December 31, 2014


For the year ended

December 31, 2013Salaries and management fees


1,640,894


$
1,727,071Share-based compensation


4,051,596



4,477,486Total Management Compensation


5,692,490


$
6,204,557
 
 Employment agreements
 
 The Company has entered into employment agreements with each of its President and CEO (the “CEO”), Executive Vice President and Chief Development Officer (the “CDO”), Vice President and Chief Operating Officer (the “COO”), and Vice President and Chief Exploration Officer (the “CExO”). Under the employment agreements, the CEO receives a base salary of $450,000 per year, benefits and an annual performance bonus of 0.25% of the annual increase in the market capitalization of the Company, provided the increase in market capitalization is 10% or more. The CDO receives a base salary of $350,000 per year and the COO and CExO each receive a base salary of $325,000 per year, benefits and an annual bonus determined at the discretion of the Board. The CEO, CDO, COO and CExO are also entitled to twenty-four months’ salary and two years annual performance bonus as a termination benefit without cause.
 
 Subsidiaries
 
 Name of Subsidiary
Place of Incorporation
Proportion of Ownership Interest
Principal ActivityPretium Exploration Inc.
British Columbia, Canada
100%
Holds interest in the Brucejack and Snowfield projects0890696 BC Ltd.
British Columbia,

Canada
100%
Holds real estate in Stewart, British Columbia
 
 
 
 
  22
 PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2014 and 2013
 (Expressed in Canadian Dollars)
 10.
PROPERTY, PLANT AND EQUIPMENT
 
 CostDecember 31








December 312013


Additions


Disposals


2014Building

$
297,297


$
-


$
-


$
297,297Camp infrastructure


358,903



86,355



-



445,258Computer hardware


253,600



21,798



-



275,398Computer software


544,915



107,230



-



652,145Exploration equipment


9,955,884



1,702,985



-



11,658,869Office equipment


95,627



11,492



-



107,119Total

$
11,506,226


$
1,929,860


$
-


$
13,436,086
 
 Accumulated AmortizationDecember 31








December 312013


Amortization


Disposals


2014Building

$
25,711


$
10,702


$
-


$
36,413Camp infrastructure


63,423



30,618



-



94,041Computer hardware


158,064



50,479



-



208,543Computer software


432,648



118,024



-



550,672Exploration equipment


2,127,145



1,532,787



-



3,659,932Office equipment


40,715



11,825



-



52,540Total

$
2,847,706


$
1,754,435


$
-


$
4,602,141Net book value at December 31, 2014









$
8,833,945
 During the year ended December 31, 2014, $70,053 of amortization was recognized in the statement of loss and $1,684,381 was capitalized within mineral interests.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 23
 
 PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2014 and 2013
 (Expressed in Canadian Dollars)
 10.
PROPERTY, PLANT AND EQUIPMENT(Cont’d)
 
 CostDecember 31








December 312012


Additions


Disposals


2013Building

$
297,297


$
-


$
-


$
297,297Camp infrastructure


358,903



-



-



358,903Computer hardware


179,705



73,895



-



253,600Computer software


430,174



114,741



-



544,915Exploration equipment


4,693,502



5,262,382



-



9,955,884Office equipment


95,627



-



-



95,627Total

$
6,055,208


$
5,451,018


$
-


$
11,506,226
 
 Accumulated AmortizationDecember 31








December 312012


Amortization


Disposals


2013Building

$
14,571


$
11,140


$
-


$
25,711Camp infrastructure


31,932



31,491



-



63,423Computer hardware


97,297



60,767



-



158,064Computer software


290,946



141,702



-



432,648Exploration equipment


921,406



1,205,739



-



2,127,145Office equipment


28,210



12,505



-



40,715Total

$
1,384,362


$
1,463,344


$
-


$
2,847,706Net book value at December 31, 2013













$
8,658,520
 
 During the year ended December 31, 2013, $66,133 of amortization was recognized in the statement of loss and $1,397,213 was capitalized within mineral interests.
   11.
SUPPLEMENTAL CASH FLOW INFORMATION
 Year ended

December 31, 2014


Year ended

December 31, 2013Net change in non-cash working capital items and otherTaxes receivable

$
(3,901,925
)

$
8,193,602Trade accounts payable


4,280,320



(6,227,712
)$
378,395


$
1,965,890
  24
  PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2014 and 2013
 (Expressed in Canadian Dollars)
 12.
FINANCIAL RISK MANAGEMENT
 
 (a)
Overview
 
 The Company has exposure to credit risk, liquidity risk and market risk from its use of financial instruments.
 
 This note presents information about the Company's exposure to each of these risks, the Company's objectives, policies and processes for measuring and managing risk, and the Company's management of capital.
 
 The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework.
 
 (b)
Credit risk
 
 Credit risk is the risk of potential loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company's credit risk is primarily attributable to its liquid financial assets including cash and cash equivalents and restricted cash. The Company limits its exposure to credit risk on financial assets through investing its cash and cash equivalents with high-credit quality financial institutions.
 
 (c)
Liquidity risk
 
 Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s financial obligations consist of accounts payable and accrued liabilities and the decommissioning and restoration provision. The Company maintains sufficient cash in order to meet short term business requirements, after taking into account cash flows from operations and the Company's holdings of cash and cash equivalents. The Company's cash and cash equivalents are currently invested in business and savings accounts with high-credit quality financial institutions which are available on demand by the Company for its programs. The Company also holds government bonds to support future environmental obligations.
 
 (d)
Interest rate risk
 
 The Company is subject to interest rate risk with respect to its investments in cash and cash equivalents. The Company’s current policy is to invest cash at floating rates of interest and cash reserves are to be maintained in cash and cash equivalents in order to maintain liquidity, while achieving a satisfactory return for shareholders. Fluctuations in interest rates when cash and cash equivalents mature impact interest income earned.
 
 If the average interest rate for the years ended December 31, 2014 and December 31, 2013 had increased/decreased by 1%, the effect on the Company would have been immaterial.
 
  25
  PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2014 and 2013
 (Expressed in Canadian Dollars)
 12.
FINANCIAL RISK MANAGEMENT(Cont’d)
 
 (e)
Capital management
 
 The Company’sobjectives in the managing of the liquidity and capital are to safeguard the Company’s ability to continue as a going concern and provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of equity attributable to common shareholders, comprising of issued share capital, contributed surplus, accumulated comprehensive income and accumulated deficit.
 
 The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue new debt, acquire or dispose of assets to facilitate the management of its capital requirements. The Company prepares annual expenditure budgets that are updated as necessary depending upon various factors, including successful capital deployment and general industry conditions. The annual and updated budgets are approved by the Board of Directors. As at December 31, 2014 and December 31 2013, the Company does not have any long-term debt and is not subject to any externally imposed capital requirements. The Companyhas sufficient funds to meet its current operating and exploration and development obligations.
 
 (f)
Fair value
 
 The carrying value of the Company’s financial assets and liabilities approximate their fair value because of their short-term nature.
   13.
TAXATION
  (a)
Deferred income tax liability
 
 The tax effects of temporary differences between amounts recorded in the Company’s accounts and the corresponding amounts as computed for income tax purposes gives rise to deferred tax assets (liabilities) as follows:
  December 31, 2014


December 31, 2013Tax loss carry forwards

$
17,204,746


$
11,690,021Financing costs


2,612,335



2,015,274Other


3,038,476



2,556,566Mineral interests


(45,067,584
)


(34,197,982
)Deferred income tax liability

$
(22,212,027
)

$
(17,936,121
)
 
 The Company has tax losses in Canada of approximately $66,172,000 (2013 - $44,962,000) expiring in various amounts from 2030 to 2034. The Company also has investment tax credits totaling approximately $7,220,000 (2013 - $7,260,000).
 
  26
  PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2014 and 2013
 (Expressed in Canadian Dollars)
  13.
TAXATION(Cont’d)
  (b)
Income tax expense
 
 The Company’s tax expense is comprised of the following:
  Year ended


Year endedDecember 31, 2014


December 31, 2013Current tax expense

$
-


$
-Deferred tax expense


4,196,241



6,476,458Deferred income tax expense

$
4,196,241


$
6,476,458
 
 The provision for income taxes differs from the amount calculated using the Canadian federal and provincial statutory income tax rates of 26% as follows:
  Year ended


Year endedDecember 31, 2014


December 31, 2013Expected tax recovery

$
(2,135,139
)

$
(2,447,632
)Share-based compensation and other items


744,883



1,597,651Flow-through shares


7,280,005



9,835,107Flow-through share premium


(1,693,508
)


(2,508,668
)Income tax expense

$
4,196,241


$
6,476,458
   14.
CONTINGENCIES
  a) Canadian Class Actions
 
 On October 29, 2013, David Wong, a shareholder of the company, filed a proposed class action against the Company, Robert Quartermain (a director, the President and the CEO of the Company) and Snowden Mining Industry Consultants Ltd. (the “Wong Action”).
 
 A similar proposed class action was filed by Roksana Tahzibi, a shareholder of the Company, on November 1, 2013 (the “Tahzibi Action”). The defendants in the Tahzibi Action are the Company, Mr. Quartermain, Joseph Ovsenek (an officer and director of the Company), Kenneth McNaughton (an officer of the Company), Ian Chang (an officer of the Company) and Snowden Mining Industry Consultants Ltd.
 
 The Wong Action and Tahzibi Action (together, the “Ontario Actions”) were filed in the Ontario Superior Court of Justice.
 
 The plaintiffs in the Ontario Actions seek certification of a class action on behalf of a class of persons, wherever they reside, who acquired the Company’s securities. In the Wong Action, the class period is between November 22, 2012 and October 22, 2013. In the Tahzibi Action, the class period is between July 23, 2013 and October 22, 2013.
 
 
  27
  PRETIUM RESOURCES INC.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31, 2014 and 2013
 (Expressed in Canadian Dollars)
  14.
CONTINGENCIES(Cont’d)
 
 The plaintiffs in the Ontario Actions allege that certain of the Company’s disclosures contained material misrepresentations or omissions regarding Brucejack, including statements with respect to probable mineral reserves and future gold production at Brucejack. The plaintiffs further allege that until October 22, 2013 the Company failed to disclose alleged reasons provided by Strathcona Mineral Services Ltd. for its resignation as an independent qualified person overseeing the bulk sample program. According to the plaintiffs in the Ontario Actions, these misrepresentations and omissions are actionable under Ontario’s Securities Act, other provincial securities legislation and the common law.
 
 The Wong Action claims $60 million in general damages. The Tahzibi Action claims $250 million in general damages. The plaintiffs in the Ontario Actions have asked for the appointment of a case management judge. There have been no further steps in the Ontario Actions.
 
 The Company believes that the allegations made against it in Ontario Actions are meritless and will vigorously defend them, although no assurance can be given with respect to the ultimate outcome of the Ontario Actions.
 b) United States Class Actions
 
 Between October 25, 2013 and November 18, 2013, five putative class action complaints were filed in the United States against the Company and certain of its officers and directors, alleging that defendants violated the United States securities laws by misrepresenting or failing to disclose material information concerning the Company’s Brucejack Project. All five actions were filed in the United States District Court for the Southern District of New York.
 
 On January 22, 2014, the Court ordered that these actions be consolidated into a single action, styled In re Pretium Resources Inc. Securities Litigation, Case No. 13-CV-7552 (PGG). The Court has appointed as lead plaintiff in the consolidated action a group of shareholders designated as the “Pretium Investor Group,” which consists of three individuals (Gary Martin, Merton K.W. Chang and Sandra Lee Reyes-Troyer) suing on behalf of a putative class of shareholders who purchased or otherwise acquired the Company’s securities between January 19, 2011 and October 21, 2013
 
 The Company believes that the allegations made against it in these actions are meritless and will vigorously defend the matter, although no assurance can be given with respect to the ultimate outcome of such proceedings.
 
  15.
SUBSEQUENT EVENTS
 
 On January 20, 2015, the Company granted employee and consultant stock options under its stock option plan to purchase 1,121,000 common shares exercisable at $8.72 per share for a term of five years.
 
 On January 16,2015 and January 21, 2015, the Company issued 12,836,826 and 2,897,490 common shares, respectively, for gross proceeds of approximately $99 million (See note 8).




28
































APPENDIX C




MANAGEMENT’S DISCUSSION AND ANALYSIS







































PRETIUM RESOURCES INC.
 MANAGEMENT’S DISCUSSION AND ANALYSIS
 FOR THE YEAR ENDED DECEMBER 31, 2014
  This Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the audited consolidated Financial Statements of Pretium Resources Inc. (“Pretivm”, the “Company”, “we” or “us”) for the year ended December 31, 2014 as publicly filed on the System for Electronic Document Analysis and Retrieval (SEDAR) website. All dollar amounts are expressed in Canadian Dollars unless otherwise specified.
  We have prepared the audited consolidated Financial Statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). This MD&A is prepared as of March 3, 2015 and includes certain statements that may be deemed “forward-looking statements”. We direct investors to the section “Risks and Uncertainties” and “Statement on forward-looking information” included within this MD&A.
  Additional information relating to us, including our Annual Information Form and Form 40-F, is available on the SEDAR website at www.sedar.com and on the EDGAR section of the SEC website at www.sec.gov.
 
 Our Business
 
 Pretivm was incorporated on October 22, 2010 under the laws of the Province of British Columbia. We are an exploration and development company that was formed for the acquisition, exploration and development of precious metal resource properties in the Americas.
  Our initial projects are the Brucejack Project and the Snowfield Project (together, the “Projects”), which are 100% owned advanced stage exploration projects located in northwestern British Columbia.
  Our focus is on advancing the Brucejack Project to production as a high-grade gold underground mine, with permitting and engineering underway.
 
 4th Quarter Highlights
  ·
On October 22, 2014, we announced the final results from the 2014 surface drill program in the Valley of the Kings, following up on our announcements on July 3, 2014 and August 20, 2014. The surface drill program was successful in confirming both the grade and continuity of Indicated and Inferred gold mineralization in an area defined by the 2013 Mineral Resource estimate block model, and the continuity of gold mineralization in the Valley of the Kings below the area defined by the 2013 Mineral Resource estimate.
 
 1
  ·
On November 20, 2014, we announced that we had contracted AMEC Americas Limited (“AMEC”) to provide the engineering, procurement and construction management (“EPCM”) services for the Brucejack Project.
  ·
On December 8, 2014, we announced that Zijin Mining Group Co., Ltd. (“Zijin”) had agreed to make a strategic investment in the Company, resulting in Zijin owning approximately 9.9% of our issued and outstanding shares. We agreed to issue to Zijin by way of a private placement 12,836,826 common shares at a price of $6.30 per share for gross proceeds of approximately $80,872,004. The Zijin private placement closed on January 16, 2015. Mr. Shaoyang Shen of Zijin was appointed to our Board of Directors pursuant to the terms of the subscription agreement dated December 8, 2014 which entitled Zijin to nominate one person.
  ·
On December 11, 2014, we announced that we had agreed to enter into subscription agreements with certain shareholders who wished to maintain their respective pro rata interests in the Company in connection with the previously announced strategic investment by Zijin (the “Pro-Rata Private Placement”). The Pro-Rata Private Placement closed on January 21, 2015. A total of 2,897,490 common shares were issued to subscribers at a price of $6.30 per share for gross proceeds of approximately C$18,254,187.
  ·
Subsequent to the end of the quarter, on January 14, 2015, we announced the appointment of Tom S.Q. Yip as Chief Financial Officer.
 
 Operations
 
 Brucejack Project
 
 The Brucejack Project is located approximately 950 km northwest of Vancouver, British Columbia and 65 km north-northwest of Stewart, British Columbia and is comprised of 11 mineral claims totaling 3,199.28 hectares in area. The Brucejack Project forms part of our contiguous claims package that comprises 105,990 hectares.
  Project Permitting
  In December 2012, we submitted the Project Description for the Brucejack Project to the British Columbia Environmental Assessment Office (“BCEAO”) and in January 2013 to the Canadian Environmental Assessment Agency (“CEAA”). These filings initiated the permitting process for the proposed 2,700 tonnes per day high-grade underground gold mine at the Brucejack Project.
  In February 2013, the BCEAO issued a Section 10 order in respect of the Environmental Assessment Certificate (“EAC”) requirement for the Brucejack Project and a Section 11 order in July 2013 outlining the scope, procedures and methods for the environmental assessment process. In May 2013, CEAA issued the Environmental Impact Statement (“EIS”) Guidelines that outline the federal permitting requirements for the Brucejack Project.
  In September 2013, we held the initial meeting with the Working Group comprised of the representatives from provincial and federal government agencies, First Nations and communities participating in the review process. Participants from the Working Group also visited the Brucejack Project site. In late November 2013, we held public meetings in five communities in northwest British Columbia during the first public comment period.
 
 2
 On May 2, 2014, we received a copy of the approved Application Information Requirements from the BCEAO and on June 20, 2014, we filed our EAC application with the BCEAO, which was evaluated for completeness over a 30-day period by BCEAO with the involvement of the Working Group.
  On August 13, 2014, our EAC application was accepted for filing by the BCEAO. In September 2014, we held a second round of public meetings in five communities in northern British Columbia during the second public comment period.
  During the fourth quarter, we provided responses to the Working Group and public comments as part of the application review process.
  The BCEAO has a maximum of 180 days from August 13, 2014, the date of our EAC application, to complete its review and prepare an assessment report for a decision by the Minister of Environment and the Minister of Energy and Mines. The Ministers have 45 days following the receipt of the assessment report to make a decision.
  CEAA reviews the EIS, which we submitted concurrently with the EAC application to the province. The provincial and federal environmental assessment process are coordinated where possible, though with a separate federal review timeline. Provincial and federal approval of the EAC application and EIS, respectively, allow for the issuance of the statutory permits and authorizations to begin construction of a mine at Brucejack.
  Project Engineering
  Basic and detailed engineering activities have been ongoing following the completion in June 2014 of the updated National Instrument 43-101-compliant feasibility study for the Brucejack Project (see “Updated Feasibility Study” below). On November 20, 2014, we announced that we had contracted AMEC to provide the EPCM services for the Project.
  During the fourth quarter, flow sheets and process design criteria were finalized as well as process and instrumentation diagrams. Plant and site layout refinements are currently underway, as well as the procurement of surface facilities and underground infrastructure.
  Additionally, we have staffed the teams in the technical areas required to advance the Project through development.
  Updated Feasibility Study
  On June 19, 2014, we announced an updated National Instrument 43-101-compliant Feasibility Study for the Brucejack Project (see our news release dated June 19, 2014). The Feasibility Study and Technical Report Update on the Brucejack Project, Stewart BC, dated June 19, 2014 was completed by Tetra Tech and was filed on SEDAR on June 30, 2014 (the “2014 Feasibility Study”).
 
 3
 
 The Valley of the Kings Proven and Probable Mineral Reserves are 6.9 million ounces of gold (13.6 million tonnes grading 15.7 grams of gold per tonne) and West Zone Proven and Probable Mineral Reserves are 600,000 ounces of gold (2.9 million tonnes grading 6.9 grams of gold per tonne).
  The Base Case (US$1,100/ounce gold, US$17/ounce silver and exchange rate of 0.92 C$/US$) estimated pre-tax Net Present Value (5% discount) is US$2.25 billion, with an internal rate of return of 34.7%.
  The 2014 Feasibility Study contemplates average annual production for the first eight years of 504,000 ounces of gold and for the 18 year life of mine 404,000 ounces of gold, an estimated capital cost, including contingencies, of US$746.9 million and an average processing rate of 2,700 tonnes/day with operating costs of C$163.05 per tonne milled.
  The 2014 Feasibility Studyis based on the 2013 Mineral Resource estimates for the Valley of the Kings and the West Zone (see “Resource Estimate” below).
  Economic Evaluation
  A summary of financial outcomes using three metal price scenarios, including spot metals prices at the time of completion of the 2014 Feasibility Study, is presented below:
  Table 1: Summary of Brucejack High-Grade Economic Results by Metal Price
  Low Case
Base Case
High CaseGold Price (US$/ounce)
$800
$1,100
$1,400Silver Price (US$/ounce)
$15.00
$17.00
$21.00Net Cash Flow(US$)
$2.02 billion (pre-tax)

$1.34 billion (post-tax)
$4.16 billion (pre-tax)

$2.72 billion (post-tax)
$6.35 billion (pre-tax)

$4.13 billion (post-tax)Net Present Value(1)

(5.0% discount) (US$)
$985 million (pre-tax)

$620 million (post-tax)
$2.25 billion (pre-tax)

$1.45 billion (post-tax)
$3.54 billion (pre-tax)

$2.28 billion (post-tax)Internal Rate of Return
20.3% (pre-tax)

16.5% (post-tax)
34.7% (pre-tax)

28.5% (post-tax)
47%(pre-tax)

38.7% (post-tax)Payback(from start of production period)
4.4 years (pre-tax)

4.5 years (post-tax)
2.7 years (pre-tax)

2.8 years (post-tax)
2.0 years (pre-tax)

2.1 years (post-tax)Exchange Rate (US$:C$)
0.92
0.92
0.92
 (1)NPV is discounted to July 2014.
 
 4
 
 Project Mineral Reserves
  The Mineral Reserves resulting from the 2014 Feasibility Study for the Brucejack Project are based on the 2013 Mineral Resource estimates for the Valley of the Kings and the West Zone. The Mineral Reserve estimates by zone and Reserve category are summarized below.
  Table 2: Valley of the Kings Mineral Reserve Estimate(2)(3) – June 2014
  Category
Tonnes

(millions)
Gold

(g/t)
Silver

(g/t)
ContainedGold

(million oz)
Silver

(million oz)Proven
2.1
15.6
12
1.1
0.8Probable
11.5
15.7
10
5.8
3.9Total P&P
13.6
15.7
11
6.9
4.6
 (2)Rounding of some figures may lead to minor discrepancies in totals
 (3)Based on C$180/t cutoff grade, US$1,100/oz Au price, US$17/oz Ag price, C$/US$ exchange rate = 0.92
  Table 3: West Zone Mineral Reserve Estimate(4) – June 2014
  Category
Tonnes

(millions)
Gold

(g/t)
Silver

(g/t)
ContainedGold

(million oz)
Silver

(million oz)Proven
1.4
7.2
383
0.3
17.4Probable
1.5
6.5
181
0.3
8.6Total P&P
2.9
6.9
279
0.6
26.0
 (4)See notes (2) and (3) to Table 2 above..
  Mining and Processing
  The Brucejack Project is planned as a high-grade underground mining operation using a long-hole stoping mining method and cemented paste backfill. The Valley of the Kings, the higher-grade, primary targeted deposit, will be developed first; the lower-grade West Zone will be developed in the second half of the Project’s 18-year mine life. The mine is planned to operate with a processing rate of 2,700 tonnes per day and mine a total of 16.5 million tonnes of ore for the 18 years at an average mill feed grade of 14.1 grams gold per tonne.
  Mineral processing will involve conventional sulphide flotation and gravity concentration, producing gold-silver doré and gold-silver flotation concentrate. Metallurgical recoveries for the Valley of the Kings are projected to be 96.9% for gold and 84.7% for silver, and for the West Zone 95.1% for gold and 91.0% for silver. A total of 7.27 million ounces of gold and 27.63 million ounces of silver is estimated to be produced over the life of the Brucejack Project, including the gold and silver recovered into the flotation concentrate. The Brucejack Project’s projected production and processing is summarized in Table 4 below.
 
 5
 
 Table 4: Brucejack Project Total Mine Projected Production and Processing Summary(5)
  Year
Tonnage

(t)
Gold grade

(g/t)
Silver grade

(g/t)
Gold Production

(‘000 ounces)
Silver

Production

(‘000 ounces)1
839,000(6)
15.4
11.7
403
2682
995,000
15.2
11.7
470
3183
995,000
16.7
12.8
519
3494
984,000
15.9
9.9
488
2635
988,000
16.9
11.0
521
2966
999,000
17.5
10.6
545
2877
986,000
17.8
11.8
547
3198
996,000
17.5
11.7
542
3199
994,000
14.9
10.2
461
27610
987,000
15.5
11.2
476
302Years 11-18
6,788,000
11.0
124.5
2,303
24,630Life of Mine (Years 1-18)
16,550,000
14.1
57.7
7,274
27,626
 (5)Rounding of some figures may lead to minor discrepancies in totals.
 (6)Tonnage includes pre-production ore.
  Capital and Operating Costs
  The capital cost for the Brucejack Project is estimated at US$746.9 million, including a contingency of US$69 million. Capital costs are summarized in Table 5 below.
  Table 5: Capital Costs Summary
  (US$ million)Mine underground
179.5Mine site(7)
210.8Offsite Infrastructure
89.1Total Direct Costs
479.4Indirect Costs
127.5Owner’s Costs
71.0Contingency
69.0Total Capital Cost
746.9
 (7)Includes mine site, mine site process, mine site utilities, mine site facilities, tailings facilities, mine site temporary facilities and surface mobile equipment.
 
 6
 
 Average operating cost is estimated at C$163.05 per tonne milled. Operating costs are summarized in Table 6 below.
  Table 6: Operating Costs Summary
  (C$/tonne)Mining
91.34(8)Processing
19.69General & Administrative
30.87Surface Services and Others
21.15Total Operating Cost
163.05
 (8)LOM ore milled; if excluding the ore mined during preproduction, the estimated cost is C$91.78/t.
  All-In sustaining cash costs, which includeby-product cash costs, sustaining capital, exploration expense, and reclamation cost accretion are summarized in Table 7 below.
  Table 7: All-In Sustaining Cash Costs Life of Mine
  (US$ million)Total Cash Costs(9)
2,814.5Reclamation Cost Accretion
27.5Sustaining Capital Expenditure
320.6All-in Sustaining Cash Costs
3,162.6Gold Sales (ounces)
7,067All-in Sustaining Cash Costs per Ounce
US$448/ounce
 (9)Net of silver credits at Base Case silver price of $US17/ounce.
  2014 Exploration Program
  The 2014 exploration program at the Brucejack Project was focused on continuing resource definition in the Valley of the Kings with both surface and underground exploration.
  The 2014 surface drill program consisted of infill drilling, exploration drilling at depth and condemnation drilling. The infill drill program, comprising 5,818 meters in three holes including 14 wedge holes, was successful in confirming the grade and continuity of Indicated and Inferred gold mineralization in an area defined by the 2013 Mineral Resource estimate block model.
  The exploration drilling at depth, which consisted of four deep drill holes comprising 3,507 meters, was successful in confirming the continuity of gold mineralization in the Valley of the Kings below the area defined by the 2013 Mineral Resource estimate. Condemnation drilling for mine site infrastructure consisted of 25 drill holes comprising 2,679 meters.
  Underground exploration in the Valley of the Kings has continued to date with mapping and sampling coinciding with the advance of ramping and vent raise excavation. Underground drilling from the 1260 meter-level is expected to commence in the first half of 2015.
 7
 
 Resource Estimate
 
 On December 19, 2013, we announced an updated high-grade Mineral Resource estimate for the Valley of the Kings (see our news release of December 19, 2013). The resource estimate, which incorporated all drilling completed to December 2013 at the Valley of the Kings, was completed by Snowden Mining Industry Consultants. The Brucejack Project Mineral Resources Update Technical Report dated December 19, 2013wasfiled on SEDAR on February 2, 2014.
  High-grade gold resources in the Valley of the Kings (5.0 g/t gold-equivalent cut-off) total:
  ·
1.2 million ounces of gold in the Measured Mineral Resource category (2.0 million tonnes grading 19.3 grams of gold per tonne);
  ·
7.5 million ounces of gold in the Indicated Mineral Resource category (13.4 million tonnes grading 17.4 grams of gold per tonne); and
 
  ·
4.9 million ounces of gold in the Inferred Mineral Resource category (5.9 million tonnes grading 25.6 grams of gold per tonne).
 Snowfield Project
 The Snowfield Project borders the Brucejack Project to the north and is comprised of one mineral claim with an area of 1,267.43 hectares. Since we acquired the Snowfield Project in October 2010, we have continued to carry out environmental studies in conjunction with the Brucejack Project.
  During 2011, we focused on completing an updated mineral resource estimate for the project, examining alternatives for advancing the project and negotiating cooperation agreements with Seabridge Gold Inc. (“Seabridge”).
  Joint Snowfield/ KSM Engineering Studies
  We have entered into a confidentiality and cooperation agreement with Seabridge that, amongst other things, provides for the completion of an engineering study examining the economics of combining our Snowfield Project and Seabridge’s KSM Project as a single operation. The internal engineering study was finalized during the first quarter of 2012 and indicated that developing the KSM and Snowfield deposits together could produce better economics than developing KSM as a stand-alone project, although no property acquisition costs or allocation of initial KSM capital were considered.
  We have also entered into a mutual access agreement with Seabridge that (a) gives Seabridge access to our Snowfield Project and us access to Seabridge’s KSM Project for the stripping of overburden and (b) provides us with road access to the Brucejack and Snowfield Projects over Seabridge’s KSM Project lands.
  Snowfield represents a longer term gold opportunity for our shareholders. Although we do not have a development plan as yet for the Snowfield Project, we plan to continue to explore the area and have budgeted for additional environmental studies which will benefit both the Brucejack and Snowfield Projects.
  8
 
 Additional Claims
  Our contiguous claims, including the claims comprising the Brucejack and Snowfield Projects, total over 105,990 hectares, providing further exploration potential to supplement the value we are creating at Brucejack. A claim boundary map is available on our website.
  Results of Operations
  Our operations and business are not driven by seasonal trends, but rather the achievement of project milestones such as the achievement of various technical, environmental, socio-economic and legal objectives, including obtaining the necessary permits, completion of a final feasibility study, preparation of engineering designs, as well as receipt of financings to fund these objectives.
  We expect that the expenditures will be consistent in future periods, other than bonuses which are determined annually by the Board of Directors, subject to any material changes in exploration and development activities.
  Selected Financial Information
  Annual information
  Selected consolidated annual financial information for the years ended December 31, 2014, 2013 and 2012 are as follows (in $000’s):
  2014
2013
2012Total revenue
$Nil
$Nil
$NilLoss per share – basic and diluted
$0.11
$0.16
$0.17Loss and comprehensive loss
$12,445
$16,584
$15,243Total assets
$816,816
$726,261
$647,472Long-term liabilities
$24,308
$19,836
$10,780Cash dividends
$Nil
$Nil
$NilCash and cash equivalents
$34,495
$11,575
$28,992Mineral interests
$759,238
$696,790
$596,159
 
 
 9
 
 Quarterly information
  Selected consolidated financial information for this quarter and the preceding seven quarters is as follows (in $000’s):
  2014

Q4
2014

Q3
2014

Q2
2014

Q1
2013

Q4
2013

Q3
2013

Q2
2013

Q1Revenue
$Nil
$Nil
$Nil
$Nil
$Nil
$Nil
$Nil
$NilLoss per share

– basic and diluted
$0.02
$0.04
$0.03
$0.02
$0.04
$0.03
$0.04
$0.05Loss and

comprehensive loss
$2,094
$4,668
$3,306
$2,377
$5,006
$2,591
$4,256
$4,731Total assets
$816,816
$811,896
$749,142
$746,736
$726,261
$731,775
$702,571
$667,049Long-term liabilities
$24,308
$23,379
$20,303
$19,228
$19,836
$16,853
$15,943
$13,076Cash dividends
$Nil
$Nil
$Nil
$Nil
$Nil
$Nil
$Nil
$NilCash and cash equivalents
$34,495
$63,981
$19,739
$24,706
$11,575
$30,564
$33,312
$20,764Mineral interests
$759,238
$727,884
$709,284
$704,021
$696,790
$674,869
$645,878
$621,315
 
 Net loss and comprehensive loss for the year ended December 31, 2014 was $12,444,772 compared to a loss of $16,583,686 during the year ended December 31, 2013. The decrease is largely attributed to the decrease in share-based compensation and deferred income tax expense.
  During the year ended December 31, 2014, stock option expense decreased to $2,847,849 as compared to $5,431,093 during the year ended December 31, 2013. This is due mainly to the reduced number of options granted in 2014 and by the timing of stock option grants. We hire individuals with the required skills to advance our business and stock options may be granted to employees and consultants as part of their overall compensation. Depending on the nature of the awarded recipient’s role, we expense or capitalize to mineral interests the fair value of these stock option issuances over the vesting period.
  During the fourth quarter of 2014, we implemented a Restricted Share Unit Plan (the “RSU Plan”). Restricted Share Units issued under the RSU Plan (the “RSUs”) vest in tranches over a three-year period and are cash-settled immediately upon vesting. The accrued liability recognized for the RSUs during the year ended December 31, 2014 was $61,799 (2013 - $Nil) of which $27,028 (2013 - $Nil) was recorded to share-based compensation and $34,771 (2013 - $Nil) was capitalized to mineral interests.
  Investor relations and shareholder communication costs for the year ended December 31, 2014 were $1,105,584 as compared to $884,249 incurred for the year ended December 31, 2013. Investor relations and shareholder communication costs were mainly due to marketing and communication activities conducted within the investment community.
  
 10
 
 
 During the beginning of 2014, we acquired additional office space. This attributed to the majority of the increase in general and administrative costs of $1,137,268 for the year ended December 31, 2014 as compared to $871,696 for the year ended December 31, 2013.
  Professional fees were $983,068 for the year ended December 31, 2014 compared to $386,711 for the year ended December 31, 2013. We are currently engaged in two class action lawsuits filed against us in the Ontario Superior Court of Justice and the United States District Court for the Southern District of New York. For details on the class action lawsuits, please see “Commitments, Contingencies and Off-Balance Sheet Arrangements” below. As we have reached our deductible limit with our insurers, future legal expenses associated with the class action lawsuits will be provided for in accordance with our insurance policy.
  During the year ended December 31, 2014, we recorded a deferred income tax expense of $4,196,241 as compared to a deferred income tax expense of $6,476,458 for the year ended December 31, 2013. The difference is related to the transfer of the tax base of mineral exploration expenditures to flow-through share investors.
  During the year ended December 31, 2014, some of our equity financings were denominated in US dollars. The majority of the foreign exchange gain of $343,728 (2013 - $Nil) is a result of the subsequent translation of the US dollar proceeds to Canadian dollars.
  We earned interest income on our cash balance for the year ended December 31, 2014 of $405,671 compared to $460,142 for the year ended December 31, 2013.
  Liquidity and Capital Resources
  Our cash and cash equivalents as at December 31, 2014 totaled $34,495,175 increasing $22,920,085 from $11,575,090 at December 31, 2013. To date, our source of funding has been the issuance of equity securities for cash.
  Our working capital as at December 31, 2014 was $33,770,270 as compared to $11,218,540 as at December 31, 2013.
  Working capital items other than cash and cash equivalents consisted of receivables and other of $12,551,947 (2013- $8,029,053) and accounts payable and accrued liabilities of $13,276,852 (2013 - $8,385,603). Receivables and other is comprised primarily of $513,706 (2013 - $Nil) accrued for gold sales receivable, $1,651,138 (2013 - $1,206,485) of Goods and Services Tax refunds, and $9,739,990 (2013 - $6,800,690) accrued for BC Mineral Exploration Tax Credits receivable from the Province of BC.
  On March 6, 2014, we completed a private placement of 568,182 Investment Tax Credit flow-through common shares at a price of $8.80 per flow-through share and 1,953,467 Canadian Exploration Expense (“CEE”) flow-through common shares at a price of $8.05 per flow-through share for aggregate gross proceeds of approximately $20,725,410 (the Flow-Through Offerings”). The agents in the Flow-Through Offerings were granted an over-allotment option and as such, on March 11, 2014, we issued an additional 34,112 CEE flow-through common shares and on March 20, 2014 we issued an additional 869,566 CEE flow-through common shares at a price of $8.05 per flow-through share. Total gross proceeds from the over-allotment option totaled approximately $7,274,608.
  11
 
 On July 29, 2014, we completed a marketed offering of 8,280,000 common shares at a price of US$7.25 per share. We received gross proceeds of US$49,524,750 for the sale of 6,831,000 common shares. The remaining 1,449,000 common shares were sold by Silver Standard Resources Inc. (“Silver Standard”) in a secondary offering pursuant to its existing registration rights to participate in offerings of our securities in an amount equal to the total number of common shares being offered multiplied by their current ownership percentage. On August 15, 2014, we completed the over-allotment option of 1,242,000 common shares at a price of US$7.25 per share pursuant to the marketed offering that completed on July 29, 2014 and we received gross proceeds of approximately US$7,400,000 for the sale of 1,024,650 additional shares. The remaining 217,350 additional shares were sold by Silver Standard. On August 15, 2014, we also completed a private placement of 496,054 common shares at a price of US$7.25 per share for gross proceeds of approximately US$3,596,000 to a holder who wished to maintain their respective pro rata interest in the Company.
  On December 8, 2014, we announced the private placement of 12,836,826 common shares at a price of $6.30 per share to Zijin Mining Group., Ltd. (“Zijin”) for gross proceeds of approximately $80,872,004. This resulted in Zijin owning approximately 9.9% of our issued and outstanding shares. The Zijin private placement completed on January 16, 2015. Mr. Shaoyang Shen of Zijin was appointed to our Board of Directors pursuant to the terms of the subscription agreement dated December 8, 2014 which entitled Zijin to nominate one person.
  On December 11, 2014, we announced that we had agreed to enter into subscription agreements with certain shareholders who wished to maintain their respective pro rata interests in the Company in connection with the strategic investment by Zijin (the “Pro-Rata Private Placement”). The Pro-rata Private Placement completed on January 21, 2015. A total of 2,897,490 common shares were issued to subscribers at a price of $6.30 per share for gross proceeds of approximately $18,254,187.
  With our current working capital, we believe we will have sufficient capital to fund the continued permitting of the Brucejack Project, our environmental and engineering activities, as well as general corporate expenditures.
  Cash used in investing activities in the year ended December 31, 2014 was $59,341,789 (2013 - $98,238,263), which was incurred mainly in respect of exploration and evaluation activities at the Projects described under Operations above in the amount of $66,794,675 (2013 - $92,718,243). Exploration and evaluation activities included $19,779,073 in engineering and permitting costs, $8,534,955 in underground mining costs, $5,315,943 for temporary road and bridges, $6,782,553 in drilling, and $6,415,392 for fuel, equipment rental and transportation. Other investing activities included $1,929,859 (2013 - $5,451,020) to acquire exploration software and machinery. Investing activities for the year ended December 31, 2014 also included cash inflows from gold sales of $9,871,995 (2013 - $Nil).
  Development of any of our mineral properties will require additional equity and possibly debt financing. We are an exploration stage company and as such, we do not generate revenues from operations, except for proceeds from our exploration program gold sales. We rely on equity funding for our continuing financial liquidity. Our access to financing is always uncertain. There can be no assurance of continued access to significant equity funding.
  
 12
 
 
 Commitments, Contingencies and Off-Balance Sheet Arrangements
  Following the announcement on October 9, 2013 of the resignation of Strathcona Mineral Services Ltd. (“Strathcona”), the consultant responsible for overseeing and reporting on the 10,000-tonne bulk sample, and the announcement of Strathcona’s reasons for resigning on October 22, 2013, the price of our shares on the TSX and the NYSE had a significant drop in value.
  Canadian Class Actions
  We are aware of two proposed class actions filed against us and certain of our officers and directors in the Ontario Superior Court of Justice: the first on October 29, 2013 by David Wong (the “Wong Action”) and the second on November 1, 2013 by Roksana Tahzibi (the “Tahzibi Action”)(collectively, the “Ontario Actions”). The plaintiffs seek certification of a class action on behalf of a class of persons, wherever they reside, who acquired our securities. In the Wong Action, the class period is between November 22, 2012 and October 22, 2013. In the Tahzibi Action, the class period is between July 23, 2013 and October 21, 2013.
  The plaintiffs allege that certain of our continuous disclosure documents filed in Canada contained material misrepresentations or omissions regarding our Brucejack Project, including statements with respect to probable mineral reserves and future gold production at Brucejack, and failed to communicate alleged information from Strathcona. The plaintiffs allege these misrepresentations and omissions are actionable as negligent misrepresentations or misrepresentations under various provincial Securities Acts. The plaintiffs seek general damages of $60 million (in the Wong Action) and $250 million (in the Tahzibi Action) as well as pre- and post-judgment interest and costs.
  There have been no further steps in the Ontario Actions. The Company believes that the allegations made against it in Ontario Actions are meritless and will vigorously defend them, although no assurance can be given with respect to the ultimate outcome of the Ontario Actions.
  United States of America Class Actions
  Between October 25, 2013 and November 18, 2013, five putative class action complaints were filed in the United States against us and certain of our officers and directors, alleging that we violated the United States securities laws by misrepresenting or failing to disclose material information concerning the Brucejack Project. All five actions were filed in the United States District Court for the Southern District of New York.
  In January 2014, the Court ordered that these actions be consolidated into a single action, styled In re Pretium Resources Inc. Securities Litigation, Case No. 13-CV-7552. The Court has appointed as lead plaintiffs in the consolidated action three individuals who are suing on behalf of a putative class of shareholders who purchased our shares between June 11, 2013 and October 22, 2013.
  In March 2014, the plaintiffs filed a consolidated amended class action complaint, which we moved to dismiss in May 2014. In July 2014, the plaintiffs filed a second consolidated amended class action complaint (“Second Amended Complaint”). We moved to dismiss the Second Amended Complaint on September 5, 2014. The plaintiffs filed their Opposition to our Motion to Dismiss on October 20, 2014 and we filed our reply brief on November 19, 2014. The Court has not yet issued a decision on the motion.
  
 13
 
 
 We believe the allegations made against us in these actions are meritless and will vigorously defend the matter, although no assurance can be given with respect to the ultimate outcome of such proceedings.
  In general, litigation claims can be expensive and time consuming to bring or defend and could result in settlements or damages that could significantly affect our financial position. We intend to contest any such litigation claims to the extent of any available defenses. However, it is not possible to predict the final outcome of any current litigation or additional litigation to which we may become party to in the future, and the impact of any such litigation on our business, results of operations and financial condition, could be material.
  We have no material long term debt, capital lease obligations, operating leases or any other long term obligations, other than a commitment for office lease and operating costs that require minimum payments.
  Related Party Transactions
  We have entered into employment agreements with each of our President and CEO (the (“CEO”), our Chief Development Officer and Executive Vice President (the “CDO”), our Chief Exploration Officer and Vice President (the “CExO”) and our Chief Operating Officer and Vice President (the “COO”). Under the employment agreements as of December 31, 2014, our CEO received a base salary of $450,000 per year, benefits and an annual performance bonus of 0.25% of the annual increase in our market capitalization, provided the increase in market capitalization is 10% or more; our CDO received a base salary of $350,000 per year, benefits and an annual bonus determined at the discretion of our Board; and our CExO and COO each received a base salary of $325,000 per year, benefits and an annual bonus determined at the discretion of our Board. Our CEO, CDO, CExO, and COO are also entitled, on termination without cause, to twenty-four months’ salary and twice the average annual performance bonus earned in the three years immediately preceding termination.
  Critical Accounting Estimates and Judgments
  Our significant accounting policies are presented in Note 3 to the consolidated financial statements for the year ended December 31, 2014. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. The consolidated financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the consolidated financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which an estimate is revised and future periods if the revision affects both current and future periods.
  
 14
 
 
 Significant judgments about the future and other sources of estimation uncertainty at the financial position reporting date, that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made include, but are not limited to, the following:
  1) Impairment assessment
  The application of our accounting policy for impairment of mineral interests requires judgment to determine whether indicators of impairment exist including factors such as, the period for which the Company has the right to explore, expected renewals of exploration rights, whether substantive expenditures on further exploration and evaluation of resource properties are budgeted and results of exploration and evaluation activates on the exploration and evaluation assets.
  Management has assessed for impairment indicators on the Company’s mineral interests and has concluded that no impairment indicators existed as of December 31, 2014.
  2) Determination of commercial viability and technical feasibility of the Brucejack Project
  The application of our accounting policy for exploration and evaluation expenditures requires judgment to determine whether technical feasibility and commercial viability of the Brucejack Project is demonstrable. We considered the application status of key environmental permits and concluded that capitalized expenditure related to the Brucejack Project are appropriately classified as an exploration and evaluation asset.
  Financial Instruments and Other Instruments
  Financial assets:
  We have the following financial assets: cash and cash equivalents, amounts receivable and restricted cash.
  Such financial assets have fixed or determinable payments that are not quoted in an active market. Accordingly, they are measured at amortized cost using the effective interest method less any impairment losses.
  Financial liabilities:
  We have the following financial liabilities: amounts payable and other liabilities.
  Such financial liabilities are recognized initially at fair value net of any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective interest method.
  
 15
 
 
 Financial Risk Management
  We are exposed in varying degrees to a variety of financial instrument related risks. Our Board approves and monitors the risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:
  Credit Risk
  Credit risk is our risk of potential loss if the counterparty to a financial instrument fails to meet its contractual obligations. Our credit risk is primarily attributable to our liquid financial assets including cash and cash equivalents and restricted cash as well as the collectability of gold sales receivable. We limit our exposure to credit risk on financial assets by investing our cash and cash equivalents with financial institutions of high credit quality. We manage the credit risk on our gold sales by requiring provisional payments upfront between 75% - 90% of the value of the concentrate shipped and through utilizing multiple counterparties.
  The carrying value of our cash and cash equivalents, restricted cash and gold sales receivable represent our maximum exposure to credit risk.
  Liquidity Risk
  Liquidity risk is the risk that we will not be able to meet our financial obligations as they fall due. We ensure that there is sufficient capital in order to meet short term business requirements, after taking into account cash flows from operations and our holdings of cash and cash equivalents. Our cash and cash equivalents are currently invested in business and savings accounts with financial institutions of high credit quality which are available on demand by us for our programs.
  Interest Rate Risk
  We are subject to interest rate risk with respect to our investments in cash and cash equivalents and restricted cash. Our current policy is to invest cash at floating rates of interest and cash reserves are to be maintained in cash and cash equivalents in order to maintain liquidity, while achieving a satisfactory return for shareholders. Fluctuations in interest rates when cash and cash equivalents mature impact interest income earned.
  Capital Management
  Our objectives in the managing of the liquidity and capital are to safeguard our ability to continue as a going concern and provide financial capacity to meet our strategic objectives. Our capital structure consists of equity attributable to common shareholders, comprised of issued share capital, contributed surplus, accumulated comprehensive loss and accumulated deficit.
  We manage our capital structure and make adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, we may attempt to issue new shares, issue new debt, and acquire or dispose of assets to facilitate the management of our capital requirements. We prepare annual expenditure budgets that are updated as necessary depending upon various factors, including successful capital deployment and general industry conditions. The annual and updated budgets are approved by the Board of Directors.
  As at December 31, 2014, we do not have any long-term debt and are not subject to any externally imposed capital requirements. With our current working capital, we believe we still have sufficient capital to fund the continued permitting of the Brucejack Project, our environmental and engineering activities, as well as general corporate expenditures.
 
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 Outstanding Share Data
  At March 3, 2015, we had the following common shares and share purchase options outstanding.
  Number of securities
Exercise price

($)
Weighted Average

Remaining Life (years)Common shares
132,562,397Share purchase options
11,911,950
$5.85 - $17.46
2.32Fully diluted
144,474,347
 
 Risks and Uncertainties
  Natural resources exploration and development involves a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties include, without limitation, the risks discussed elsewhere in this MD&A and those identified in our Annual Information Form dated March 31, 2014 and filed on SEDAR, which are incorporated by reference in this MD&A.
  Internal Control over Financial Reporting and Disclosure Controls and Procedures
  Internal Control over Financial Reporting
  Management is responsible for establishing and maintaining adequate internal controls over financial reporting. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. There has been no change in our internal control over financial reporting during the year ended December 31, 2014 that has materially affected, or is reasonably likely to affect our internal control over financial reporting.
  Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (1992). Based upon our assessment and those criteria, management concluded that our internal control over financial reporting was effective as of December 31, 2014.
  Disclosure Controls and Procedures
  Management assessed the effectiveness of our disclosure controls and procedures as of December 31, 2014. Based upon the results of that evaluation, management concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information disclosed by us in the reports that we file were appropriately recorded, processed, summarized and reported to allow timely decisions regarding required disclosure.
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 Statement Regarding Forward-Looking Information
  In connection with the forward-looking statements contained in this MD&A, we have made certain assumptions about our business, including about our planned exploration and development activities; the accuracy of our mineral resource estimates; capital and operating cost estimates; production and processing estimates; the results, costs and timing of future exploration and drilling; timelines and similar statements relating to the economic viability of the Brucejack Project; timing and receipt of approvals, consents and permits under applicable legislation; and the adequacy of our financial resources. We have also assumed that no significant events occur outside of our normal course of business. Although we believe that the assumptions inherent in the forward-looking statements are reasonable as of the date of this MD&A, forward-looking statements are not guarantees of future performance and, accordingly, undue reliance should not be put on such statements due to the inherent uncertainty therein.
  This MD&A contains ‘‘forward-looking information’’ and ‘‘forward looking statements’’ within the meaning of applicable Canadian and United States securities legislation.
  Forward-looking information may include, but is not limited to, risks related to information with respect to our planned exploration and development activities, the adequacy of our financial resources, the estimation of mineral resources and reserves, realization of mineral resource and reserve estimates, timing of development of the Brucejack Project, costs and timing of future exploration, results of future exploration and drilling, production and processing estimates, capital and operating cost estimates, timelines and similar statements relating to the economic viability of the Brucejack Project, timing and receipt of approvals, consents and permits under applicable legislation, our executive compensation approach and practice, and adequacy of financial resources. Wherever possible, words such as ‘‘plans’’, ‘‘expects’’, ‘‘projects’’, ‘‘assumes’’, ‘‘budget’’, ‘‘strategy’’, ‘‘scheduled’’, ‘‘estimates’’, ‘‘forecasts’’, ‘‘anticipates’’, ‘‘believes’’, ‘‘intends’’ and similar expressions or statements that certain actions, events or results ‘‘may’’, ‘‘could’’, ‘‘would’’, ‘‘might’’ or ‘‘will’’ be taken, occur or be achieved, or the negative forms of any of these terms and similar expressions, have been used to identify forward-looking statements and information.
  Statements concerning mineral resource estimates may also be deemed to constitute forward-looking information to the extent that they involve estimates of the mineralization that will be encountered if the property is developed. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance are not statements of historical fact and may be forward-looking information. Forward-looking information is subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those expressed or implied by the forward-looking information, including, without limitation, risks related to:
  ·
uncertainty as to the outcome of legal proceedings including certain class action proceedings in the U.S. and Canada;
  ·
the exploration, development and operation of a mine or mine property, including the potential for undisclosed liabilities on our mineral projects;
  ·
the fact that we are a relatively new company with no mineral properties in production or development and no history of production or revenue;
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  ·
our ability to obtain adequate financing for our planned exploration and development activities and to complete further exploration programs;
  ·
dependency on the Brucejack Project for our future operating revenue;
  ·
our mineral resource estimates, including accuracy thereof and our ability to upgrade such mineral resource estimates and establish mineral reserve estimates;
  ·
uncertainties relating to the interpretation of drill results and the geology, grade and continuity of our mineral deposits;
  ·
commodity price fluctuations, including gold price volatility;
  ·
our history of negative operating cash flow, incurred losses and accumulated deficit;
  ·
market events and general economic conditions;
  ·
the inherent risk in the mining industry;
  ·
the commercial viability of our current and any acquired mineral rights;
  ·
availability of suitable infrastructure or damage to existing infrastructure;
  ·
governmental regulations, including environmental regulations;
  ·
delay in obtaining or failure to obtain required permits, or non-compliance with permits that are obtained;
  ·
increased costs and restrictions on operations due to compliance with environmental laws and regulations;
  ·
compliance with emerging climate change regulation;
  ·
adequate internal control over financial reporting;
  ·
increased costs of complying with the Dodd-Frank Act;
  ·
potential opposition from non-governmental organizations;
  ·
uncertainty regarding unsettled First Nations rights and title in British Columbia;
  ·
uncertainties related to title to our mineral properties and surface rights;
  ·
land reclamation requirements;
  ·
our ability to identify and successfully integrate any material properties we acquire;
  ·
uncertainties related to title to our mineral properties and surface rights;
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 ·
currency fluctuations;
  ·
increased costs affecting the mining industry;
  ·
increased competition in the mining industry for properties, qualified personnel and management;
  ·
our ability to attract and retain qualified management;
  ·
some of our directors’ and officers’ involvement with other natural resource companies;
  ·
potential inability to attract development partners or our ability to identify attractive acquisitions;
  ·
potential liabilities associated with our acquisition of material properties;
  ·
our ability to comply with foreign corrupt practices regulations and anti-bribery laws;
  ·
changes to relevant legislation, accounting practices or increasing insurance costs;
  ·
our anti-takeover provisions could discourage potentially beneficial third party takeover offers;
  ·
significant growth could place a strain on our management systems;
  ·
share ownership by our significant shareholders, their ability to influence our governance and possible market overhang;
  ·
there is no market for our securities other than our common shares;
  ·
the trading price of our common shares is subject to volatility due to market conditions;
  ·
future sales or issuance of our equity securities;
  ·
certain actions under U.S. federal securities laws may be unenforceable;
  ·
if we raise debt securities, they will be unsecured and will rank equally with other unsecured debt;
  ·
our broad discretion relating to the use of proceeds from financings;
  ·
we do not intend to pay dividends in the near future; and
  ·
our being treated as a passive foreign investment company for U.S. federal income tax purposes.
  
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 This list is not exhaustive of the factors that may affect any of our forward-looking statements. Although we have attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Forward-looking statements involve statements about the future and is inherently uncertain, and our actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to in our Annual Information Form dated March 31, 2014 as well as those referred to in our Short Form Base Shelf Prospectus dated July 16, 2014, both of which are filed on SEDAR and in the United States on Form 40-F through EDGAR at the SEC’s website at www.sec.gov.
  Our forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made. In connection with the forward-looking statements contained in this prospectus, we have made certain assumptions about our business, including about our planned exploration and development activities; the accuracy of our mineral resource estimates; capital and operating cost estimates; production and processing estimates; the results, costs and timing of future exploration and drilling; timelines and similar statements relating to the economic viability of the Brucejack Project; timing and receipt of approvals, consents and permits under applicable legislation; and the adequacy of our financial resources. We have also assumed that no significant events will occur outside of our normal course of business. Although we believe that the assumptions inherent in the forward-looking statements are reasonable as of the date hereof, forward-looking statements are not guarantees of future performance due to the inherent uncertainty therein. We do not assume any obligation to update forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by applicable law. For the reasons set forth above, prospective investors should not place undue reliance on forward-looking statements.
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