Seeking Alpha

Pretium Resources is a likely takeover candidate, CIBC says

  • Pretium Resources (PVG) is a logical takeover candidate in the next 12-18 months due to the promising outlook for its Brucejack project, CIBC analyst Jeff Killeen says.
  • Even using a lower operating rate than company projections, CIBC thinks Brucejack could produce 300K-plus oz./year of gold, which would provide meaningful production growth to a range of producers; "bottom line is that we believe the scarcity value of high-grade development projects like Brucejack garner higher acquisition multiples, which value the underlying project at or near intrinsic value."
  • Killeen thinks PVG could attract a multiple of ~1x NAV, and raises his share price target to $11.50 from $9.50.
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Comments (5)
  • 6151621
    , contributor
    Comments (1180) | Send Message
     
    If the price target would be acquisition price, then I'd vote against it unless they spiced up the offer somehow. A couple years ago when the project was much further for being de-risked (as it now is) people paid $18/share. (That's not me as I got in on the flush out in late October/ early November. Let's see some euphoria in an offer, then I'll gladly vote to sell.)
    28 Jun 2014, 01:17 AM Reply Like
  • goldminer01
    , contributor
    Comments (135) | Send Message
     
    Agreed takeover price is higher than this $11.50 target.
    The target will be reached based on continued positive on going drilling results next 4 months to September coupled with PoG > $1400/1436.

     

    I think from there interest will develop from GG et al.
    So a 50 % premium to $11.50 provides a takeover price of roughly $18 -- as you mentioned a previous peak which lacked support from tons of positive drilling results (Bulk Sample) at roughly the same level of the price of gold. $1400-1550
    28 Jun 2014, 04:59 PM Reply Like
  • goldminer01
    , contributor
    Comments (135) | Send Message
     
    Let's compare to Newmont's takeover of Fronteer Gold on February 3, 2011. Fronteer had 4.2M ozs measured and indicated at 2.3 g/T. Takeover price was $2.3B. So that is like $500/oz for 2.3 grams per ton. By the way PoG was $1340 at the time of this deal... just 2 % higher than today's $1318 close. Are you still with me ?

     

    Now PVG has 50 % more gold and the grade is like 6X higher. Apples to apples gives you a PVG takeover valuation of like $5B or $44 per share. Too much since the majors no longer spend like drunken sailors, right ? Okay, how about just $ 300 per oz for these 15.6 g/T ozs (not just 2.3 g/T) plus how about $5 /oz for Snowfield with gold at $1445.

     

    Now we are looking at $2.3B or $18-20 per share. For just 1 bidder, if there are 2 or more expect $22-24 per share. Gold price $1450-1550 end of the year.
    28 Jun 2014, 05:18 PM Reply Like
  • goldminer01
    , contributor
    Comments (135) | Send Message
     
    If PVG decides to go it alone then expect earnings of $1.75-2.00 (heavily diluted) share in first years of the mine production. Give that a 10X multiple if gold is sitting at $1550 or 15X at gold $1800-2100 in late 2017
    28 Jun 2014, 08:09 PM Reply Like
  • 6151621
    , contributor
    Comments (1180) | Send Message
     
    @goldminer: definitely significant dilution esp. in the current market if they do it themselves so I agree with heavily d...!
    29 Jun 2014, 03:34 AM Reply Like
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