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Pretium Resources: The Gold Price Is A Great Spice

May 06, 2020 8:05 AM ETNewcrest Mining Limited (NCMGF), NCM:CA6 Comments
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  • Revenues for the first quarter were $125.56 million, up from $103.12 million in 1Q'19, with a net profit of $6.24 million, or $0.03 per diluted share.
  • The Brucejack Mine produced 82,888 ounces of gold, and the company sold 80,460 ounces at an all-in sustaining cost of $996 per ounce of gold sold.
  • Investors must trade PVG short term, and bet only a small portion for the long term.
  • Looking for a helping hand in the market? Members of The Gold And Oil Corner get exclusive ideas and guidance to navigate any climate. Get started today »

Image: The Brucejack -Source: Mining

Investment Thesis

The Vancouver-based Pretium Resources (NYSE: PVG) released its first-quarter results, and I was not impressed with the gold production indicated. However, a record-high gold price is helping the company significantly.

It is the balance that we will have to evaluate regularly to be able to invest successfully in this miner. Another risk attached to the mine now is the effect of the COVID-19.

So far, the company has been able to avoid the spread of the virus at the mine site, but it is a serious risk that we cannot disregard. If the company is forced to put the mine on care and maintenance, then revenues will be hurt very fast, and the stock will drop quickly. It is a significant threat for this gold miner with an income based on only one asset like Pretium.

The Brucejack mine is a great mine that produces excellent free cash flow, but to be able to keep the present valuation, as it is now, the company needs a gold price well over $1,650 per ounce, in my opinion. Below that value, the stock will quickly drop to a much lower valuation estimated at around $6.50-$7.00.

Thus, the investment thesis is quite simple and has not changed for years. Investors must trade PVG short term, and bet only a small portion for the long term until investors can safely trust what will be produced and make a reliable long term prevision. Furthermore, investors will have to trade the stock in correlation with the gold price, which adds more short-term volatility and could accentuate the recent cratering effect or boost the share.

Note: Again, in this article, I will not comment on the Snowfield prospect that the company owns.

Pretium Resources - 1Q'20 Results and Financial

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This article was written by

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Fun Trading is a retired engineer and independent investor. In addition to writing on investing in all aspects of gold, oil, and gas, he runs his own portfolio..

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I trade short term PVG

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (6)


Good article, thanks on a thankless share. PVG is the textbook goldrush share - hit the roof in 2016 on 'fantastic reserves etc etc ' and has gone nowhere since, while much of the rest of the gold miners have themselves now gone through the roof. A good lesson as to why investing in individual mining stocks (even those based in super-safe Canada) can be such a risky business. As Perry Como once sang in his heyday 'Don't believe the hype'! Or even if you do, spread out the risk.
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@Norman Bates at Disneyland

Thank you for your comment on PVG. As you can see most of the dream is now gone in this miner stock. It was a time where the entire world was posting how great the stock will be in a few years... Now?
Not a bad stock anyway.
Indeed. At one stage, articles on PVG were getting 50+ comments (95% bullish and heavily criticising your advice to tread cautiously). Not a bad stock, but not as great a stock as people had assumed. I have traded a number of times but am currently sitting on the wrong side of $9.90 after the last collapse but one.

Meanwhile, gold miners refuse more than 2 down days (RGLD - previously at $68 - now $135!!!!). Despite Disney, Footlocker, Starbucks and (closed) casinos going up, people remain uncertain about the economy. Wall Street tells one thing, but people see another thing on the Local Street.
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@Norman Bates at Disneyland

We are slowly building a gold bubble. Just be smart to exit before it explodes...
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