Despite a declining commodity, Pretium Resources Inc. (PVG, Financial)'s Brucejack high-grade gold deposit in British Columbia delivered a profitable third quarter of 2018, generating an adjusted net profit of $26.3 million or 14 cents per share from the production and sale of the yellow metal. The stock is therefore expected to soar on the stock market.
But let's see more details why.
The earnings growth of 75% year-over-year was backed by revenues of $110.06 million. The turnover sales grew over 55% from the comparable quarter of 2017 thanks to an impressive volume of gold placed on the market. The company sold 94,458 ounces of gold versus 55,413 ounces a year ago, while the average realized gold price decreased 8.7% to $1,169 per ounce.
Pretium sold a higher volume of metal because it produced more metal. The ore grading was 12.4 grams of gold per ton, which allowed Pretium Resources to achieve a remarkable quantity of 92,641 ounces of produced gold, reflecting a 12.7% increase from 2017.
On costs, the situation also improved as fixed expenses and charges were spread over a larger production base. Total cost of sales decreased 5.3% to $767 per ounce of gold sold, total cash cost went down 13.4% to $568 per ounce of gold sold and the all-in sustain cost declined 10% to $709 per ounce of gold sold.
With cash flow of $52.4 million generated, a 10.3% increase, Pretium Resources received another contribution to its cash balance, whcih reached $190 million at Sept. 30.
Looking ahead, Pretium Resources forecasted that production will range between 200,000 and 220,000 ounces of gold in the second half of 2018, and between 387,000 and 407,000 ounces in full-year 2018. Following the third-quarter production, the mining company should match its guidance range at least on its lower end.
The company said that it is on track to meet its guidance for the second-half of 2018 for all-in sustaining costs of $710 to $770 per ounce gold sold.
Since the Brucejack mine has reached a stable state of operations after the completion of ramp up, the shareholders of Pretium Resources can now expect a reduction in costs as the company will focus more on operational efficiency than other things.
Pretium Resources should obtain the refinancing of the construction credit facility shortly, as it secured a $480 million signed commitment letter from the banks at the beginning of October.
In addition, the miner will unlock future gold production worth more than $710 million after having relieved, with a $237 million investment, its Brucejack mine of the obligation to deliver an 8% gold and silver stream. The obligation consisted of delivering about 566,000 ounces of refined gold and about 2.1 million ounces of refined silver starting Jan. 1, 2020, over the entire life of operations at Brucejack. The asset has a mine life of 18 years.
Pretium Resources closed at $7.28 per share on Thursday. The share price has fallen 36% for the 52 weeks through Nov. 8 to below the 200-, 100- and 50-day simple moving average lines. The company has a market capitalization of about $1.33 billion.
The 14-day Relative Strength Indicator is 37, within a 20 to 80 range.
The price-book ratio is 1.55 versus an industry median of 1.74.
The recommendation rating is 2 out of 5, and the average target price is $13.66 per share.
Disclosure: I have no positions in any securities mentioned.
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Pretium Resources Falls Despite Impressive Production Results
Pretium Refinances $480 Million Credit Facility for Brucejack Mine
Pretium Resources Unlocks Future Gold Production of $710 Million
