In a Sept. 5 research note, analyst Andrew Kaip reported that BMO Capital Markets raised its target price on Pretium Resources Inc. (PVG:TSX; PVG:NYSE) to CA$24 per share from CA$20 given that "we continue to see upside for shares of Pretium."
After BMO took Joe Ovsenek, CEO, and John Hayes, senior vice president of corporate development, through Toronto to meet with investors, Kaip wrote, "we sense investors are beginning to become more comfortable with the company's execution and are now more focused on future priorities such as upcoming catalysts."
In his report, Kaip summarized the highlights from management's comments.
1. As for H1/19 performance, Pretium is expected to increase production quarter over quarter and achieve its H1/19 guidance of 170,000 ounces (170 Koz) gold along with its 2019 guidance of 390–420 Koz.
2. By the end of September, Pretium must decide whether or not to buy back 75% of the gold sales offtake. Kaip indicated that "at current metal prices, it makes sense to spend the $60 million."
3. Pretium will continue to pay down debt throughout the rest of this year and next. Ovsenek said he'd like the company debt free.
4. Expansion plans to 3,800 tons per day (3.8 Ktpd) by year-end 2019 are on track. Only minor mill upgrades still need to be done. Kaip added that "permitting has opened the door to further expansion to 5 Ktpd."
5. By September's end, Pretium will finish a 70 kilometer infill drill program aimed at converting half of the Indicated resource to Measured. "We expect infill drilling to improve the quality of the resource and lead to a more robust reserve estimate," commented Kaip. Pretium will need to decide whether or not to revise the mine plan to encompass longitudinal hole stoping.
6. Starting in 2020, Pretium can start allocating $40 million toward a dividend or an NCIB, under the terms of the debt facility, and the leaning seems be toward a dividend.
BMO removed the Speculative component of its Outperform rating on Pretium, "given improved execution year to date," noted Kaip.
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1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures from BMO Capital Markets, Pretium Resources, September 5, 2019
I, Andrew Kaip, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of our compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from Pretium Resources.
Disclosure 6C: Pretium Resources is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: C) Non-Securities Related Services.
Disclosure 8A: BMO Capital Markets or an affiliate has a financial interest in 1% or more of any class of the equity securities of Pretium Resources.
Disclosure 16: A research analyst has extensively viewed the material operations of Pretium Resources.
Disclosure 17: Pretium Resources has paid or reimbursed some or all of the research analyst's travel expenses.
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