Pretium Resources Stock Can Deliver More Upside

The sharp spike in the price of gold has been a tailwind for Pretium Resources in recent months, with the stock now sitting pretty on gains of almost 50%. But Pretium’s rally isn’t solely dependent on the gold price spike, as the gold miner has been delivering impressive operational growth that’s allowing it to benefit from a favourable pricing environment.

That was evident from the company’s latest results that displayed a remarkable improvement in its operational metrics. Let’s take a closer look at how Pretium performed during the quarter and what lies in store for the company going forward.

Pretium Resources Is Progressing in the Right Direction

Pretium Resources beat Wall Street’s estimates comfortably in the second quarter of 2019. The company’s second-quarter revenue of $113 million was nearly $3 million higher than expectations, while its adjusted earnings of $0.09 per share bettered analysts’ expectations by two cents.

Now, the year-over-year comparisons at Pretium were not very favourable, but that didn’t deter investors from bidding the stock up as one of its mines is witnessing a successful production ramp.

In fact, second-quarter gold output at Pretium fell 18% annually and the average realized price of gold was also lower from the year-ago period. However, Pretium was still able to pay $65 million of its debt during the quarter thanks to the “robust economics” of the Brucejack mine, putting the company well on track to achieve its $140 million debt reduction target.

Also, Pretium says that it is firmly on track to meet its annual production target range of 390,000 to 420,000 ounces. In the first quarter of the year, the company produced just over 79,000 ounces of gold and followed it up with just over 90,000 ounces of production in the second quarter.

Now, Pretium says that it is advancing the mining rate to 3,800 tonnes per day as the year progresses from the current rate of 2,700 tonnes a day. As such, don’t be surprised to see the company eventually achieve a higher production rate by the end of the year and crack its production target.

The good part is that even if Pretium hits the lower end of its production range, it would be an improvement from the prior-year period’s output of just over 376,000 ounces of gold. This puts the company on track to take advantage of an improvement of the gold price rally.

Expect Solid Second-half Growth

Pretium Resources has not been enjoying high gold prices so far in 2019. In the second quarter, the company clocked an average realized price of $1,257 an ounce.

But as things stand, the spot price of gold is currently at more than $1,500 an ounce. If gold prices stay at this level, Pretium investors can expect a rise in the company’s average realized price in the second half of the year. As a result, the company will be able to deliver stronger top and bottom-line growth in 2019 thanks to a combination of higher prices and an improving production profile.

So investors should continue holding Pretium Resources stock as it is capable of delivering more upside.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Harsh Singh Chauhan
Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.

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