Pretium Resources [stock_market_widget type="inline" template="generic" color="default" assets="PVG.TO" markup="(TSE: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] began 2019 on a sour note as investors probably decided to cash in on the spike in the company’s stock price in December last year. The junior gold and silver miner, however, has recovered since then and looks set to sustain its momentum going forward in light of its latest updates. Let’s take a closer look at the reasons why investors should be treating this gold prospect as a long-term play that’s capable of delivering strong upside.
Growing at a Terrific Pace
Pretium Resources produced 376,012 ounces of gold in 2018, a massive increase over the preceding year’s production of 152,484 ounces. Additionally, silver production shot up from 179,237 ounces in 2017 to 422,562 ounces last year.
Pretium’s production shot up last year thanks to higher grades and recoveries. The Vancouver-based company’s head grade increased from 9.4 grams per ton of gold in 2017 to 11.9 g/t last year. Additionally, its recoveries increased to 97.3% during the year from 96.2% in 2017.
The substantial increase in Pretium’s production was more than enough to offset the weak pricing environment experienced by the company last year. Its average realized gold price fell slightly to $1,231 an ounce, though that didn’t have much of a negative impact on the company’s margins. In fact, Pretium’s average realized cash margin per ounce of gold increased 9% annually last year despite lower pricing.
That’s because Pretium’s higher grades allowed it to keep costs under control. The company’s cash cost per ounce of gold fell nearly 9% in 2018 to $623, while all-in sustaining costs were down 10% to $764 an ounce. This isn’t surprising as a higher grade profile allows a gold miner to gain access to the ore relatively easily and reduces the costs involved. In all, the combination of improved production and lower costs helped Pretium deliver a profit of $36.6 million as compared to a loss of $16.4 million a year ago.
More Growth Ahead
Pretium expects gold production in the range of 390,000 to 420,000 ounces in 2019. The mid-point of that indicates a year over year increase of less than 8%, which isn’t as great as last year. The slower production growth will be a result of a slight decline in the head grade to 10.4 grams per ton. The lower grades will be driven by Pretium’s decision of “sequencing of stopes in the mine plan to achieve the development ramp up to the 3,800 tonnes per day production rate.”
The lower grades will also impact the company’s cost profile. Its all-in sustaining costs are expected to range between $775 per ounce and $875 per ounce this year, the mid-point of which is nearly 8% higher than in 2018. However, Pretium investors can still expect top and bottom line growth from the company thanks to an increase in average gold prices.
As it stands, the spot price of gold is at more than $1,300 an ounce in 2019 so far. Analysts expect the price to rise further, with Bank of America forecasting an average price of $1,350 an ounce this year. That should be enough to make up for the increase in the company costs, and also amplify Pretium’s top line growth given that its production is set to increase.
Pretium is on track to grow further in 2019 so nvestors should consider holding the stock for more upside.
