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Pretium shares up on solid Q2

Canada-focused Pretium Resources shares jumped nearly 40% in New York on Thursday after it reported strong financial results.
Pretium shares up on solid Q2 Pretium shares up on solid Q2 Pretium shares up on solid Q2 Pretium shares up on solid Q2 Pretium shares up on solid Q2

Pretium Resources has reported stable operating results from Brucejack in British Columbia

However, questions linger on the operational front about whether the flagship Brucejack mine, in British Columbia, has truly turned a corner.

June-quarter headline earnings for the Vancouver-based producer nearly trebled to US26c, up from 9c in the comparable quarter of 2019, and beating consensus estimates for 11c. The bottom line benefitted from higher metal sales and prices.

Revenue increased nearly 50% to $166.6 million on the sale of 96,047oz gold and 83,642oz silver, compared with 85,953oz and 104,442oz in the year-earlier period, up 12% and down 20%, respectively.

Realised gold prices gained 32% year-on-year to $1,738/oz.

The company said all-in sustaining costs came in at $911 for the quarter, down 3% year-on-year and mainly the function of more ounces sold, offsetting higher cash costs.

CEO Jacques Perron said the first six months of the year saw Brucejack produce 173,307oz gold, generating $293.1 million in revenue and $124.6 million in free cash flow, topping management's full-year free cash flow target.

The company made use of the buoyant cash flow to reduce debt 23% to $382.8 million through the first half of the year.

Gold production, at 90,419oz, came in slightly lower than the year-earlier total, but the head grade remained steady at 8.9 grams per tonne while recoveries fell marginally - positives given the mine's troubled past. Silver by-product output fell 20% to 109,332oz.

Perron said the company was on track to achieve its full-year production guidance of 325,000-365,000oz if there were no significant new impacts from COVID-19 on the operation.

The company adjusted AISC slightly upwards to $960-$1,120/oz to reflect the continued focus on lateral development through year end, including added costs associated with the high-density reverse circulation drilling grade control programme and definition drilling to increase the volume of grade information required to enhance mine planning and optimise gold production.

Early in March, Pretium announced an updated mineral reserve, resource and life of mine plan for Brucejack, which, since commercial production was declared in July 2017, has proven difficult to model given its coarse gold nature.

The updated LOM plan is focused on mining the Valley of the Kings and West Zone to deliver average annual production of more than 366,000oz during the first five years, and average annual production of over 357,000oz over the first 10 years at an average AISC of $747/oz, and a LOM average of 311,000oz.

The updated Brucejack proven and probable reserve estimate is 15.7 million tonnes grading 8.4g/t for 4.2Moz at a lowered cut-off grade of 3.5g/t, which the company then said better resembled recently mined grades. This reflected a 33% grade reduction from the prior 12.6g/t grade and the loss of some 2.2Moz.

The more stable operating results to date suggest management indeed has a better handle on the deposit.

Before the quarterly report were published early on Thursday, shares in Pretium (Nasdaq:PVG) were lagging peers despite the strong metal price environment. In the year to date, shares were down about 10% prior to the results release, swinging into the black at $12.44 post release Thursday, for a 12% gain to date. Over the 12-month frame the stock is up only 5%.

Pretium has a market value of $2.3 billion.