Following a month in which the stock sank 11%, shares of Pretium Resources (PVG) not only bounced back but soared 19% in the month of December, according to data from S&P Global Market Intelligence. Although the market's overall volatility and the 5% rise in the price of gold helped to lift shares of the intermediate gold producer, the company's announcements regarding exploration activities and the Brucejack mine were surely the greater catalysts for the stock's uptick last month.
Check out the latest Pretium earnings call transcript.
Early in the month, Pretium provided updates on various exploration activities. For one, the company announced that a drill program is scheduled for 2019 at Valley of the Kings, where it seeks "to expand the current mineral resource and reserve to the east and at depth and to improve resource definition ahead of mining." In addition, Pretium reported that drilling activities at the Bowser Claims confirm the presence of "high-grade gold mineralization ... highlighting the potential for discovery of porphyry-related copper-gold mineralization and high-level epithermal mineralization on the property."
A week later, Pretium announced that it had received amended permits to increase production at the Brucejack mine located in northern British Columbia. The amended permits allow for Pretium to increase production approximately 40% from an annual rate of 0.99 million tonnes to 1.387 million tonnes.
According to management, minor mill upgrades are required in order for the company to achieve the increased production rates. Expected to cost less than $25 million, the upgrades will be performed during regularly scheduled mill shutdowns.
A cursory glance at Pretium's announcements last month would suggest that the company's organic growth opportunities -- from exploration activities to increased production at Brucejack -- are positioning the company well for future growth, but investors would be well served to pump the brakes before becoming blinded by the company's glittering prospects. For one, the company has a short history of operating the Brucejack mine, the company's principal asset; first gold was poured in June 2017. Moreover, Viceroy Research Group issued a short-seller's report in September, raising numerous issues that cast doubt on the value of the Brucejack mine. Viceroy's skepticism regarding the gold producer is so great, in fact, that it concludes that "the most likely scenario is that Pretium's assets are seized by its secured creditors as collateral."
Moving forward, investors interested in Pretium should monitor the company's ability to generate cash and service its debt -- a major concern raised by Viceroy. Secondly, investors would be wise to watch for how well management executes the mill upgrades at Brucejack, keeping the project under the $25 million budget.