In a Sept. 24 research note, analyst Andrew Kaip with BMO Capital Markets reported that Pretium Resources Inc. (PVG:TSX; PVG:NYSE) gave notice to buy back the entire 8% gold and silver stream at its Brucejack mine by Dec. 31, 2018, for US$237 million (US$237M), which is "net present value accretive" to the company. "With no mention of the offtake arrangement, it is assumed that it remains fully in place," he noted.
Kaip pointed out that also by that date, Pretium has a US$350M credit facility to pay, "with an option for extension to Dec. 31, 2019 on payment of 2.5% of the principal and accrued interest by Dec. 31, 2018." The company is considering a refinancing of the facility by year-end 2018. According to BMO, a new debt package is preferable to an issue of equity.
With payment of the two amounts, US$237M and US$350M, looming, Kaip noted, "we view the current dialogue surrounding refinancing as key for the successful repurchase" of the stream.
Kaip mentioned other news in his report. For one, Pretium management said the company should meet H2/18 production guidance, with greater output in Q4/18 than in Q3/18. The goal remains 200–220 thousand ounces of gold at an all-in sustaining cost of $710–770 per ounce.
Also, Pretium indicated it remains on track with ramping up production at Brucejack to 3.8 thousand tons per day (3.8 Ktpd) from 2.7 Ktpd, "with a decision expected later this year," wrote Kaip.
BMO Capital has an Outperform rating and a CA$17.50 per share target price on Pretium, which has a current stock price of around CA$10.506 per share.
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Disclosure:
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, Sept. 24, 2018
IMPORTANT DISCLOSURES
Analyst's Certification
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 my 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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