Investors are placing a strong short position on Pretivm Resources Inc. (TSX: PVG) after the company released news on February 12, 2020 ‘Pretivm Reports 2019 Results, Production Outlook and Leadership Transition Plan’ that their total 2019 gold production was 354,405 ounces and the outlook for their Brucejack Mine for 2020 is expected to be in a similar range of 325,000 to 365,000 ounces.

Why is this so disappointing? 

Because this preliminary updated production outlook (the “Preliminary Production Outlook”) supersedes the previously published April 2019 Valley of the Kings Life of Mine average annual gold production estimate of approximately 525,000 ounces as announced in their April 4, 2019 press release ‘Pretivm Resources Inc: Continued Robust Economics of Brucejack Mine Confirmed with updated Mineral Reserve and Resource, 14 year Mine Plan’. The press release clearly states below the title that ‘Brucejack is expected to produce an average of over 525,000 ounces of gold annually over the first 10 years at all-in sustaining cost of $535 per ounce.’

Following that news in April 2019, the stock shot up approximately $2 from mid $8 to mid $10 and continued to climb along with rising gold prices throughout 2019. 

 

 

However, this recent announcement adds more pressure to the already falling stock which released a press release on October 30, 2019 ‘Pretivm Reports Third Quarter 2019 Operating and Financial Results’ which demonstrated that the mine wasn’t performing outputs that aligned with average annual gold production estimate.

Joseph Ovsenek, President & CEO of Pretivm. “During the third quarter, we continued to focus on opening up the mine while increasing grade to the mill. Pursuing both objectives simultaneously while stope inventory was constrained proved to be more challenging than anticipated, and we ended the quarter with gold production below our own expectations. As a result of limited stope inventory, we now expect that the fourth quarter will be consistent with the third quarter and have adjusted our full-year 2019 production guidance to between 340,000 to 350,000 ounces of gold production, an approximate 15% decrease from the midpoint of our prior production guidance range of 390,000 to 420,000 ounces of gold sold.”

It was already clear that Pretivm wasn’t going to produce as much gold as expected and, this February’s news demonstrates those expectations continue to decline.

Since the release of the February 12, 2020 results, investor chatter has been buzzing online with disappointing commentary of a once high growth story which will now produce around 40% less gold annually than anticipated. 

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I was hit hard on Pretium $PVG today.
Originally, a high growth story with a guidance of +500Koz production a year with AISC < 700 USD/oz.
Now, the outlook has dimmed to 350Koz a year with AISC at 850 (985 for 2020 due to extraordinaries) due to inconsistent gold grades.

— Kristoffer Nørgaard (@lillepenis) February 12, 2020

Resource calculation is difficult and engineering firms can make errors and this is exactly what we are seeing with Pretivm Resources Inc. whose placing the blame on their CEO; “Pretium’s Board of Directors has initiated an external search for a new President and CEO. Joseph Ovsenek has agreed to continue to serve as President & CEO while the search is underway.

Furthermore, the Company is providing preliminary guidance for post-2020 gold production in the Valley of the Kings which are expected to be disclosed by March 31, 2020 however, it is evident that investors are placing their bets against the company.

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