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2/8/18

Pretium (PVG): The IKN Weekly called the rebound

This short piece appeared in The IKN Weekly issue 455, out last Sunday evening. FWIW since this was published PVG is 4.2% up while the market benchmark GDX is down 5.3%. Just sayin'.

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Pretium (PVG) may be a near-term buy (but be careful longer-term)
Now down 40% since the news of last week which inspired the piece in IKN454 last weekend, Pretium (PVG) lost 13% last week and only half of that was the wider market bear, as the stock  underperformed the XAU benchmark by 6% (see right). So much for the rebound after weak hands, PVG has gone from market darling to utterly unloved in ten days flat.

Which, to contrarian despicable me, means it’s suddenly interesting again, of course. We now have a period in which PVG will be able to settle down, re-group and get its promo story back together and that’s likely to make it a trade in the near-term. We have the following as possible material moments:

1)     PDAC (and BMO just before it) on the way, no better place to tell your side of the story.
2)     Then in the second week of March we get PVG’s annual financials and they very likely to look good, at least at a superficial level, because there are around 30k oz of gold that were produced in 3q17 but not sold. Assuming PVG sells all its Q4 production plus those hang-back ounces, top line revenues should be pleasing on the eye.
3)     Next the 1q18 production numbers, out (most likely) the second week in April. I’d expect them to be good on the headline numbers, as PVG now has the option of papering over the cracks and (as noted last weekend in IKN454) high-grading other parts of its deposit to produce an out-sized production quarter (likely at the expense of future reserve ounces but hey, who’s counting?). As the debt load is the worry, a decent quarter (while burying difficult data such as reconciliation percentages as deeply as possible) would allow a rally.

Together, I think the combo of those three events, plus the PVG marketing machine (and they’re very but VERY good at that, plus Sprott USA is knee deep in this paper and would “appreciate an elegant potential exit opportunity”), plus the eventual end of the toilet flush selling (I thought we got to the bottom Thursday, then the Dow dive day hit PVG and everyone again) will give this stock a good chance to rebound and offer relief to the suffering longs.

Plus a potential trade-flip for the rest of us of course, however I must stress that:

1)     I will NOT be trading PVG myself. I prefer other things, I don’t like the company, near-term plays aren’t usually my thing anyway, or any other excuse. This note is me respecting the broad church that is IKN Weekly readership with an idea that will appeal to some, not all of you.
2)     Over the medium-term I think PVG really is in serious trouble. So if you decide to trade it, I would STRONGLY recommend you’re out of it by the time the 1q18 financials and MD&A are published around the second week of May. For me, at best this is a near-term rebound on rah-rah and the reaction of a market that will get better top line numbers from the company.