Pretium Q4 2018 update: management is crazy but the mine did generate a lot of cash

Firstly, I should admit that I was wrong about Pretium.  I thought that the situation would be like Rubicon Minerals where the resource modelling issues would cause the stock to immediately blow up.  That did not happen.  The company has generated a substantial amount of cash that it has used to pay down debt and interest.  I was surprised that the grades did ramp up to high levels and that the mine did generate substantial cash.

Going forward, management hasn’t provided a serious guidance as the range is unreasonably tight at less than ±4% (see slide 25 of the earnings presentation).  This is fresh off of missing its previous guidance and (rightfully) blaming that miss on the variability of the deposit.  Bizarrely, it seems that management hasn’t learned from its past mistake.

My takeaway is this:

  • Management is guiding for a weak first half of 2019 (presumably below 10.4 g/t), as indicated by their remarks on the conference call.
  • Beyond that, I don’t think that management / Pretium’s geologists have a great idea as to what grades will be.  If there was good news, such as the mine consistently producing grades in the 10g/t range or higher, it would make more sense for management to behave more normally.

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