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H.C. Wainwright says gold companies should not overreach in 2015

"Our advice to any gold company is to dedicate time and efforts toward more efficient and long-term enhancements to individual projects while keeping a tight budget. The companies which can deliver better operating results in a cost effective manner could see a positive reception from the market."
H.C. Wainwright says gold companies should not overreach in 2015

H.C. Wainwright (HCW) is predicting that a number of companies it covers in the gold sector will continue forward in 2015, despite the volatility in gold prices.

"In our opinion, the key to success in 2015 is fairly basic for each company although dissimilar goals have been set forth. Each management team should not over promise either on the timeline or scope of what can be accomplished in 2015," advised HCW analyst Jeffrey Wright in his research note released earlier today.

"While we have seen a modest rebound in the gold market since fall 2014, the overall climate does not warrant nor reward overreaching endeavors. 

"Our advice to any gold company is to dedicate time and efforts toward more efficient and long-term enhancements to individual projects while keeping a tight budget. The companies which can deliver better operating results in a cost effective manner could see a positive reception from the market."

Of note, Wright higlighted Pretium Resources (NYSE:PVG) (TSE:PVG), which he expects will be in a position to make a construction decision at the company's high-grade Brucejack project in the second half of this year. 

He said 2015 could be a milestone year for Pretium, as the company awaits on just a few permits to be received. According to the company, the British Columbia Ministry of Environmental Quality permit as well as the Canadian Environmental Assessment permit should be received during in the first half of 2015.

"Following checking of these boxes, we expect Pretium to finalize financing options for the approximate $747 million CapEx required to bring Brucejack into production," HCW added.

"While we remain cognizant of the amount of capital required, we believe a project of this quality should be able to raise the funds one way or another."

HCW analyst Wright explained that it is possible for Pretium to raise the funds on its own, or bring in one or more strategic partners, as part of the overall financing package. Should financing be secured by mid-2015, a construction decision and "breaking of ground" could happen shortly afterward, he said.

The brokerage reiterated its buy rating and $11.00 price target on Pretium shares, with its current model anticipating first production to be reached in the second half of 2017.

Other notables for HCW in the gold sector this year include Gold Standard (NYSEMKT:GSV), which is striving to further expand its Railroad-Pinion project in Nevada, as well as Allied Nevada Gold (NYSEMKT:ANV), Pershing Gold (OTCMKTS:PGLC):, Brazil Resources (CVE:BRI) and Vista Gold (NYSEMKT:VGZ). 

HCW said that although the gold market appears to have reached more stable levels of late, around US$1,200 per ounce, it believes future gold prices must rise to sustain current global production levels. It listed several macroeconomic factors that could keep prices lower for now, including the likelihood for an increase in interest rates this year by the Fed, and stimulus activities by both Europe and Japan.

The brokerage also noted, however, events which could lead to an increase in prices, including the Chinese New Year in February, as well as the potential exit of Greece from the eurozone and the possibility of rising tensions in Russia.

"In summary, we contend that conflicting factors should counterbalance one another in the short term as we continue to see gold in a tight range between $1,175 and $1,250 per ounce without any new developments taking shape," HCW concluded.

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April 16 2013

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