Credit crunch no problem for Quartermain’s Pretium

Robert Quartermain’s Pretium Resources (PVG-T, PVG-N) has started the new year with a bang, announcing plans on Jan. 19 to raise $18.5-million in flow-through funds at $18.50 a share. The bought-deal financing led by Salman Partners represents a sweet 18% premium to Pretium’s Jan. 18 closing price of $15.63.

News of the one-million-share placement helped the company’s shares up 58¢ on Jan. 19 to close at $16.21. The stock has risen from a low of $8.40 in November 2011 and the price is up significantly from when the company completed its $265-million initial public offering  at $6 a share in December 2010. The financing follows Pretium’s Jan. 12 listing on the New York Stock Exchange. 

Pretium says the proceeds will be used to conduct exploration and infill drilling this year at the high-grade Valley of the Kings zone, part of the company’s flagship Brucejack gold-silver project in northwestern British Columbia. The drilling will help support an ongoing feasibility study for an underground mine. The study should be completed by year-end. 

UBS Securities analyst Dan Rollins has kept his “buy” recommendation on the stock. In a note to clients following the financing news, he boosted his price target to $21 from $18.50, reasoning: “The company continues to be attractively valued relative to its high-grade peers (Continental, Extorre and Rubicon) on an enterprise value to resource basis (gold-equivalent) when only taking into account PVG’s high-grade resource. Based on our analysis, PVG currently trades at $150 per oz., a significant discount to its peers which trade at $235 per oz.” Rollins further argues the company is a likely takeover candidate and its world-class Brucejack property has plenty of exploration potential left. “Due to the potential for further high-grade drilling success and news flow, PVG remains our preferred exploration play.” 

Pretium had $33 million in working capital as at Sept. 30, 2011. The company has 86.8 million shares outstanding excluding the recently proposed financing and a market capitalization
of $1.4 billion.

When setting up the company in 2010, Pretium’s president Quartermain structured the deal so he received 2.5% of its common shares after the IPO in exchange for his one Series A preferred share of Pretium. According to Pretium’s prospectus, he received the preferred share in return for capitalizing the company by way of a $1.5-million investment. Quartermain’s 2.75 million shares have since increased in value from $16.5 million in December 2010 to $44 million in January 2012, representing an impressive 2,833% return on his original $1.5-million investment. He also receives $400,000 a year for his services as president and CEO.

Insider trading reports show Quartermain has yet to sell a single share in the public market despite the higher prices. Instead he has added 126,100 shares to his position since March 2011 at prices ranging from $9.05 to US$15.54. His latest trade was buying 100 shares of Pretium at US$15.54 on the company’s first day of trading in the U.S.