Yamana gold (AUY) is a worldwide mining company with proven management is HQ’d in Canada with over 17 million ounces in proven and probable low grade gold resources plus over 82 million ounces of silver resources operating within basically secure mining situations in North & South America. Pretivm Resources (PVG), with proven management is a Canadian exploration and gold & silver mining company with over 30 million ounces of gold plus 100 million ounces of silver in measured and indicated gold resources located in secure British Columbia.
I expect PVG to go into limited production (at 2,700 tons per day) within 2 years and full production within 5 years (in my opinion). AUY sells for approximately $18 per share on the NYSE. PVG sells for around $13 per share on the NYSE. Recent drilling results for PVG have shown as much as 45,000 grams of high-grade gold per ton in the Valley of the Kings zone and is continuing to add significant reserves each quarter. This is one of the highest grades of gold ever drilled world-wide in recent memory.
AUY, by comparison is continuing to use up its low grade reserves or add to its reserves by acquisitions, not significant internal exploration and development. In our opinion, Pretium’s consolidated resources of all projects combined will show better than 40 million ounces of gold and 200 million ounces of silver when released in the second quarter of 2013. Visit our website for PVG updates at http://www.SheldonsFinestCoins.com
AUY pays an annual dividend of 26c per share per year. PVG does not pay dividends yet since they are not yet in production. AUY annual EPS is about 48c. PVG has no earnings yet. Based upon my latest calculations PVG could earn in excess of $18 per share once in full production within 5 years. Using the same PE ratio of AUY (37), I estimate that PVG’s price potential could reach $666; if not diluted by additional share issuances. I believe that PVG is dramatically undervalued with the potential to rise in price by a factor of almost 33 times its current selling price on the NYSE to approximately $444. In addition, with a short interest of approximately 0.4 million shares, this short squeeze should be something to behold!
The time for PVG’s rise could be very close. I expect the shares of PVG to rise after this short induced sell-off has run its course or when updated resources are released in early 2013. AUY appears to be fully priced at current gold prices and will only go up $ for $ with gold prices. PVG can go up 33 times in price from here and then go up $ for $ with gold prices. A spread might make sense; long PVG and short AUY or own PVG outright.
All the best, with continued shine and glitter in your lives!
Ed Sheldon CPA (retired)