Gold Is Getting Ready to Shine
Pretium Resources could be off to the races if its upcoming progress report shows good news.
Gold has held its own during the most recent market malaise. SPDR Gold Trust (NYSE: GLD) is showing signs of life as its holdings have increased for the past few weeks. Two major mergers between senior mining companies means good news for a sector that does well as the price of gold rises.
Recently, Barrick Gold (NYSE: GOLD) merged with Randgold to create the world’s largest miner. But Barrick Gold was quickly outdone when Newmont Mining (NYSE: NEM) took over Goldcorp (NYSE: GG) in an all-stock transaction to regain the “largest producer” mantle.
These large mining companies are having issues finding cheap gold, which isn’t available unless you figure out how to buy up the competition for a great price.
This type of mergers and acquisitions activity could spill over into the junior mining sector where valuations are dirt cheap.
The VanEck Vectors Junior Miners ETF (NYSE: GDXJ) trades for around $30. At its peak, when gold was around 50% higher than where it is today, it was trading at $173! That’s more than 5.7 times the current level.
One company that has popped up on my screen is Pretium Resources (NYSE: PVG). It’s a low-cost mining company in British Columbia that has increased its resource estimate more than a couple of times in the past year. It’s profitable, growing and subject to intense volatility.
Pretium Resources’ 52-week high is $11.30, and its low is around $6.44, close to the current level.
It’s a story stock, which means the value of Pretium Resources is based on expected outperformance instead of its assets and income.
Pretium Resources is scheduled to give a progress report in the next few weeks. If the announcement meets or beats expectations, the shares could really be off to the races.