(By Balaseshan) CIBC World Markets Inc. analyst Jeff Killeen downgraded rating of Pretium Resources Inc. (TSE:PVG) to "Sector Underperformer" from "Sector Performer" and lowered price target to $15.50 from $18.50.
The brokerage maintained its 2012 loss per share estimate for the exploration and development company of $0.16 and its 2013 loss estimate of $0.11.
Killeen said Pretivm has released an updated resource estimate for the Valley of the Kings (VOK) zone at the Brucejack project. He has reduced price target based on the updated estimate and revised assumptions in our model.
The analyst is concerned by the significant variance in inferred category resources relative to the April 2012 estimate. Inferred grade increased 37% but tonnes and ounces decreased 64% and 50% respectively. As such, he now limits his model to include only 10% of inferred ounces at Brucejack.
Killeen continues to apply a 0.8 times multiple to his 5% discounted net asset value of $18.73/share, down from $22.14/share, in deriving his price target. The multiple represents a premium to non-producer peers, which he believes is warranted due to the high-grade nature of Brucejack underground resources.
The analyst continues to believe that the VOK could become among the highest-grade gold deposits exploited globally. However, given the amount of uncertainties he believes exist in estimating VOK resources going forward he thinks significant conservatism is warranted in his valuation of Pretivm.
PVG is trading down 5.49% at $12.92 on Thursday.