Finding gold in the ground is always a gamble. Even the most certain geologic reports and surveys still might lead to a mine filled with nothing but worthless rocks. Pershing Gold (NASDAQ:PGLC) avoids the uncertainty by buying gold mines that have proven reserves but are no longer being worked for non-technical reasons, such as bankruptcy.
Pershing Gold's first major purchase was the Relief Canyon Mine in Nevada, which it bought at a very low price out of bankruptcy. Relief Canyon Gold Mine produced gold intermittently since 1984, but was abandoned when the parent company ran into financial problems. Pershing has bought some land around the mine and is preparing to resume drilling and expanding the mine with a goal of production in early 2014, if not sooner. The company is also debt free and they have obtained almost all of the permits necessary to go back into production.
I like Pershing Gold's low-risk, potentially high-payoff business model and their acquisition of the Relief Canyon Gold Mine. But I'm not the only one who thinks Pershing Gold is an excellent investment with a possible high rate of return. Coeur d'Alene Mines Corporation (CDE), the largest U.S.-based silver producer with a market cap of $2 billion, made a strategic investment in Pershing Gold at $0.32 a share about 6 months ago (Press Release). Other experts in the mining area are also extremely interested in Pershing Gold:
The largest shareholder in addition to CDE is Phillip Frost (Forbes Rank: 188). He owns about 18% of the company or about 50 million shares.
Pershing Gold Director Barry Honig strongly believes in his own company; he personally invested $1.125 million and with his family invested a total of $1.5 million. Honig's total personal investment is now more than $10 million.
Director Barry Honig strongly believes in Pershing as well, as evidenced by his continued investment in the company and his consistent purchasing of shares in the open market (which can be seen in the SEC filings for the company).
Pershing Gold also has experience at the helm. Steve Alfers, CEO, has more than 20 years in the mining business and has shown he can get results. Leading Pershing Gold he consolidated 39 square miles over the past 12 months, partially due to reaching agreements with Newmont USA (NEM) and Victoria Gold.
None of the previous three operators of the Relief Canyon Mine were able to accomplish this consolidation over the past 30 years.
Alfers was a key reason for the successful consolidation moves, which increases the potential amount of gold Pershing should be able to extract from the mine. Alfers was the former Chief of U.S. Operations for Franco Nevada (FNV) under CEO David Harquail (Press Release). Steve still serves as advisor and consultant to Franco.
Alfers is bringing on more experts. Last week Alex Morrison, former Vice President and Chief Financial Officer of Franco-Nevada, joined the Pershing Gold board (Press Release).
This move shows that Alfers' leadership and the Pershing Gold business model is one that can convince other industry leaders to join the company.
This is a golden opportunity and the time to act is now. Why?
Pershing is expected to release an updated resource report in the next week showing close to triple the previous reserves, as can be seen in page 19 of the Investor Presentation on the company's website:
Many experts expects Pershing Gold to uplist to AMEX within the next 9 months, if the company is still independent at that time and has not been bought by one of the big mining conglomerates, which should lead to a nice return on any investment in Pershing Gold.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in PGLC over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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