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Editor’s Note: This article covers a stock trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Pershing Gold (OTCQB:PGLC) is a high-risk, small-cap junior gold company that's not a suitable investment for all investors. Readers should seek help from a financial advisor and perform their own due diligence. A good place to start is by reviewing the company's February, 2014 corporate presentation.

The string of drill result press releases from Pershing Gold that began on September 19, 2013 is extremely important to review and understand. Last year's drill campaign sets the stage for some exciting developments this year and next. In fact, second largest shareholder Dr. Frost (through Frost Gamma Investments Trust) made open-market purchases of Pershing shares on February 6th and 7th. Please review press releases: [drill results #1] [drill results #2] [drill results #3].

Review of 2013′s Drill Campaign, Results Released From September 19, 2013 to January 27, 2014

In carefully re-reading the drill results, there are some important takeaways. The first set of drill results on September 19th delivered a punch with the stock jumping to $0.385 from $0.365 on roughly 8 times the average trading volume. [Please see detailed article I wrote on September 30th]. Chairman and CEO Stephen Alfers announced that the newly discovered Lower Zone, "LZ" showed signs of continuity AND that 4 of 7 holes intercepted higher grade ore, (greater than 0.20 opt). Alfers was quoted, "These holes could be a game-changer that may significantly expand and upgrade the Relief Canyon gold deposit."

The second set of drill results was released on November 25th, (the week of Thanksgiving). The stock was unchanged at $0.36 on half the average volume. Despite the muted response, this second set of (10) holes was better that the first. [Please see my December 4th article]. Among the first set reported in September were LZ intercepts of 230 ft @ .025/opt, 128 ft @ .058/opt 48 ft @ .044/opt and 30 ft @ a whopping .27/opt! Included in the second group were strong intercepts / intervals such as 178 ft @ .059/opt, 49 ft @ .048/opt, 43 ft @ .194/opt! and 39 ft @ .05/opt. This was a spectacular outcome compared to the average .0188/opt found in Relief Canyon's January, 2013 NI 43-101 compliant [Measured & Indicated] resource estimate.

Bigger and Better

Not only did the LZ show greater lateral extent, it demonstrated additional evidence of continuity. Equally important, 7 of 7 holes that hit gold in the LZ encountered robust intercepts with grades significantly above .0188/opt AND the LZ remained open in all directions.

On January 27, 2014 the stock moved from $0.36 to $0.38 on about twice the average trading volume. The third and final set of (16) drill holes demonstrated strong intercepts in the Jasperiod Zone, "JZ" (located beneath the LZ), including 44 ft @ .224/opt!!, 21 ft @ .188/opt! and 41 ft @ .088/opt. Remarking on the entirety of diamond core drill holes, Alfers said:

"These results are a game-changer…. First, for the discovery that the deposit is comprised of three stacked mineralized zones… We believe we will be able to significantly expand the size and the overall grade of the deposit, because both the Lower and Jasperoid zones showed higher grades than the previously mined Main Zone. Second, we successfully encountered numerous gold-mineralized intercepts in both new zones, with 10 holes hitting the Lower Zone and 13 drilled into the underlying Jasperoid Zone. We have also expanded the lateral extent of both zones."

All Roads Leading to an Economic Mine at Relief Canyon?

To recap, until September 19, 2013, Relief Canyon had 564k ounces of [Measured, Indicated & Inferred] gold resources with vast upside potential on the company's 25k acre property. Fast forward to January 27, 2014, and Relief Canyon contains a still growing and open (in multiple directions) deposit with 3 stacked zones, 2 of which are significantly higher-grade (LZ & JZ). In my opinion, the past 4 months have been a real eye-opener regarding the understanding of Relief Canyon's deposit and the immense possibilities therein. Remember, Alfers has done extensive drilling on less than 5% of Pershing's consolidated holdings.

Even though we now have over 30 new holes that greatly enhance and de-risk the Relief Canyon project, today's stock price is almost exactly the same as it was last September. This makes little sense. The Relief Canyon project continues to grow in size and grade with no end in sight. In my opinion, over time, the number of recoverable gold equivalent ounces could run into the millions, possibly supporting mining activities at Relief Canyon alone for a decade or two. A long-lived, low-cost, Nevada mine remains an attractive takeover target to a company like Coeur Mining (NYSE:CDE) once the gold price recovers.

H.C. Wainwright & Co. Initiates Coverage With a BUY Rating and $0.70 Price Target

As the Pershing Gold story continues to be de-risked by strong drill results and the prudent advancement of the Relief Canyon project, investors and analysts are taking note. Last week, H.C. Wainwright & Co., "HCW" initiated coverage on Pershing Gold with a BUY rating and $0.70 price target. That's nearly twice the current price. HCW incorporated a DCF valuation with a conservative 7.5% discount factor, long-term gold price assumption of $1,200/oz and annual gold production of ~50,000 ounces. These are hardly aggressive assumptions, yet even at $1,200/oz gold, HCW believes the NPV of Relief Canyon is ~$205 million. Presumably, there's upside to HCW's NPV figure from a higher gold price and/or extraction (eventually) of greater than 50,000 ounces per year. I for one believe that a higher gold price and production level are not only possible, but likely.

The HCW report validates my belief that Relief Canyon is economically viable. In order for HCW to come up with a valuation of ~$205 million using a fairly conservative gold price and production scenario, the implied operating costs must be attractive. Further, the amount of additional equity capital that HCW believes is necessary to get Relief Canyon into gold is modest. While there's nothing earth shattering in the HCW report, it demonstrates a non-aggressive valuation methodology that suggests a possible double in the stock price within 12 months.

I believe that the release of the HCW report represents an important milestone, with more milestones coming soon. Upcoming catalysts in the next few months include an upgraded NI 43-101 resource and a Preliminary Economic Assessment (PEA). Later in the year, Pershing will get its stock up-listed, (off the Bulletin Boards). The company is comfortably funded and has no debt.

Another Independent View of Pershing's Relief Canyon Project

I recently caught up with Peter Baxter, senior Geologist & Director of Mining Investment Banking at Scotiabank. I first met Mr. Baxter in Nevada as we toured the Relief Canyon Mine site. I asked him about his latest thoughts on Pershing Gold subsequent to the company having released its third set of drill results. Note: Mr. Baxter has no existing or previous business relationship with Pershing Gold. The following is a brief Q&A session with Mr. Peter Baxter, "PB."

PE: Mr. Baxter, thanks so much for sharing your thoughts. In addition to our site visit, I understand you spent an additional day with Pershing's management team. What do you think about the company's management and technical teams?

PB: The team is highly experienced and extremely capable. The geology staff is strong in both production and exploration experience. Their permit specialist has a long and highly successful history in Nevada. Their production advisers also have a long and successful Nevada history, and they are building out their production staff.

PE: What do you think about the exploration potential of Pershing's 25,000+ acre land package?

PB: The brownfield potential on the north extension of Relief Canyon is already demonstrated by ongoing drilling. At the time of our visit, there was also a favorable indication for disseminated gold mineralization well south of the deposit.

PE: What's your view on where the company stands on permitting? Are they ahead or behind the curve compared to peer gold juniors?

PB: Permitting is one of the greatest advantages of the Relief Canyon project. The existing Plan of Operations with the BLM is expected to accelerate their timeline to production and allow them to meet their planned development schedule.

PE: Some describe the latest drill results [through January 27th] as very important. How significant do you think those drill results are?

PB: Highly significant. The potential to increase the resource base is very high. That will allow for a longer mine life and possibly higher annual throughput.

PE: Do you think that Pershing is an attractive takeover candidate? If not now, at what stage?

PB: I believe Pershing can best maximize value by proceeding with their strategy to increase their resource base and advance to production. The culmination of these efforts should make Pershing a very attractive takeover target, especially if it coincides with a strengthening gold price. The project would likely be attractive to multiple junior producers.

Barry Honig, Largest Investor and Important Part of the Pershing Story

Barry Honig's active involvement and ongoing open-market stock purchases should not be taken for granted. Barry attracted Dr. Frost to the story. [Note: Frost has made open-market purchases of Pershing Gold this month]. Honig is an experienced investor and trader going back 20 years. He tends to buy and hold (for years if necessary) situations that are unloved, overlooked or oversold. For example, he acquired Relief Canyon out of bankruptcy. His position in Pershing is a big one, but he told me he doesn't lose sleep over it because of his high conviction in the assets, management team and substantial exploration upside. Honig has been here before, as a top shareholder, helping build and fund a company.

As Founder and Director of interCLICK, he made fellow investors a fortune by helping the company grow rapidly from 2009 until 2011, when Yahoo (NASDAQ:YHOO) acquired it for $270 million. Like Pershing, interCLICK was a Bulletin Board stock with no research coverage or institutional sponsorship. Honig helped bridge the company during difficult times, made frequent open-market purchases of stock and facilitated key introductions.

Or, consider ChromaDex (OTCQB:CDXC). He made 20 open-market stock purchases of CDXC from February, 2012 to April, 2013 at prices ranging from $0.50-$0.77. The stock closed as high as $1.82 last month and Honig owns close to 10 million shares. In September 2012 when the stock jumped above $1/share, he could have sold it for a quick and easy double, but he didn't. The same can be said of his experience with Pershing. In March, 2012 Pershing's stock briefly spiked to $0.90 on heavy trading. He didn't sell a share. In fact, he's never sold a share of Pershing Gold.

Conclusion

Pershing is poised to be one of a select few new Nevada gold companies to reach production next year. Midway Gold's (NYSEMKT:MDW) Pan project is slated to commence production in late 2014, but aside from that, I know of no others. Instead of relying solely on what Pershing's management team says, Peter Baxter of Scotiabank and H.C. Wainwright & Co. recently offered their views of the progress that Alfers and his expert team are making. Yet another positive indicator is that second largest shareholder Dr. Frost very recently began adding to his holdings in the open market. As pieces of the puzzle fall into place, namely the PEA and upgraded NI 43-101 reports, the universe of investors looking at the company will only expand. I continue to believe that Pershing Gold is a relatively low-risk way to play a rebound in the gold price. Low-risk, but with meaningful upside upon ongoing de-risking and growth at Relief Canyon.

Source: Pershing Gold: Strong Drill Results, Insider Buying And New Research Coverage