Long-term and prospective investors alike should review Pershing Gold’s new corporate presentation. It has been updated and enhanced significantly since I last wrote about the company. Pershing expects an upgraded resource report in a few weeks and another one within about six months. By then, the combined NI 43-101 compliant Measured, Indicted & Inferred resource should be in excess of 1 million ounces, most of which should be in the Measured & Indicated categories. A knock against Pershing has been a sub 1 million ounce resource. Once past 1 million ounces, detractors should move on to other gold companies. More important in my mind is that 1 million + ounces supports many years of production at an initial run-rate of 50k oz/year, growing over time to 80k oz/year. Cash flow from initial years could be used to self-fund additional drilling at Relief Canyon and searching for discoveries elsewhere on Pershing’s property. The number of delineated ounces is rapidly becoming less crucial as a valuation benchmark. Once in production, Pershing will be compared on operating metrics, all-in costs, margins and production volumes, coming out of low-risk Nevada, to peer small and mid-tier producers globally.
Finally, I point to the silver and gold colored Elephant in the room. Rarely is much ink spilled on the topic of Coeur Mining (NYSE:CDE) possibly acquiring Pershing Gold, but I continue to believe it makes sense. Now that the Paramount Gold & Silver acquisition is largely out of the way, Coeur should be (in my opinion) looking at its closest neighbor. Coeur can afford to outbid others because of the synergies the combined company would be able to achieve. Perhaps Coeur is waiting for production to start? If so, the acquisition price will only move higher. Coeur has done a commendable job at righting its ship. The stock price is up 71% from its low and debt is down modestly. If Coeur waits too long, it could face find itself in competition as the existing list of potential suitors is getting larger. Is Pershing Gold’s (PGLC) stock a triple from here? No. A double? Perhaps, depending on progress made and takeover interest over the next 6-12 months. Is the company going to fall off a cliff without a net, parachute or bungee cord? Not a chance. Unlike Midway and Allied Nevada, Pershing Gold retains considerable upside (with no debt) with minimal fundamental downside. I like the risk reward of that proposition.
Disclosure: I, Peter Epstein, CFA, MBA have no prior or existing relationship with Pershing Gold (PGLCD) or any company mentioned herein. Readers should be aware that an investment in Pershing Gold is a speculative one. Readers should consult with their own investment advisors before buying or selling any speculative stock. I, Peter Epstein, own no shares of Pershing Gold at this time. I have owned shares in the past and might buy shares in the future. In 2011 Peter Epstein, CFA, left a $3 billion hedge fund where he was a senior analyst to help increase awareness of a number of small cap companies in which he’s invested in. Follow him @peterepstein2
