Market Overview

Small-Cap Corner: Is All That Glitters Truly Gold? (PGLC)


It has been well-documented that gold miners, large and small, have been experiencing a renaissance of sorts in recent weeks. Left for dead earlier this year after close to two years of lagging the futures prices of the yellow metal they extract from the earth, it feels gold miners are finally starting to turn the corner.

Those that are willing to embrace might want to have a look at Pershing Gold (OTCBB: PGLC), a newly formed gold exploration and development. Pershing is looking to build a portfolio of lucrative precious metals properties, but for now the bulk of the company's operations are focused on the Relief Canyon Gold Mine in Pershing County, Nevada.

Yes, Nevada is the "Silver State," but by some estimates the state is one of the five largest gold producers in the world, a factoid that bolsters the bullish thesis for Pershing Gold. Earlier this month, Pershing announced the discovery of a new high-grade gold mineralization at the Relief Canyon Mine property.

Building on the success of Phase I, the Company is now carrying out its Phase II 2012 drilling program at Relief Canyon, with an emphasis on identifying and testing targets on lands within the Pershing Gold-Newmont AOI. Results from this drilling are pending, the company said in a statement.

Micro-cap miners often concern investors because at the development stage, many of these firms do not have solid balance sheets. Pershing is working to be the exception. In April, the company said $9 million of indebtedness and warrants issued in connection with the Relief Canyon Mine acquisition was been converted into shares of common and preferred shares. And in March, the company reduced its shares outstanding by over 22.4 million.

Balance sheet strength is essential for junior miners because sound balance sheets allow for lower borrowing costs. That much is obvious, but the more Pershing solidifies its balance sheet, the better positioned it will be to carry out its true mission, which is to profitably extract gold from the earth.

Should Pershing's mining success come together, this 30-cent stock will prove the undervalued thesis correct and even if the shares double in price, Pershing would still only have a market cap of $120 million, easy enough for a large-cap miner to come along and swallow Pershing in an acquisition.

Posted-In: Long Ideas News Short Ideas Small Cap Analysis Futures Commodities Small Cap After-Hours Center Best of Benzinga


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