Submitted by Morgan Smith as part of our contributors program.
One of the leading innovators in the pharmaceutical industry, Dr. Phillip Frost, has invested heavily in Pershing Gold and has teamed up with industry experts to bring this potentially lucrative operation into fruition. Pershing Gold is poised to make a significant impact in the mining industry by generating substantial earnings from highly probable, abundant gold discoveries and establishing royalty contracts or a possible acquisition from one of the major players in the industry. In this article, I will explain why Pershing Gold (PGLC) is an appealing stock capable of significant growth and capital appreciation in the near future.
First, I will look at the fundamentals. Pershing Gold’s beta is around 1.6. Its price is currently above its 50 day moving average and below its 200 day moving average. Pershing Gold’s market value slightly exceeds its enterprise value, while its current ratio is above 2 and its price to book ratio is below 3. Pershing Gold is favorable priced, has capital at its disposal, and is current available at a very attractive discount. The market has already noticed the potential in owning this asset, and it would not be surprising if the price beings to climb as Pershing Gold’s operations develop and production begins in the near future. These financials indicators suggest that Pershing Gold has the ability to gain momentum in the market very quickly.
Dr. Phillip Frost is a self-made billionaire in the pharmaceutical industry. He has taken several firms from rags to riches, in the end, selling them to further his position in the industry or to establish lucrative residual contracts for the long-term. To say he is an opportunist would be an understatement. He was featured as one of Forbes 400 wealthiest Americans and earned his way into the position as Chairman of Teva Pharmaceuticals (TEVA). He also holds advisory positions with Schering-Plough of Merck (MRK) and Ladenburg Thalmann (LTS). He has accumulated his wealth and status from innovative, aggressive and intuitive investments in the pharmaceutical industry.
In May of 2011, Dr. Frost made his interest in the mining industry known when he acquired seven million shares in Pershing Gold. Within one year, his total investment in Pershing Gold grew to over $9 million. In August of 2011, Pershing Gold acquired the Relief Canyon Mine in Pershing County, Nevada. The acquisition was through a bankruptcy proceeding. It included the property containing three open pit mines along with a large heap leach gold processing facility that was recently renovated. This property is surrounded by some of the major mining firms in the industry that are actively drilling and mining the surrounding areas.
The Wilco Project is a mine nearby that is being managed by Rye Patch Gold (RPM) on Newmont Mining’s (NEM) property. Rye Patch Gold has found over 600,000 ounces of gold on the property and believes there is more than 1.1 million more ounces of gold to be discovered on Newmont’s land. Couer d’Alene Mines’ (CDE) Rochester Mine in Pershing County neighbors the Relief Canyon property. The Rochester mine is one of the most successful silver mines worldwide. Midway Gold (MDW) and Barrick Gold (ABX) are working together to drill and explore the Silver Valley Project in the Humboldt Mountains that are not far away from Relief Valley. Barrick Gold has allocated over $11 million for this project, and was able to find gold in 75 percent of the drilling sites throughout the Spring Valley in 2008. Midway Gold believes the Spring Valley area could be one of the largest gold mines in Nevada in recent history. The abundance of activity of the major mining firms in areas surrounding the land Pershing Gold owns is a sign that Frost has indeed found a goldmine.
It is clear that Pershing Gold has found a valuable piece of property. It is widely believed that this Relief Canyon mine has the potential to yield around 15,000 ounces of gold at a low cost. In addition, Pershing Gold acquired 24,000 acres surrounding the mine. The entire property has the potential to yield over 150,000 ounces of gold. Pershing has also negotiated royalty contracts with Newmont for an ownership stake in the gold Pershing finds on the bordering Newmont property. Pershing Gold now has a significant stake and dominant position in the mineral rich formation in the southern half of the Pershing Gold and Silver Trend. Coeur de Lane also owns land in this region. Pershing Gold now has the land, mines, and the capacity at its facility to manage additional ores, all of which came at a discount from the bankruptcy proceeding.
With this appealing opportunity, Dr. Frost was able to entice Steve Alfers to leave his position as Chief of U.S. Operations for Franco-Nevada (FNV) to become the new CEO of Pershing Gold. Alfers is an authority in the gold mining industry. He is a mining industry lawyer that originally founded New West Gold, which eventually merged with Fronteer Gold and was ultimately acquired by Newmont Mining in 2007. Alfers has experience and success in upstarting these operations. He aided in the development of a property with two million ounces of gold for Fronteer. Alfers has brought additional industry experts into management positions, each having over 25 years of experience in the heavy mining industry. Pershing Gold already has the necessary permits and has brought on additional management with expertise for obtaining any additional permits needed in the future.
Dr. Frost has found himself a goldmine in the midst of major mining firms’ robust activity. He has secured Pershing Gold, the mines, property and equipment all at a discount in order to save capital for reinvestment and foster long-term growth. He has surrounded himself with experts in the industry that can help manage, grow and possibly aid in the negotiations of a potentially lucrative acquisition. Based on my analysis, this stock is undervalued and has the potential for significant capital appreciation in the near future.
Transparency/Disclosure: I am not a registered investment advisor and do not provide specific investment advice. The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research. I am a consultant to a third-party and have received one hundred fifty dollars for independent research. Always discuss investments with a licensed professional advisor before making any financial decisions. Statements made herein are often “forward-looking statements” as stipulated under Section 27A of the Securities Act of 1933, Section 21E of the Securities Act of 1934, and the Private Securities Litigation Reform Act of 1995. While I have researched this company thoroughly, my due diligence is not a substitute for your own.