Borislav Tonev

Pershing Gold Corp (OTCMKTS:PGLC) Struggling To Get Noticed

by Borislav Tonev August 16, 2013
3PGLC.pngThings seem to be going along nicely at Pershing Gold Corp (OTCMKTS:PGLC, PGLC message board). In fact, on July 24, they issued a press release that we rarely get to see from a junior mining company. Apparently, they are starting work on Phase I of their drilling program at the Relief Canyon Mine property in Pershing county. That, you would agree, is a huge announcement and we must say that bombshells like this are not seen everyday. Then again, PGLC is not the typical mining penny stock.

Unlike a lot of their counterparts, they do have a real office, they do actually own some properties in Nevada and, although we are often skeptical about promises coming out of the management teams, they say that the bright future is virtually guaranteed. Another, and perhaps the most significant difference between PGLC and the rest of the mining small cap enterprises, is the financial situation. They published their 10-Q for the second quarter of 2013 a couple of hours before the start of yesterday's trading session and you can find the most important figures below:

  • cash: $1.4 million
  • current assets: $1.7 million
  • current liabilities: $1.1 million
  • no revenue since inception
  • quarterly net loss: $1.9 million

If you take a look at our previous article you'll see that some of the financials like the cash reserves and the current assets have deteriorated somewhat, but PGLC compensated for that (and then some) by making a private placement for around $9 million at the beginning of August. The sale of securities involved Series E preferred shares as well as some warrants and the bad thing about it is that the investors who currently hold them can convert them into common stock. The rate for the preferred shares is $0.33 while the warrants are exercisable at $0.40 which, considering PGLC's current value, is not unreasonable but the potential dilution is definitely looming.

The issuance of new stock could have a negative effect on the already brittle stock performance which, at the moment, seems to be PGLC's biggest problem. The ticker got promoted around mid-March and the artificial hype did give the price a push, inflating it to over $0.05 per share. The newsletters left, however, and the performance displayed after that was less than impressive. PGLC managed to avoid the catastrophic drop that we're normally used to seeing from promoted mineral exploration ventures like Sanborn Resources Ltd (OTCMKTS:SANB) but even so, about a month after the campaign started, the ticker had sank below the $0.04 barrier.

Fortunately for PGLC and their shareholders, the venture has barely been mentioned in the emails ever since, but it would appear that the dismal behavior under the promotional pressure is still here to haunt them. You can see from the chart at the beginning of the article that there were a few ups and downs, but the overall direction was South, which means that by Tuesday, the price was already sitting at around $0.33. Even the press release that we talked about in the first paragraph failed to make a significant impact on the ticker's behavior and it would appear that in order to raise some awareness around the stock, some contributors are writing optimistic articles on Seeking Alpha. Whether they'll manage to succeed or not, remains to be seen, but you should bear in mind that the volatility of penny stocks means that this could act as a double-edged sword. Couple that with the lack of any sustainable stock performance and you'll find out that a potential PGLC investment still carries its risks.

3EXHI.pngIf you want to understand how vital it is that you consider them carefully, you might want to take a look at the chart on the right. It's for Exlites Holdings International, Inc. (OTCMKTS:EXHI) and it shows how EXHI scored an impressive run fueled by a large promotional campaign. Lots of people got excited by the artificial hype and forgot about the danger of sudden and violent corrections. When the drop began, there was little they can do, but to accept the losses.

Comments 1

1. Guest
August 24, 2013, 09:43AM

Quotes Does CDE have a stake in Pershing? It had taken some shares in a private placement in June 2012..

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