Borislav Tonev

Pershing Gold Corp (OTCMKTS:PGLC) Gaps Up After Private Placement News

by Borislav Tonev August 28, 2013
38PGLC.pngOn July 24 Pershing Gold Corp (OTCMKTS:PGLC, PGLC message board) issued a press release through which they announced that they have started work on Phase I of their 2013 drilling program. This doesn't necessarily mean that they and their shareholders are about to get rich, but in Pennyland, where a large portion of the mineral exploration companies rely on nothing more than artificial hype spread through the emails, this is a massively important piece of news. And how did traders react?

Well, they couldn't care less. Trading volumes were dismal and the price rarely moved by more than a percent or two. Then, a couple of hours before the the opening bell on August 15, PGLC published the 10-Q covering the second quarter of 2013. We mentioned in our previous article that, when compared to the preceding reports, it did contain some good-looking figures as well as some that weren't too convincing, but it still cemented PGLC's reputation as one of the few mining penny stocks with a relatively stable financial situation.

Once again, however, investors weren't paying attention. Trading volumes did increase and PGLC did manage to register a 7% run when the 10-Q came out but not long after that, the ticker retraced its steps and wiped out a large portion of the gains. A couple of optimistic articles on Seeking Alpha appeared in an attempt to convince people that the future is indeed bright, but the share price was having none of it - there were quite a lot of fluctuations but a more determined move in the green direction turned out to be rather chimerical.

This means that PGLC closed Monday's session at $0.365 - pretty much the same value as the one displayed before they announced the start of the drilling program. Yesterday, however, was a little bit different. The opening bid stood at $0.39, the ticker made a brief run all the way to $0.42, hesitated a bit towards the end of the day and closed the session at $0.39. What is the reason for this?

Well, a press release came out about an hour before the opening bell which informs us that a $11.1 million private placement has been completed. The information shouldn't be that exciting since about $9 million of the proceeds were announced back on August 12, but apparently, the bigger number was enough to get investors all fired up. This means that the ticker could initiate another attack on the $0.40 per share barrier in the next few sessions. Then again, PGLC's rather inconsistent historic performance means that predicting the near future with any degree of certainty is all but impossible. But what about the long haul?

Well, quite frankly, this will be really hard to foresee as well. Certainly, the proceeds coming from the sales of equity means that PGLC are unlikely to go bankrupt any time soon, but the mountains of cash won't help them stay afloat in case the Relief Canyon Mine fails to meet their expectations.

As we wrote in one of our previous articles, PGLC did try their hands at extracting gold as well as other precious metals from various mining claims throughout the years. After some considerations, they decided to get rid of most of them by selling them to other penny stock ventures like Valor Gold Corp (OTCBB:VGLD) and Marathon Patent Group Inc (OTCBB:MARA). In exchange for the rights, PGLC received some VGLD and MARA stock which was later sold.

The latest line of financing, however, comes from the sale of PGLC's own securities which means that the dilution could be quite severe for the shareholders, especially if the revenues and profits don't come rushing in soon. Just like the first placement that was completed during the first half of August, the one announced yesterday involves Series E convertible preferred shares that can easily be turned into common stock. If that happens, the pressure exerted on the investments of the long-term shareholders could prove too much for some people, leading to an even more disappointing ticker behavior.

7ETEK.pngSpeaking of dissatisfactory stock performances, we should point out that Eco-Tek Group Inc (OTCMKTS:ETEK) and Blue Fire Equipment Corp (OTCMKTS:BLFR) are still caving in under the promotional pressure meaning that the two tickers have registered some truly horrific losses during the last couple of days. There is currently no pump for PGLC and we certainly hope that they will manage to keep it that way.

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