Are you one of those investors that likes to follow the footsteps of billionaires? If so, you may want to take a look at Pershing Gold Corporation (PGLC), with a market cap of about $72 million and a share price of around 35 cents. Pershing Gold started as Excel Global in 2007, transformed into Empire Sports and Entertainment Holdings in 2010, Sagebrush Gold in June, 2011 and became Pershing Gold in February 2012.
As a practical matter, Sagebrush Gold wasn’t an honest to goodness gold mining company until June 1st when it changed its name and focus. Then, on June 8th, it acquired two mining properties in northern Nevada, Red Rock, and North Battle Mountain, confirming its status as a gold mining enterprise in both words and deeds (no pun intended). As a result, successor, Pershing Gold owns Red Rock, North Battle Mountain and owns Relief Canyon mine along with all of Relief Canyonâ€™s infrastructure. The properties are ripe with potential, but none more so than Relief Canyon mine, which gives Pershing Gold a â€˜leg upâ€™ on many junior gold mining rivals by virtue of the infrastructure and equipment already in place. Most notably, the necessary permits, electricity, and the transportation infrastructure are all intact. Not a turn-key operation…but close!
The Relief Canyon property may well have been the magnet that attracted the talents of current CEO, Stephen D. Alfers, formerly chief of U.S. operations for the $6 billion mining firm Franco-Nevada Corporation (FNV). The corporate CFO position is held by Adam C. Wasserman. Pershing Gold outsourced the position to CFO Oncall, Inc., a shrewd move for a start-up. Wasserman is Chief Executive Officer of Oncall. Pershing Goldâ€™s fundamentals wonâ€™t sell you on an investment in its stock. The fundamentals are a Buffett nightmare. But this is the case with many mining startups, and definitely does not exclude it from investment potential. Just ask investment guru Dr. Phillip Frost. He recently invested $9.3 million by buying up the subordinated debt and preferred stock of the company. My guess is that Dr. Frost made a persuasive argument for investment in Pershing Gold to Barry C. Honig, a board member of ChromaDex (CDXC). Dr. Frost is a beneficial owner of ChromaDex pursuant to a significant investment in that company. Honig, holding 6.4 million shares, is now seated on the board of Pershing Gold and ChromaDex. The substantial investment these two gentlemen have made in Pershing Gold, not only in cold hard cash, but in time and talent as well, suggests that one might consider looking past the fundamentals. Dr. Frost is not a careless man.
If gold breaks out of the doldrums, and many analysts agree that it will, gold mining stocks are certain to benefit. Pershing Gold is but one of three stocks referenced in this article. There are many gold and silver mining stocks to choose from. The OTCBB is replete with offerings. My focus on Pershing Gold is based, not on the fundamentals, which I have already acknowledged as poor, but rather on the deep pockets of Dr. Frost. This is an important consideration. Most gold mining startups fail because they run out of money, experience cash flow problems, or are undercapitalized to begin with. I donâ€™t see Dr. Frost allowing this to happen to Pershing Gold.
If youâ€™re into gold mining stocks and Pershing Gold hasnâ€™t impressed you, maybe you would feel more secure in an equity with better looking fundamentals. Take a look at some mature success stories such as Coeur d’Alene Mines Corporation (CDE) trading at about $17 per share and sporting a market cap on the plus side of $1.5 billion. Coeur d’Alene Mines has a trailing twelve month price to earnings ratio of 18.02 and a price to earnings growth ratio of 0.23. Price to book is a fractional 0.74 and its return on equity is 4.05%. Quarterly year-over-year revenue growth is 2.5% while quarterly year-over-year earnings growth is negative at – 68.1%. Financially, this company sits on bedrock with a debt to equity of 6.76 and a current ratio of 1.77. On a discounted cash flow basis, Coeur d’Alene Mines is undervalued 165.45%.
You might also consider Aurizon Mines Ltd. (AZK). It trades in the â€˜pennyâ€™ stock range at about $4 per share. The company has a market capitalization of around $723 million. Its trailing twelve month price to earnings ratio is 14.97 and its price to earnings growth ratio is 4.15. Aurizon Mines Ltd. has a price to book of 2.28 and boasts a return on equity of 16.43%. Quarterly year-over-year revenue growth is 20.2% and quarterly year-over-year earnings growth is 237.8%. Â Yahoo! Finance is not reporting a debt to equity figure but the balance sheet looks extremely strong. Aurizon Mines Ltd. sports a current ratio of 6.83. From a discounted cash flow perspective, the stock is undervalued by 8.79%. I chose to give you an overview of Aurizon Mines Ltd. because I believe it will provide you with so sense of where Pershing Gold could go.
This stock has been trading since 2003 and has risen in value over 400% in the past 9 years.
For the investor willing to take some risk, junior gold stocks, thoroughly researched, can offer amazing returns. Donâ€™t take my word for it or anyone elseâ€™s for that matter. There is no substitute for your own due diligence.
Transparency/Disclaimer:Â I was compensated $150 by Pershing Gold Corporation to write this article. While I have vetted each company, researched it thoroughly and Iâ€™ve done my own due diligence, my due diligence is not a substitute for your own.