The Gold Report: Pershing Gold Corp. (PGLC:NASDAQ) just uplisted to NASDAQ. What are the immediate and long-term benefits of that listing?
Steve Alfers: The short-term benefit is increased liquidity. The new listing, combined with recapitalization from the stock split we recently completed, will allow institutions to easily get into the stock. I'm hoping we will get new sponsorship and support.
TGR: Have you had institutional support in the past?
SA: We had some institutional support. Most of those interested in the mining space tend to be specialists and many of those were constrained from investing in the bulletin board or because of minimum price constraints.
TGR: How did the stock split help?
SA: Now we have a stock that is priced within the range that a share must trade in order to be eligible for a listing on the NASDAQ. It also structures shareholdings so we can still have considerable volume every day and maintain an appealing price.
TGR: The share price increased when the stock split. Do you expect the same kind of bump from the listing on the NASDAQ?
SA: We have only been post-split for a week or so, and the share price has held up very well. As we begin to trade on the NASDAQ, we'll watch that closely to see how it behaves. Ultimately, the stock price will respond to news flow as we show progress toward building the next domestic gold producer. We have been on that path since we started, but we'll do it on a bigger stage now.
TGR: What is the financial profile of Pershing Gold? Do you have debt?
SA: We have no debt. We do have around $11 million in our Series E Preferred shares. It's a very friendly preferred. It's owned by a couple of our directors, predominantly Barry Honig. There is no dividend, and there are no serious constraints on the activities of the company. Beyond that, the preferred is convertible 1 for 1 for common shares, so it is in line with the interests of all the common shareholders.
TGR: What is your plan for further exploration at the Relief Canyon mine in Nevada?
SA: We will continue on the two parallel tracks that we have been pursuing. The first is preparing to reopen the mine for production. We already have processing facilities and infrastructure in place and these facilities are permitted and operational. We are fine-tuning plans for material handling and processing.
"The new listing, combined with recapitalization from the stock split we recently completed, will allow institutions to easily get into the stock."
The second track is to continue to build the deposit itself. This includes drilling out the ore body at Relief Canyon, expanding it and upgrading it. We announced a new resource at the end of 2014. We just released an updated resource on the basis of drilling completed as of Jan. 31, 2015.
We have already begun the second phase of our 2015 drilling program. We've had two rigs out and two more will be in place soon. We are aggressively expanding the Relief Canyon ore body. We are also evaluating and identifying targets that are more remote from the mine, but still on the trend. We have a 25,000-acre land position on the trend and some compelling targets there. We expect to drill two of those more remote targets this year.
In short, we are simultaneously advancing the project toward production and growing the deposit through drilling. We also hope to discover a significant new opportunity on the trend.
TGR: Based on your recently updated resource estimate, what is the current size of the deposit?
SA: The new estimate is significant. Measured and Indicated (M&I) ounces are up to 739,000 ounces (739 Koz) from 552 Koz, a 34% increase. The increase in M&I ounces really adds value because these ounces are highly likely to be mined and monetized, or are ounces in the same real estate. That is what creates shareholder value.
TGR: Why is Relief Canyon an opportunity at this point in time?
SA: This is a resource that was mined in the 1990s by a mid-tier producer called Pegasus Gold Inc. Pegasus had a number of operations, including Florida Canyon, which is on trend with Relief Canyon in the Pershing Gold and Silver Trend. The Florida Canyon mine is still in production today, although it may be nearing the end of its mine life. Relief Canyon is just getting started. It was in production in the late 1990s when Pegasus ran into financial difficulties due to its projects in Australia and Montana. It was eventually forced into bankruptcy and liquidation. Florida Canyon and some other assets were acquired by a private equity group in New York. Relief Canyon continued to produce gold, but closed when gold prices eventually sank to $270 an ounce ($270/oz).
We came on the scene in 2012. The project was acquired by our two largest investors, Dr. Phillip Frost and Barry Honig, in late 2011. I joined in early 2012 and we put together our team.
"We are aggressively expanding the Relief Canyon ore body."
Our first course of action was to take advantage of some real opportunities to grow the company through the acquisition of on-trend land, including the Pershing Pass exploration project, 9,000 acres of mining claims and mineral rights. Even more important, we acquired more than 10,000 acres of private mineral rights and mining claims from Newmont Mining Corp. (NEM:NYSE) and Victoria Gold Corp. (VIT:TSX.V) in May 2012. With those transactions, we took the project from around 1,100 acres to 25,000 acres.
Since then, we have grown the deposit from 113 Koz Indicated, 42 Koz Inferred to a 739 Koz of M&I and 70 Koz Inferred NI-43-101-compliant resource. The size of the deposit has increased more than five-fold in three years, and we are not through yet. The deposit sits open in virtually every direction. We'll continue to drill out the deposit for several years, all the while advancing the mine to production in the near term. We plan to do an economic analysis this year and make a decision on the timing of the reopening of the mine before the end of the year.
TGR: What is the capital expenditure that you are projecting?
SA: This is going to be a relatively low-cost operation because of the type of asset. It will be an open-pit, heap-leach operation. The ore body is substantially oxide. Our metallurgy work shows that it is amenable to heap leaching, and the recoveries that we get through our test work range from the high 70% range to as much as 90%. We have the facilities in place, so we don't need to spend the capital to design, permit and construct a facility. All of that is done. This will be a very low capital expenditure project.
TGR: What is the track record of the executive team?
SA: I am so proud of our team. Our senior people have a great deal of operating and exploration experience and success in Nevada.
I'm the chairman and CEO. This is the third company that I've been involved with at the executive level. NewWest Gold Corp, where I was CEO in 2002, merged into Fronteer Development Group, now Fronteer Gold Inc. (FRG:TSX; FRG:NYSE.MKT), in 2007. I continued to consult with management there for some years. Newmont eventually acquired that asset and concentrated on the NewWest Gold package, spinning other assets off to another company. I then joined Franco-Nevada Corp. (FNV:TSX; FNV:NYSE), assisting in the founding of that great company. I left Franco-Nevada in 2012 to start Pershing Gold.
My two most senior officers have vast experience in acquiring, permitting and operating companies in Nevada. Senior Vice President Debra Struhsacker handles external affairs and permitting. We have enjoyed considerable success on the operations and exploration permitting side thanks to her.
Our second senior officer is our Chief Operating Officer (COO), Tim Janke. He was COO at AuEx Ventures, which had the Long Canyon deposit. That was where I met him. He was also general manager of a number of open-pit, heap-leach operations in Nevada, including Marigold, Florida Canyon, Ruby Hill and the Pinson mines.
"The increase in M&I ounces really adds value because these ounces are highly likely to be mined."
The VP and General Manager of Relief Canyon is Dan Moore. He comes to us from Kinross Gold Corp. (K:TSX; KGC:NYSE). Nick Ricci is our Process Manager and Kurt Davis is the Senior Mine Engineer. Our metallurgical adviser is Earl Shortridge, who had a long and successful career with Newmont in Nevada.
Larry Hillesland is Vice President (VP) of Exploration and Development. He works with Pershing Gold's Manager of Exploration, geologist Doug Prihar. And we have the support of two well-respected geologists in Nevada, Bob Casaceli and Pete Dilles. Our Landman, Bill Houston, retired from a career at Barrick Gold Corp. (ABX:TSX; ABX:NYSE) before joining our team.
At our corporate headquarters in Denver, Mindyjo Germann is our Executive Administrator and Corporate Secretary. Eric Alexander is Vice President, Finance and the company's Controller. Jack Perkins is our VP, Investor Relations. Our focus is to put boots on the ground with an experienced team that knows the rocks and the jurisdictional challenges.
TGR: I see you just added two members to your board of directors. How important is the board for setting your strategies?
SA: We started with a close-knit board of directors that includes Alex Morrison, a colleague of mine from my Franco-Nevada days; Barry Honig, a highly respected and successful investor; and myself. The three of us work quite closely. Alex is an independent director, so he carries that responsibility. I am responsible for management and the day-to-day operations, and I consult with my board members as I need them.
On the occasion of uplisting to NASDAQ, we increased our board of directors to add different talent. I have known Ed Karr for four years. He lives in Geneva, Switzerland, but is an American by birth. He is an entrepreneur with vast experience in the mining business. He is very well situated to help us as we look for new sponsorship and support for the company in Europe. The second new director is Alan Branham. He is a geologist with degrees from Stanford and Washington State University, and had a long and successful career with Newmont. He brings a lot of experience on the ground in Nevada, as he made a number of significant discoveries, including Spring Valley, which is now being advanced by Barrick Gold on trend just a few miles north of Relief Canyon. Ed and Alan will bring the skills to continue to move Pershing forward.
TGR: How pivotal is the price of gold to the success of your operation?
SA: Gold is what we sell, so the price of gold is very important. The gold price has been drifting down over the last three years, mainly because of the strength of the U.S. dollar in relation to the euro and most other convertible currencies. Real demand for gold remains strong for geopolitical reasons. I expect to see growth return in Europe, the U.S., China and India in the not too distant future.
Right now, we're seeing gold trade in a range between $1,150–1,275 per ounce ($1,150–1,275/oz). The most recent spike in the dollar versus the euro has resulted in gold prices being flat to modestly down, stated in U.S. dollars. What that tells me is that the fundamentals for gold are good. As the U.S. starts to grow, we'll start to see real demand increase. I am confident the Eurozone will recover, we'll see the euro start to rise against the dollar. Gold has a lot of upside. So I am bullish on gold.
"The deposit sits open in virtually every direction."
We are in the enviable position of being able to design the mine plan around a price environment that I expect to stay close to the $1,200/oz trading range with margin because this is such a low-cost operation. Once we have the economics down on paper, then we can make a decision about the timing of the opening of the mine.
TGR: What differentiates Pershing from other gold miners in Nevada? Why should investors buy your stock before you've gone into production?
SA: The main distinction is that we are an emerging producer. We started as an exploration company, and within a very short period of time we successfully defined a significant gold resource. We have a processing facility in place, designed for the specific ore types at Relief Canyon. Relief Canyon was mined by others successfully in the past, and with a bigger and better ore body we expect to build on that past success.
The other reason you should pay attention to emerging producers like Pershing Gold is that we have the opportunity for rerating as we step toward production. The metrics for valuing a producer are different; they are more generous because they present lower risk than explorers and developers.
We differ from other emerging producers because we are on the cusp of making that decision to go into production. That decision does not entail construction, financing and permitting. Those are all behind us. A decision for us to start the mine is one that can be executed in a very short period of time. We are an emerging producer that can provide real leverage to the gold price, more than others in our sector of the industry.
Also, we are working through some very significant catalysts. One was the uplisting to the NASDAQ. That means that we're playing on a bigger stage now. Major investors in the gold space can now buy Pershing. We will have better liquidity and new sponsorship of the stock in the U.S., Europe and in Canada.
There are also some catalysts on the ground. By the end of this year, we will be in a position where we can know the economics and set the timing for a restart of the mine. Also this year, we intend to continue to drill out the ore body. As we do that, we'll have still another announcement further expanding and upgrading our resource as we continue drilling.
The last catalyst that people can look for here is the discovery of even more deposits on our large land position. This year, we're going to drill two of our exploration projects, our Packard pediment project north near our border with Coeur Mining Inc. (CDM:TSX; CDE:NYSE), and some of the older gold, antimony and mercury districts to the south, which will be worth watching. There will be a lot of news coming out.
TGR: Thank you for your time Steve.
Steve Alfers has a distinguished 30-year career in the domestic and international natural resources industry. He has a proven success record in building value and maximizing growth. Mr. Alfers has extensive experience in private and public corporate finance, mergers and acquisitions, complex international business transactions and governmental affairs. He is nationally and internationally recognized for his expertise in natural resource development, privatization of state owned enterprises and foreign investment. Mr. Alfers is a results-driven leader, committed to increasing shareholder value through disciplined management and integrity.
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