A cost reduction strategy of CRGC and PGLC. Pershing Gold Corporation (PGLC) and Continental Resources Corporation (CRGC) have jointly announced Continental’s record date on March 01, 2013 for dissolution and liquidation of the company. We know that companies engaged in mining related operations need to invest huge fund for the first two or three years of operation and after successful digging, they get natural resources such as gold , silver, uranium, etc. as output to add with revenue pie. Both Pershing Gold Corporation and Continental Resources Corporation are engaged in same time of business. They required huge investment in initial stage of operation. Lastly, the situation came to such a stage they had exhausted working capital or liquidity. The situation was very vulnerable for CRGC. Due to large amount of preliminary expenses, the present financial flexibility of the company is not sound. As a result, “the Company has incurred a net loss attributable to Continental Resources Group, Inc. of approximately $9.6 million for the nine months ended September 30, 2012 and cumulative net losses of approximately $36.5 million since its inception and requires capital for its contemplated operational and marketing activities to take place”(SEC filling). The Management of CRGC stated their doubts whether they would be able to raise additional capital by issuing more common stock. They cleared that (SEC Filling), “the obtainment of additional financing, the successful development of the Company's contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raises substantial doubt about the Company's ability to continue as a going concern”. The company was planning how to minimize operating expenses to run the company in future. Similarly, Pershing Gold Corporation (PGLC) was facing almost same type of problem though this company was comparatively in better position than CRGC. However, PGLC management was also seeking a way to reduce their operating expense.
Perhaps, the above situation brings a good solution for both PGLC and CRGC. Their joint declaration will cause dissolution and liquidation of CRGC. The Shareholders of CRGC will get shares of PGLC. A lot of common expenses will be eliminated to make financial flexibility of PGLP. This cost reduction strategy will bring cost effectiveness as well as less pressure on liquidity. As a result, it is likely that PGLC will move well to generate more revenue as well as more profit margins.
