$PGLC - High-Grade Drill Holes De-Risk And Enhance Pershing Gold http://seekingalpha.com/article/1719872-high-grade-drill-holes-de-risk-and-enhance-pershing-gold?source=email_portfolio&ifp=0 Blockbuster Drill Results on 4 of First 7 Holes! On September 19th Pershing Gold (PGLC.OB) released the results of 7 diamond-core step-out holes, all of which hit gold. Four had significant intercepts of high-grade (0.2 ounces per ton, "opt" or greater). In my opinion, there's now a good chance that Pershing will be able to double its NI 43-101 resource to over 1 million ounces, at a meaningfully higher grade, in the next 4-6 months. Taking the weighted average of the 7 drill holes yields a gold grade of ~0.045 opt. Therefore, the average grade contained in these new holes is about 2.4 times that of the existing average of ~.019 opt. Assuming that Pershing will be able to double the size of the total resource with these and the remaining holes in the program, the company could be sitting on over 1 million ounces at an average grade of ~0.032 opt. And, that would still be on only a small fraction of Pershing's property. Best of all, the Lower Zone remains open in all directions! Press Release Exhibits Positive & Confident Tone Pershing Gold's press releases are always carefully crafted, each word deliberately chosen. However, last week's press release contained more positive commentary than usual, i.e. phrases like, "game-changer, and, "landmark events." Alfers and the Board would not have allowed this wording unless there was confidence that the reported drill results were significant. Alfers said, "These holes could be a game-changer that may significantly expand and upgrade the Relief Canyon gold deposit," …Based on our initial results, we expect material from the Lower Zone to add significantly to the gold resource. "…we have encountered high-grade gold in four holes within the Lower Zone mineralization. The expansion of the Lower Zone and the high-grade intercepts represent landmark events in the exploration history of this project." According to the press release, "the highest grade intercepts include a 2-foot zone of 1.321 opt gold contained within a 123.8-ft intercept that averages 0.044 opt gold, and a 6.2-ft intercept of 0.992 opt gold contained within a 30-ft intercept of 0.27 opt gold…" These intercepts, "...contain some of the highest-grade gold intercepts ever discovered at Relief Canyon. Pershing Gold's Thesis Playing Out Well A hallmark of Pershing's thesis regarding its recently consolidated 25,000+ acres is that Pershing County is underexplored despite documented and extensive, "known mineralization zones." Remember, Relief Canyon is a past producing mine. To prove the highly prospective nature of Pershing's property, Alfers retained the best geologists and technical people and deployed state-of-the art technologies to find gold efficiently, cost effectively and quickly. Last week's drill results go a long way towards validating Alfers' game plan and the strength of his team. Combined with the recent capital raise, which should comfortably fund the company through the release of a new NI 43-101 resource report and PEA, Pershing's story has been greatly de-risked. The ability of Alfers to raise debt capital or execute a royalty / streaming deal next year, on favorable terms, is significantly higher. It's important to look at the big picture de-risking afforded by this new discovery. The valuation of Pershing Gold is based partly on the expectation of finding a lot more gold. Not only is the company finding more gold, it just found much higher-grade gold in fairly wide intercepts. Presumably, the internal scoping study that was performed on Relief Canyon did not contemplate 0.03+ opt gold, it would have incorporated the 0.019 opt material. Relief Canyon Economics Only Getting Better However, the existing 0.019 opt resource's grade, depth and quantity was more than sufficient to suggest a possible mine with all-in costs of ~$750/oz - ~$800/oz. Even though some were concerned about the grade, 0.019 opt is better than peer heap leach projects in the region. For example, Coeur Mining's heap leach, gold-only grade is about 0.003-0.004 opt and Corvus Gold has a proposed heap leach project at 0.006-0.009 opt. More important, the capital required to put Relief Canyon into production is low due to Pershing's owned and permitted processing facilities. Now, the confusion about the ore grade, looked at in isolation from other strong attributes, should be put to rest. Implications For Relief Canyon Economics Substantially Positive! Assuming as I do, (subject to more drilling) that the average grade in and around Relief Canyon could be 50%-100% higher than the existing 0.019 opt estimate and that Relief Canyon could be sitting on a much larger deposit, these drill holes could truly be a , "game-changer." Think about what it could mean for the economics-- double or more the size, (and still open in all directions) and 50%+ the grade-- it would be substantially positive. Instead of a mine ramping up from 50k ounces of gold equivalent to 100k ounces at an all-in cost of about $775/oz, consider a mine growing to 200k ounces per year with all-in costs of $600/oz. With higher grade, twice the production and low processing facility expansion costs, Pershing's all-in costs would benefit greatly from economies of scale. [All of these figures are my estimates only, not necessarily that of management.] The fact that these strong intercepts were found so early in this ongoing process is incredibly important and exciting. These results represent more than just a new find, they validate the geology and provide data supporting a possibly much larger, tabular deposit. Furthermore, the discovery being made in a well planned out, targeted area, on the first set of holes no less, demonstrates skill and technical expertise. In speaking with shareholders and reviewing prior press releases, it's clear that Alfers has a plan and is following it. There's a great deal of excitement about the increasing possibility of the Lower Zone being large and tabular, which would allow for a low strip ratio. The relatively wide intercepts are also supportive of a tabular deposit. More drilling is required, but investors should be very pleased with Pershing's target identification. Prudent De-Risking Continues, Takeout Bait? Over the past year, Coeur Mining (CDE) has been mentioned as a potential acquirer of Pershing. This particular M&A scenario still makes a lot of sense. However, the cost of playing poker just went up and new players just sat down at the table. A year ago, the idea of a company like Newmont Mining (NEM) or Barrick Gold (ABX) paying much attention to Pershing Gold might have been a long shot, they didn't need to. A year ago, gold producers had more internal growth opportunities than they could pursue. Few could have known that large-scale projects would become impossible to fund, or that projects with all-in costs of $1,200/oz + would not be economic or that a new wave of foreign projects would fall victim to resource nationalism. A Move Towards Lower Risk = A Move to the U.S / Nevada! Now, producers have to replace ounces from natural mine depletion and demonstrate to investors a pipeline of low-cost, low-risk projects. And they must do so without spending too much and while reducing debt. With their inventories of suitable internal projects greatly diminished, producers will inevitably turn to acquisitions. Where are the lowest risk ounces? North America.... the U.S..... Nevada! Take Barrick for example. It was recently smacked with another long delay in its massive Chilean gold project, Pascua-Lama. This project has already been delayed for years and Barrick has sunk billions. Closer to home, Barrick is actively pursuing an earn-in at Spring Valley, a Midway Gold (MDW) project near Pershing's Relief Canyon. Spring Valley looks promising, but is still several years from production. Barrick could be into new gold production faster by partnering with or acquiring Pershing Gold outright. To be clear, I'm not saying that an acquisition of Pershing is imminent, just that the odds of it happening have gone up. Conclusion Investors in gold stocks experienced another highly volatile two weeks in underlying gold prices. Through all that noise, make no mistake-- Pershing Gold's drill results were very, very good. The ability of the company to translate historical data into superb drill targets is extremely important. Alfers and team proved a lot more than the presence of high-grade gold in 4 of 7 drill holes. They proved that Pershing is on track for rapid, efficient and prudent resource delineation that is attracting the attention of new investors and prospective suitors.