If you can find another stock in the entire market with the kind of relentless insider buying that Pershing Gold (PGLC, Financial) has had over the past two years, please bring it forward.
With many investors interested in long-term exposure to gold wondering if this plunge in the price of the commodity represents a buying opportunity that kind of insider buying is worth paying attention to.
Gold may be having a slump, but many experts do believe that the long-term merits of holding gold and gold-related investments are still very much in place. The grand global central bank easing experiment continues with the possibility of a loss of faith in paper money very real.
Despite the struggles of gold Pershing Gold insiders continue to buy. That has to speak volumes about what they believe the economics of their core Relief Canyon Mine to be at even these reduced gold prices.
From the start of 2013 through the end of 2014 Pershing directors purchased over $20 million worth of stock with his own cash. These weren’t option grants or restricted stock; these were open market transactions.
And since then insiders have purchased another 21 million shares.
| Insider Purchases - Last 6 Months | |||
| Â | Shares | Trans | Â |
| Purchases | 21,084,700 | 24 | Â |
| Sales | N/A | 0 | Â |
|
Net Shares Purchased (Sold) | 21,084,700 | 24 | Â |
| Total Insider Shares Held | 2.66M | N/A | Â |
|
% Net Shares Purchased (Sold) | (114.5%) | N/A | Â |
The most recent of these insider buys occurred last week when both director Honig and director Frost purchased a significant amount of stock.
| Date | Insider | Shares | Type | Transaction | Value* |
| Jul 24, 2015 | HONIG BARRY CDirector | 65,000 | Indirect | Purchase at $3.87 per share. | 251,550 |
| Jul 24, 2015 | FROST GAMMA INVESTMENTS TRUSTBeneficial Owner (10% or more) | 25,000 | Direct | Purchase at $4.03 per share. | 100,750 |
| Jul 23, 2015 | HONIG BARRY CDirector | 5,000 | Indirect | Purchase at $4.39 per share. | 21,950 |
| Jul 22, 2015 | HONIG BARRY CDirector | 10,000 | Indirect | Purchase at $4.68 per share. | 46,800 |
| Jul 21, 2015 | HONIG BARRY CDirector | 5,000 | Indirect | Purchase at $4.80 per share. | 24,000 |
There are lots of reasons for insiders to sell shares of the company they own. There is only one reason to buy, and that is because they think the share price is going up.
You have to admit this is an unusual amount of insider buying. The story of how the company got to where it is today may help explain why these insiders are so pleased with the progress of the company.
How the company got to here
The Relief Canyon Mine was originally in operation back in the 1990s and was run by Pegasus Gold Inc. Pegasus had several operations including projects in Australia and Montana. In the late 1990s Pegasus ran into financial distress because of problems at its projects in Australia and Montana and was forced into bankruptcy and liquidation. The Relief Canyon mine continued to produce gold after the bankruptcy, but shut down when gold prices eventually sank to $270 an ounce.
What is now known as Pershing Gold acquired the Relief Canyon open pits and processing facility in 2011 for the bargain price of only $20 million. The company opportunistically grew the land position around the project from 1,100 acres to 25,000 acres through both private acquisitions and deals with Newmont Mining and Victoria Gold Corp.
Expanding the size of the property has been a great idea. The resource growth that Pershing has experienced since acquiring the project is proof of that. The total estimated resource (per NI-43-101 compliant report) has grown 520% which could explain the continuous insider buying as the project keeps getting bigger and bigger.
And the growth may continue as the deposit sits open in every direction. The company plans to continue to drill out the deposit for several years.
What is in store for 2015
After several years of expanding its landholding around the Relief Canyon mine and adding a large amount of resource through drilling 2015 is going to represent the next step for Pershing.
Despite a horrific environment for junior commodity producers Pershing Gold was again able access the capital markets and is cashed up. During the third quarter of this year the company will proceed with obtaining stock listings on both the Toronto and Frankfurt exchanges and will conduct a full economic feasibility study. Then at the end of 2015 Pershing expects to make a decision on whether to proceed with the transition to production. Based on the continued insider buying one would have to surmise that things are looking good for early 2016 production.
