Euro Pacific: Buy Pershing Gold with price target 6.90 USD

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Pershing Gold

(Ticker: PGLC US — $4.72)

Company Update

August 1, 2016 United States of America Metals and Mining

Buy Volatility: 4

PGLC Begins 2016 Drilling Program
PGLC Begins 2016 Drilling Program. On 27 July 2016, the Company announced

that it has initiated the 2016 drilling program. As mentioned in our earlier note, the drilling program will be divided into two phases. While the phase one will be focused on improving the current pit economics, phase two will be focused on testing the targets on the south and east of the existing pit (refer Exhibit 2 below). To further explain, the phase

$0.44 one of the 2016 drilling program will include 20 holes (a mix of HQ and PQ (different $0.00 diameter drill holes)) and will utilize one core drilling rig. Also, it will primarily focus on the western and northern margin of the deposit. The Company has contracted Titan Drilling, Ltd of Butte, Montana to initiate the program. The phase two of the drilling program is expected to begin in 3Q:16 and will include ~25 holes. The program is expected to test the targets currently being developed to the south and east of the existing pit.

Overall, the Company has budgeted ~$2MM for the drilling program, which is much lower than the previous drilling programs. Also, the number of drill holes is limited to ~45; however, this is the largest exploration drilling program (primarily phase 2) the Company has planned over the past few years, in our opinion. The majority of the drilling programs in the past were either focused on expanding the current resource or understanding the existing pit. In addition to the drilling program, the Company has contracted Zonge International of Reno, Nevada to complete the geophysical surveys at Relief Canyon. The survey, that includes an induced polarization and chargeability survey, is being completed to develop the potential targets.

Production Decision Update. Currently, the Company is focused on advancing the Relief Canyon deposit into production for which it is evaluating the self-mining and contract mining options outlined in the Preliminary Economic Assessment (PEA), which was announced on 28 June 2016. We believe the decision is critical as it will allow the Company to arrange the financing for the project following which it can make a production decision. Also, the Company is expecting the receipt of the permit (expand the pit above the water table) from the U.S. Bureau of Land Management (BLM) over the next few weeks. The permit is critical and will not only allow the Company to expand the boundary of the existing pit but also deepen the ore body up to 5,080 ft. (or above the water table). Note our NAV model assumes that the Company will opt for the self- mining option. Additionally, the Company will need approximately six to nine months following the production decision to advance the Relief Canyon deposit into production. Maintain BUY and PT of $6.90. 



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