Roth Capital Partners: Pershing Gold buy and price target 6.25 USD

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PGLC: PEA Demonstrates Value of SelfMining On June 28, 2016, PGLC released the results of its PEA on the Relief Canyon project in Nevada.

We believe the results demonstrated both the viability of the project and the potential impact of self-mining instead of using contract mining. As a result, we are reiterating our Buy rating and $6.25 price target.

■ PEA demonstrates value of self-mining. On June 28, 2016, Pershing Gold released the summary of its recently completed PEA on the Relief Canyon project.

The PEA considered both self-mining and contract mining and although self-mining requires an additional $9.8 million in upfront capital, we believe PGLC will ultimately elect to use this method due to the significant impact it would have on the project NPV, in our view. As a result, we have updated our modeling assumptions to reflect the use of self-mining.

■ Next step should be to finance and construct, in our view. Given the work done to date and low capital requirement to enter production at Relief Canyon (as compared to most gold mining projects), we believe PGLC will move towards construction rather than completing additional preliminary economic studies. With this in mind, Pershing believes it will receive all necessary permits to begin phase one of the project during Q3 2016. Once PGLC receives the necessary permits to begin phase one, we believe the company will make a construction decision and begin construction with an eye on first production in the first half of 2017.

■ Reiterating rating and target. Although we updated our model to reflect self-mining rather than contract mining, the additional updates we made mostly offset the benefit. As a result, we are reiterating our $6.25 price target. However, we believe the PEA adds credibility to the Relief Canyon project and could result in a significant rerating of the company over the coming months as PGLC moves towards a construction decision. Thus, we are reiterating our Buy rating.



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