The general consensus among shareholders of Pacific Gold Corp. (OTCQB: PCFG) is that the big payday is still some time in the distant future and while the when is yet to be known the how is almost universally agreed upon, the activity of their subsidiary Nevada Rae Gold, Inc. and its efforts at the Black Rock Canyon Mine in Nevada’s Crescent Valley. Nevada Rae Gold recently expanded its lease agreement to secure the remaining 25% interest in the B&B claims, a claims area that “encompasses almost 2,000 acres of additional federal mining claims containing gold bearing gravels.”
Shares in PCFG had been holding above the 0.08 mark as late as August 16, 2011 after revealing that NRG had measured its next 3 mining blocks to be mined and processed in the third and fourth quarters of 2011 as well as rented a small fleet of equipment from a large heavy equipment manufacturer that includes a track dozer, two front end loaders, three 40 ton haul trucks, a motor grader, water truck and hydraulic excavator with plans to use the equipment at least through the end of 2011.
Unfortunately for shareholders of PCFG the following day shares tumbled to the 0.04 level after it was announced that the company’s subsidiary, Pilot Mountain Resources, Inc., had settled its Quiet Title action with Platoro West Inc. (“Platoro”), Wolfranium Resource Corporation, and William Sheriff. Essentially PMR agreed to pay Platoro 15% of all proceeds received from Black Fire Minerals subsidiary Pilot Metals under the option agreement between Pilot Metals and PMR.
Of course PCFG CEO Rob Landau tried to spin this news in a positive manner, stating “We felt that our claim to title was very strong, however the length of time and money involved in fighting the dispute was considerable and we felt that the Company would benefit more from having our resources working immediately at the Black Rock Canyon Mine.” The reality is Landau is right and recognizing that Black Rock Canyon Mine is where the value is should give shareholders some peace of mind.
In their press release back on August 16, 2011 PCFG updated the production at Black Rock Canyon Mine and said since July 13th they had “totaled approximately 9,600 tons or about 6,500 yards of gravels. The processed gravels comprised the entire remaining stockpile at the BRCM as of June 30th. Included in the stockpile were mostly those gravels which the Company has identified as ‘mudflow’ as well as a limited amount of gravels that the Company considers normal ‘pay’ gravels (gravels that the Company has identified as its main resource). From the stockpile gravels the Company produced approximately 30 ounces of gold.”
As part of the processing PCFG saw a significant difference in gold grade of the mudflow and the grade of gold within the pay gravels of the stockpile; an average gold grade of about 0.1 g/yd3 compared to 0.3 and 0.4 g/yd3. The significant difference pushed the company to the conclusion that they should suspend their mining of mudflow material and concentrate their efforts on their previously identified pay gravels for the remainder of 2011.
Looking at PCFG’s plans for the remainder of 2011 as it relates to Black Rock Canyon Mine, the company estimates the total cost, including production and SG&A, should not exceed $270,000 per month from August to December. During this period PCFG expects to mine and screen the 120,000 cubic yards of gravel from the three mining blocks mentioned earlier, anticipating 0.4 grams of gold per cubic yard.
Shareholders will get a better idea about what’s happening in November when PCFG releases their third quarter report at which time they have said they would update guidance on the fourth quarter. Patience is something that shareholders have had to develop and that patience will again be tested at Black Rock Canyon Mine as the company has acknowledged that they are “taking a slightly slower approach than originally planned in order to make sure that the plant runs efficiently.’
That being said Landau is confident that “we are now ready for consistent production and we plan to work diligently to convert PCFG from a Company developing a mining operation into a Company operating profitably.” If they can manage that then the days of shares trading at 0.04 will be over but saying they’re ready for consistent production and actually realizing consistent production are two different things and PCFG has shown it is difficult to generate profits.
Right now it’s just as difficult to generate financing as the company stated that as of August 15th there were 745,732,651 shares of common stock outstanding, a figure that has played a significant role in keeping share price down. Because PCFG has no steady revenue, reporting none in the second quarter, they have funded their operations from the sale of securities, issuance of debt and loans shareholders, most recently a $140,000 loan from Landau and the issuance of a convertible promissory note to one investor for $219,000- a note that is convertible into shares of PCFG at 0.07 per share and simple interest at 10%.
The trouble with financing could lead to additional trouble at Black Rock Canyon Mine as PCFG has said “we will incur substantial expenses for the near term as we build up operations at the Black Rock Canyon Mine and progress with our evaluations of future mining prospects.” Obviously they are costs that need to be incurred but that doesn’t mean they are costs that can be covered and that is why there is substantial concern regarding the company’s future.
That bleak outlook is based on concrete figures outlined in the company’s second quarter results: “As of June 30, 2011, our assets totaled $1,329,234, which consisted primarily of mineral rights, land and water rights, and related equipment. Our total liabilities were $4,500,781 which primarily consisted of note payable to a shareholder of $2,070,031, accounts payable and accrued expenses of $1,311,308, notes payable to related parties of $322,088, and promissory notes of $677,540. We had an accumulated deficit of $26,514,754 and a working capital deficit of $1,594,936 at June 30, 2011.”
While shareholders continue to rely on patience the clock is ticking on PCFG, they cannot continue to issue promissory notes and sell securities to fund their operations; they need to generate revenue that will in turn keep their operations running. The picture should get a lot clearer in November when PCFG recognizes revenue in their third quarter results and updates their guidance for the fourth quarter, in the meantime shares will likely remain around their current level and the believers will continue to stock up.