Towards financial flexibility: a case from CRGC and PGLC
Companies involved in mining projects require massive financing for the first two or three years of operation and finally they get return from so long investment as well as involvement. We know Pershing Gold Corporation (PGLC) and Continental Resources Corporation (CRGC) are same type of companies. Both PGLC and CRGC has invested huge amount to run operating activities though they were yet to get any result in the form of revenue. Their financial inflexibility exhausted working capital or liquidity. PGLC incurred a net loss of approximately ($5.1) million for the quarter ended September 30, 2012 and approximately ($45.6) million for the nine months ended September 30, 2012.
Similarly (as shown by SEC filing of CRGC), “the Company has incurred a net loss attributable to Continental Resources Group, Inc. of approximately $9.6 million for the nine months ended September 30, 2012 and cumulative net losses of approximately $36.5 million since its inception and requires capital for its contemplated operational and marketing activities to take place”(SEC filling). CRGC was planning how to minimize operating expenses to run the company in future. Similarly, Pershing Gold Corporation (PGLC) was facing almost same type of problem though this company was comparatively in better position than CRGC. However, PGLC management was also seeking a way to reduce their operating expense. The Management of CRGC stated their doubts whether they would be able to raise additional capital by issuing more common stock. They cleared that (SEC Filling), “the obtainment of additional financing, the successful development of the Company's contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raises substantial doubt about the Company's ability to continue as a going concern”.
Under this situation both Board of PGLC and CRGC reached at good solutions. They jointly declared dissolution and liquidation of CRGC. This will eliminate a lot of common cost to make financial flexibility as well as to generate more profit margins from operation.