This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on May 9 - 15, 2016.

In this excerpt, the author interviewed Barry Honig, a financier, entrepreneur and investor, to find out the latter’s ability to move quickly to put deals together, outfox his competitors and convince others to follow his lead – like in the case of Pershing Gold.

The story of Pershing Gold begins in 2009 when Barry took a company public through a reverse merger, raising $4 million. He also took a seat on the board. But as all the Superstars will tell you, not every deal works out as planned. The business model was flawed and the management team did not execute. “When the CEO and CFO burned through all the cash, I had to figure out a way to create value for my friends who helped fund the company,” he says. “So I bought two pieces of dirt in Nevada for 

$2 million. I then found an asset that I could purchase out of bankruptcy, a fully permitted mine, for $20 million. However, I had four weeks to find the money to complete the acquisition. I gave them a $2 million deposit and a Letter of Intent.” 

Turning the proverbial lemon into lemonade, he put together a deal to acquire a uranium company, for which he had just raised $20 million.

“I was lucky, as the Fukushima meltdown happened about the time I was working on the Nevada transaction. Uranium companies blew up. I had helped raise money for the uranium company as well, so now, I had two companies that I had put friends in that were not working. Now, I had two companies to save. My reputation was on the line.”

He issued stock in the newly formed gold company, the “two pieces of dirt” in Nevada, and Pershing Gold acquired the uranium company, American Energy Fuels, taking $18 million of the cash in the uranium play to finalize the purchase of the asset of the Relief Canyon properties in Nevada. Pershing Gold later spun out the uranium assets. His next step was to find a superstar CEO to build Pershing Gold.

“I knew nothing about gold except the gold I got my wife at the jewelry store,” he explains.

“l needed management, so I called Pierre Lassonde, the president of Franco-Nevada (NYSE: FNV), who is one of the most famous people in the gold business, and I asked him how I should go about finding a top-notch CEO for Pershing Gold. He basically said I should either try to recruit the best people from the best companies or use a headhunter.”

Barry called Franco-Nevada’s head of North American Operations, Steve Alfers and offered him $500,000 in cash and 10% of Pershing Gold to take over the CEO position. Alfers accepted the offer in September 2011 and has quietly been building the company, preparing it for a listing on the NYSE. The company is expected to go into production sometime in 2015.

As for Barry, he is adamant. “My biggest deal right now is Pershing Gold. It’s going to be a $1 billion market cap company. This is my biggest deal ever.”

As the company literature states, Pershing Gold has consolidated a 39-square-mile land package in mining-friendly Lovelock, Nevada, neighboring significant current and past producing mines. Nearby producing mines include Coeur d’Alene’s (NYSE: CDE) bordering Rochester mine, which has been producing for 30 years.

Coeur d’Alene, the largest US-based silver producer, with a market cap of $725 million, has a current strategic investment in Pershing Gold. Under Steve Alfers’ leadership, Pershing Gold has more than tripled its gold resource to a measured and indicated 552,000 ounces.

H C Wainwright recently issued a “Buy” rating on Pershing Gold and 12-month target price of $0.70.

“Not only do I look after myself, but it is very important to me to stay with the company until it works. I have been in this business for over 10 years because I look out for my investors. If I put my money into the stock, and that of friends and family, I owe it to them to do everything I can to make the company successful,” says Honig.

If you are going to invest in the microcap space, get in early, and sometimes you want to get out early, because most small-cap companies will have to keep raising money. If they are successful, they will keep raising money to grow; if they are not successful, they will need to raise money to stay alive. Invest alongside guys who have been in the game, and get in as early as possible.

Barry, like most of the Superstars, has more than once sold his position too early and left money on the table. The microcap space is like a perpetual game of poker. The lyrics in the song, “The Gambler”, made famous by Kenny Rogers, though clichéd, sums up the quandary in which microcap investors often find themselves: “You got to know when to hold ’em, know when to fold ’em, know when to walk away, know when to run.”

Honig’s experience has taught him that “the biggest score is not necessarily the biggest win; it’s about the big win in the shortest period of time. Sometimes I have gotten out too early. I could have made 5 or 10 times more; I have been too smart for my own good, but other times I have anticipated potential pitfalls before other investors saw them, and been right to get out when I did”. I asked him to give me an example of a situation where he got out too early. “Akeena Solar did a reverse merge at a $10 million market cap in 2007. Not too long after they went public, they needed a second round of financing, and they couldn’t raise money, so I funded it. The stock went to $17, but I sold my stock at $5, and though I made $7 million, I did well, I could have made a lot more, but I got out early because I didn’t think the margins were good enough, and additionally they had no proprietary technology.

“You know people complain that I buy cheap stock,” he says. “You’re damn right I do. I’m the early investor in most of these deals. I’m fixing them or helping create them.”

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