Trading SBB

Once buzzing around $8 at its high, my favorite northern Canadian project is in the dumps (as far as sp is concerned). That being said, there seems to be a number of individuals trading this thing quite successfully. The latest zone of resistance seems to be around the $1.40 range, with a weak support level at $1.

I saw it move up, and close, at that level yesterday and watched this morning, and sure enough bounced off that level by a good 4%. This is the third attack at this level so we will see in the coming days how it plays out.Interestingly enough, the historical charts don't show any major buying at this level, even going back 4 years (note: highest volume in the last 4 years has been at 4 dollars)

Things shaping up for Mahdia

Well, if you read my last post about Mahdia Gold you know what I think of Alan Zaakir. Well...today he resigned (canned).


So now we have Andre Duchane at the helm and the old boys group which was headed by Zaakir is no longer safe. I look forward to seeing exactly who they bring in to replace Zaakir as the Executive Chairman.

I can't help but suspect that this was a forced move. Mike Wekerle bailed the company out with $1,000,000 to pay the Guyana Government, the amount which Zaakir had given himself as salary. The project could be sound, but the money behind it likely got tired of the games being played by this man. Overall, a good move for shareholders, Curious to see who they bring in next.


EDIT: ship hasn't turned it course. Some average alluvial gold production but no financing....

Received my CXB proxy form

Should I really have been surprised when I read that it has been recommended that shareholders vote yes on a proposed share consolidation.

I get a kick every time I read a recommendation like this, as if it will somehow bennefit the share holders.

Now, granted, CXB has ~190 million shares. In case no one has been through this before let me explain to you what typically happens.

Typically, when a company announces a proposed rollback, sp goes down. Not horrendously, but down none the less. Why? Well, because people who believe that there is a good chance the reverse split will occur realize, or have learned, that the stock price, almost always (especially in the junior exploraco industry), ends up going back down to the same, or near the same price, as it was before the roll back. So, out of fear of just winding up with less shares at the same price, they sell their shares, even if its at a large loss, and buy back the same position after the post-rollback havoc has been wreaked upon the share price (or they just walk away asking why they didn't liquidate sooner).

In a worst case scenario, the rollback actually gets shareholder approval and so ensures what it described above.

Long story short, a reverse rollback essentially leaves you with less amount of the same priced shares. Now, your shares may have more value in the sense that there is less of them around and any large, panic buying inducing, news will likely see the stock go up to higher levels than it would have otherwise...but, of course, you have less shares.

Rollbacks are notorius in this industry because many companies don't seem to do anything other than sell stock, and when their shares drop so low that there is little interest in buying them (because they haven't done anything to create interest) management decides that a higher share price will increase share buying. Now, that doesn't really help the investor who is down on his investment, but certainly does help management. This was a game played for years on the VSX, and has continued on the TSX-V.

All this being said, I don't want to make it sound like Calibre Mining is one of those companies. I really do not believe they are. They have a nice story, that just seems to be getting cheaper like all other junior stories right now. As per a recent news release, B2Gold is to spend 6 million in exploration work on their Primavera property for an additional 19% stake in the property (which, after earn in would be a total of 70%). 6 million in exploration in this market is something to champion. I think CXB themselves are running low on cash (a little over 1 mill in the bank as per last financials) and may be sweating a bit when the idea of management fees, exploration costs for other properties, and listing fees/working capital comes up (yes...in that order of course).

With good news on the horizon, minimal cash, other promising looking projects, and 190 million shares outstanding I could almost think about considering to vote yes....but I won't. Nothing like asking the shareholders to take another one for the team. How about increasing shareholder value before asking us to agree to decrease it.

Victoria Gold

There are a number of plays which I have been looking at entering but I have been waiting for the bottom in this junior down cycle. I was very sure that we were months away from the bottom, and I was gearing up to pull the trigger. The recent fall (attacks) in the price of (paper) gold has sent me crawling back to my perch, far away, as I observe the happenings for a bit longer.

Its in these bottoms, whenever I can best perceive them, that I will go into a play on the fundamentals, going long over a greater period of time than normally characterizes my trading style.

Anyways, one of the companies I have been looking at for a while is Victoria gold and their Eagle Gold project. Victoria Gold, trading on the V under the symbol VIT has been trading in the 17-20 cent range lately with 340 million shares out and a market cap of about 60 million.

The Good

Their Eagle Gold project contains quite an amount of gold which includes a reserve of 2.3 million (all falling under the probable category) oz Au at 0.78g/t, 4.8 million indicated at 0.68 g/t, and 1.5 million inferred at 0.60 g/t.

In regards to the reserve, the CAPEX will be roughly $400 mill with life of mine sustaining costs at $133 mill. According to the reports, it would be an open pit mine which would move 29,500 tpd ore and produce roughly 200,000 oz Au per year at $542/oz, with the highest grades/yields coming from the first 3 years of the mine. The mine is proposed to open in 2014/15 with a life of 9 years. Processing costs are projected at around $12/t ore.

All in all not bad. Although the company has some money, somewhere around 40 million last I checked, they will need to raise much more cash to get it rolling. That being said, they are quite far along in their permitting processing with a feasibility study, first nations agreement, and an environmental assessment that has been approved by the Yukon government. They currently need to finish up with their construction permits and then construction of the mine. As well, they are still needing their quartz mining permit.

At .17 cents it has seemed like a undervaluation to me, and apparently to Kinross as well as they own 16% of Victorias shares. Sure the project is a bit low in the grade department, but majors like these kind of plays as take over candidates, where all the dirty work is done. I will be waiting to see if they can turn some of that 6 million inferred ounces into the indicated category as well.

Aside from the general market conditions, Yukon plays seem to receive further devaluation. The area fell out of favor a couple years ago and has never regained its form. That being said, the Yukon is my favored territory in Canada for miners. The first nations groups are more sophisticated in a bussiness sense then say those in Nunavut, as they have been through it before, and there are not the land claim battles going on the same extent as they are in the NWT.


The Concerning
Well...They need to raise a lot of money. It this sector and market condition that large number seems even larger. As well, I would imagine that large dilution will come of this, very high dilution. I recall reading that they were planning on selling gold forward. Not sure if it was just a presentation suggestion/food for thought but it seems that the general market sentiment is fairly bearish on the POG. At this point in time, gold is trading at 1470/oz and their 43-101 report was done based on a 1325/oz price.

Generally, that is fine when gold was trading at 1650/oz, but at nearly $200/oz less on a low grade project a $145 buffer zone just does not give the same comfort as, say, a $325 buffer zone. I actually felt they should have used a lower POG for their technical report. Some of the other projects I have been looking at were using $1250. We all saw how gold can fall in the course of a day.


So...as per full disclosure....What am I going to do? I plan on picking up some shares in the 17-20 cent range, but not a large position. Will add if I see something I like in regards to the POG and VITs ability to finance their project.

Bad Management, Good projects.

I have written about Mahdia Gold Corp in the past and, anyone who has read the last write up I did, knows my feelings on the company; great project with horrible management.


I realize that talk is very cheap in this industry, sometimes intentionally and sometimes through unforeseen circumstances that cause good management, who really do care about increasing shareholder value, to go back on plans and miss timelines.

That being said, there is little excuse for management to use shareholder money for their personal bank account, which does happen far to often. A good example of this is Mahdia Gold and its management. When they closed a PP for 8 million a year and a bit ago, share holders really believed that it was time for the company to start developing this project which seems to have very high potential. But, one problem.... You can't just give 8 million to a group of guys who have spent the better part of the last 4 years closing PPs and never doing a thing. Go back and read my write up on Mahdia Gold, which begins with a brief history of Aztek mining; a company which Allan Zakir raised money in the millions and never did a single thing on the properties they owned, which they ended up transferring to Mahdia Gold. From the 8 million PP Al Zakir alone took a million and put it into his bank account, add other management salaries, and the fact that so little work was done on the property one begins to ask what happened to the other millions of dollers.

The next fiscal year, after giving himself his paycheck, Al released plans for a PP once again. Essentially, the company was broke again. After a small drill program and the re-evaluating of historical drill core. They were looking to raise money at 25 cents, of course, none of the guys who had become rich off of the shareholder money decided to put up any money themselves. Andre Duchane, the newest and only member of management to have any kind of credibility in the industry, put up some of his money.

So, out of the planned 4 million, they managed to raise a mere $350,000. Nothing more was heard from that PP. Yesterday, they raised $1,020,000 through unsecured subordinated debentures. 1 million will go straight to the Goverment of Guyana Geology and Mines Department, as per their Omai agreement, and that leaves 20k, plus the 350k they raised last month, which we haven't heard anything about.

Now....what, to me, is the most disappointing aspect of this whole Mahdia fiasco? It is that, for a long time, they have had a pile of low grade ore sitting around. Some reports say the grade is 0.85 g/t, but the official cut off grade for Cambior, when they were operating the mine, was 1.6 g/t. A cambior report form 1999 recorded 248,000 oz of gold in the stock pile. The mine continued to produce until 2006, and the stock pile grew over that time. Remember, gold was around $350/oz when this was happening. Now, with a higher gold price (a little less higher than it was last week) 0.85g/t projects are in development.

The trick in this industry is finding large mine-able deposits, then getting the money to explore them, permit them, and process them. These guys, at one point in time, had 8 million dollars and a pile of gold containing ore sitting on their property. I still cannot fathom why they did not go ahead and start processing it. The times where, and still are, tough for financing, and it would seem that processing a large amount of gold ounces, which you didn't invest any time in uncovering, they were more a bonus item to the property, would be one of the first items to take care of.

Lets say that the stockpile never grew, which doesn't make any sense, but lets just use the lowest possible figure we can. Hell, lets use 200,000 oz. At a price of $1100/oz that is $2.2 x 10^8. Now, lets say that half the money one makes off each ounce was used to process it, a very large number, but still that gives $1.1 x 10^8. Alot of money which can be used for further drilling/exploration on the project.

Of course, this team has little experience in actually developing projects, only in using share holder money for their own bank accounts, so I suppose it wasn't that surprising. When Andre Duchane came in as president and CEO, it was one of the first things he announced...go figure.

This post might sound a little bit vindictive, and perhaps it is, but it really is frustrating to see incompetent individuals in charge of very nice projects.When you add up the money raised, the figure is in the excess of $13,000,000, not counting the money made from selling regular shares on the market.

So, we are in for another round of financing, and perhaps any money that they will get from their placer operations, in an area where no geology information has been released, no reports, no nothing. just a couple of sentences outlining the plans.

On a bright note, Michael Wekerle put down the 1.02 million so I suppose that is a bright side. He participated in the 8 million PP, taking down at least half that number iirc, so hes been in this play with some money for a while. Hes made a lot of money, and is a smart man, so I take some solace in the fact that he is still willing to invest.


PS: This post, although focused on Mahdia Gold is really describing the problem with this industry as a whole. This industry had little credibility left and its decline, in my opinion, lies in the hands those who have been profiting the most off it. At no point has the industry sat down and said that it is not ok to set up shop on only old moose pasture, get financing without any belief that the project has any real potential, and start collecting decent to high salaries, only to abondon the project a year and a half later citing lack of funds, then blaming the market. All the while, sitting on the board of 4 other companies playing the exact same game.

Even the majors are guilty. They rarely announce all in costs, then when Q3 comes out and investors are asking "why didn't you meet the targets", and in some cases "why are we loosing money", the CEOs and presidents come up with a load of excuses, but never telling plain simple truth; "we just mislead you into thinking exactly how much it would cost to pull the gold out of the ground and process it".

With so much money slipping through the fingers and disappearing its a wonder why anyone has wondered why the financing has dried up.

Just like raccoons and the distemper virus, the juniors go in cycles. Right now, the juniors are in in a distemper cycle reaching epidemic levels. Soon many will die and financing will once again start flowing back into the sector as only those companies with quality management and projects will survive the break out.

Until then, we ride out junior death and a gold price under attack. I still believe that the day will come. When gold being to stabilize I will begin nibbling, there are many juniors on my watch list....I'm just not sure how low they will go...

Until next time...

CZY...my old penny flipper

I used to flip pennies on Caza gold when it traded back and forth around the 11-14 cent range, and then again when it traded back and forth in the 7-10 cent range.

But eventually it sank lower, volume dried up, and the volatility dissipated. When this happened I left it.


I've noticed a bit of activity this last week and the price has jumped back up into the range where I was last trading it.


I'll see how it goes Monday and Tuesday and I may start trading it again. I initially traded CZY using various Fibonacci techniques but after a while I seemed to gain an intuitive understanding of the stock, and was correct damn near most of the time. It really is a special feeling.

Interesting enough, I wanted to buy into Caza back when it was trading at .35, for a number of reasons. But, I felt I had become attached to the stock, and decided not to buy it on that basis. I'm glad I did. Then, after flipping it for pennies, I grown another fondness for the stock.

Anyways, take a note of the volume.

Happy Birthday

Well....today is my birthday. Nice birthday gift from the markets today as gold plummeted $86. Haven't seen that kind of drop for some time.


This comes only a few days after Goldman Sachs recommended to their "clients" that they should sell their gold. Everyone who has been through this once before, any even many who do not, know whats going on. Goldman says sell, then they buy the gold that their clients are selling.


These prices wont be happening for very long unless two things occur. One, humans stop valuing gold, or two, the all in costs of miners fall dramatically.

Although there are a few large high grade deposits around where costs would could be around 500-800/oz all in, this would be very rare. In this case, for gold to continue to go down, the demand of gold would have to be less than the amount of gold which could be mined from deposits which require very low all in costs.


Anyways....gives a good buying opportunity for a lot of the gold majors.