Exited out of Americas Petrogas BOE.V

I have been a big cheerleader of Americas Petrogas on this blog for quite some time. Americas Petrogas has been good to me along the way with my average cost around $0.20/share. I like the way the company was structured and financed along the way.

I blame my exit on the asinine policies in Argentina.

Yes Americas Petrogas has got some cherry property, great partners and a healthy treasury, but the constrictive environment in Argentina will never see Americas Petrogas reach its full potential.

If there is a change in government that is more pro business investment friendly then by all means I will jump back in, until then there is money to be made elsewhere.

Goodbye my old friend.

Is Orko Silver looking for a new suitor?

I receive the Stockwatch Gold Summary a few times a month and there is always nuggets of information between the lines. On August 24th, Stockwatch had included a paragraph on Orko Silver, a Mexican explorer that was left at the alter by Pan American Silver.

 Gary Cope's Orko Silver Corp. (OK) rose eight cents to $1.50 on 1.03 million shares. The company awaits a late updated resource estimate, which it hoped to have by March. In June, the consulting firm hired to complete the estimate blamed the delay on software problems. Orko needs the estimate before it can update the preliminary economic assessment for its La Preciosa gold-silver project in Mexico, where the company has been having a horrible year. Its La Preciosa joint venture partner, Ross Beaty's Pan American Silver Corp. (PAA: $17.13), dropped its 55-per-cent option unexpectedly in April, sending Orko's stock tumbling to 50 cents from $2.70. After three years of sitting pretty, promoting Orko's "fully carried to production" story, president Cope is now scrambling to find a new JV partner. He still hopes to get the $270-million mine into production by early 2014. Orko says it had entered confidentiality agreements with more than one silver miner, and has also scheduled site visits. The company has $11-million in working capital. Mr. Cope has not had to raise money at Orko since 2009.

In today's market the only exit for some of these juniors is a night in white armor and with $11 million in the bank and a Cap-Ex of $270 million it would seem to me that Orko is up for sale.

Now before anyone should jump in one has to be aware of some pending stock option that are due to expire in October and in November this year. These stock options are very much in the money and given the value of exercising them I fully expect them to hit the market. Before I reveal the options lets look at the broad strokes of the share structure as of April 2012.

According to Orko Silvers website the share structure is as follows

Issued: 131,693,979
Options: 10,425,000
Fully Diluted: 142,118,979


In October and November is where things get interesting for Orko Silver as per the following information gathered from the latest quarterly information, April 30, 2012.
 
In October 2012, 5,195,000 options at $0.60 expire and in November a further 4,915,500 options at $0.45 expire. Let analyze the $0.60 options first and lets use today's closing price of $1.58/share.

5,195,000 options represents $3,117,500 to the treasury, it also means that who ever owns them has to write a cheque for the same amount. Given today's closing price of $1.58 it also meant that who ever holds these options are in the money for $5,091,000.

4,915,000 options represent $2,211,750 to the treasury and it also means that a very large cheque is to be written for them. Again lets take the closing price of $1.58 and see how much profit is on the table, $5,553,950! So to recap by November Orko can bump up their treasury by $5,329,250 and the insiders could potentially rake in $10,644,950.

Now here comes the dilemma for Orko do they exercise their option or let them expire for the bigger picture. If they exercise their options one would assume that who ever owns the options would sell a good majority of the 10,110,000 options into today's market.

The other option would have a suitor make an offer around today's price and the options would be part of the buy out package.

But wait...those with money know that Orko needs $270 million to become a real company so why pay now or even in November until all those juicy warrants expire, leaving close to $10 million on the table for the insiders. 

With a fully diluted market cap of $222,256,986 and a required Cap-Ex of $270,000,000 and only $11,000,000 in the bank is there a suitor willing to bet this deal is worth $492,000,000? According to their latest presentation the PEA (which indicated that it is to be updated) shows a undiscounted present value $497 million and a NPV at 5% discounted at $315 million.

As I scroll through the latest presentation the share structure as of August 28, 2012 reads as follows

Issued:                                 135,093,979
Options: (average $0.55)         5,575,000
F/D:                                     140,668,979
 

Which indicates to me that 3,400,000 options have been exercised and 1,450,000 options have been cancelled since April. According to Canadian Insider a lot of the $0.45 and $0.60 options are being exercised with the President Gary Cope selling 182,300 on Aug 27 and 28th at an average price of $1.57 and I am sure he is not finished yet. (I will be keeping an on Canadian Insider for the next few months)


A few player in the area include Argonaut Gold and the El Castillo Mine, Avino Silver & gold with their Avino Mine (Avino is to small to be a real player). Hecla Mining is also a player with the San Sebastian mine but seeing that Hecla was only going to pay a small premium for US Silver, I would strike them off the list, also I do not believe they have a mill at their mine. First Majestic is also in the area with their La Parilla mine, but given First Majestic's shrewd take over of Silvermex, the current premium looks to be too high. Fresnillo could also be a player but all bets are that they swallow MAG Silver before going after this asset.
Pan American Silver could easily come back to the table as the current price of Orko is much more attractive since the break up. Pan American Silver needs to replace the lost Navidad asset in Argentina.

For the record I have no position in Orko Silver but at some point I believe and as Gary Cope has indicated, Orko needs a deep pocket friend, so there will be an opportunity there. The 5.6 million options on a short string is keeping me away, no need to be the greater fool. Sure there are a few tire kickers but everyone wants a deal these days.

I believe given today's tough environment, those with the deep pockets can wait Gary out and strike a better deal in the future or Gary can raise $270 million and put the mine in production. What would you bet on?


Update: September 4 2012:

After perusing the chatter on Stockhouse, Orko punters believe Goldcorp could be in the running and Couer d'Alene Mines also.  Someone else mentioned Fresnillo but Mag silver would be their most likely target.

Meanwhile Gary Cope unloaded another 91,700 shares on August 31,2012 and exercised another 1,400,000 shares. Minaz Devji exercised 1,500,000 shares.

 http://www.canadianinsider.com/node/7?menu_tickersearch=OK+|+Orko+Silver

By all means if Orko was near a deal with anyone who signed a confidentiality agreement there would be a black out and the sale of stock would be prohibited. I would assume it would be in the best interest of Gary and Minaz to delay any hard negotiations until after they have sufficiently sold their option position.

Quinsam Capital throws the towel in on the E-Learning business

Roy Zanatta, President of Quinsam Capital opted to throw the towel in on his E-Learning venture, citing the lack of revenues.

The company announced that it has entered into an agreement to sell its on-line learning business.

 The company commented: "We are very disappointed with the lack of growth in the e-learning business. Our inability to convert a significant percentage of trial users to paying subscribers has made scaling of the business impossible. It has become clear that we were very unlikely to see the rapid growth needed to earn significant returns to shareholders, and continued operation of the business was an unsustainable drain on the company's limited capital. With revenues of less than $4,000 per month, the only realistic alternative to the proposed transaction was to close the business, which would have disrupted the children now using the e-learning system. The transaction we have agreed to will allow the company to exit the business while avoiding various costs and liabilities related to a shutting-down of the business. It will also allow the children now using the learning system to maintain their use of it.

According to the last Management discussion for the quarter ended June 30, 2012 Mr. Zanatta still felt it appropriate to pay himself $53,381/quarter to run an unprofitable company. At this rate he will have paid himself $112,000/year. No mention of him taking a salary reduction in lieu of not having a viable project for his shell.

With $280,000 in the bank and a burn rate of $70,000 a quarter, I will be watching for another Vancouver promoter putting his house on the market this time next year.

Culling of the junior markets

As I wrote the last piece on Teslin River Resources it has occurred to me that the current financial drought in juniors is showing who are the real promoters in the market and who are the marginal promoters.

Today's market will separate the herd from promoters who run public companies like it is their own little fiefdom to the real entrepreneurs that create wealth.

The money is still out there but it is only going to groups that can competently execute with shareholder money.

Pay attention to those who can raise money in today's market for possible winners.

Teslin River Resources TLR.V does not have 2 nickels to rub together

Teslin River Resources TLR.V admitted defeat in the markets today asking for a mulligan on their option of the Fraser Gold Property until 2013 from Eureka Resources. Teslin Resources is run under the shell umbrella group Resinco Capital Partners, who seem to be struggling in finding shareholder support these days.

Eureka Resources Inc. has completed an agreement with Teslin River Resources Corp. to amend the Frasergold project option agreement originally executed on Nov. 21, 2011, and subsequently amended on April 25, 2012.
The option agreement, as revised on April 25, 2012, required property expenditures of $1,206,678.31 be incurred by Teslin by Dec. 31, 2012, with a further $1.1-million incurred by Dec. 31, 2013, and a further $1.1-million by Dec. 31, 2014.
As a result of reduced investor confidence in the natural resource sector, which has made financing junior resource companies challenging throughout 2012, Teslin has had to recalibrate its exploration plans in line with the realities dictated by the adverse current market conditions.
As part of this realignment of expectations, Teslin entered into discussions with Eureka, the owner of the Frasergold property, located 100 kilometres east of Williams Lake in the Cariboo area of central B.C., to advise it of the uncertain market conditions and specifically the ability to finance continuing exploration activities.

Eventually this is what happens when you run public companies for the benefit of the insiders, you go back to the well one more time only to find it dry.

Financing juniors is still happening even in this market but the money is going to groups that actually make money for their shareholders.

It would take $15,000 worth of buying to get Teslin River back to a nickel bid to try and close their previously announced placement and the obvious supporters (insiders) seemed to be reluctant to throw their money at it.

That being said maybe the Frasergold property is really just moose pasture and not even worth buying at $0.025/share.

Note worthy traders of late

I have had success trading Taipan Resources TPN.V between $.34-.35/share and $0.38-.39/share on the back of speculation of their recent oil and gas project in Kenya.

My Tolima Gold TOM.V stink bids keep getting filled only to be sold later for bout $0.04/share gains.

A Sunward Exploration SWD.TO stink bid in at $1.32 was worth the effort as the shares were sold on Monday's open at $1.55/share. I am back on the bid at $1.32

I have opted to take a small kick at the can on Fire River Gold FAU.V at $0.085/share as they seem to have some production problems but have been able to raise close to $6 million in this market so they must have something there, anyway I won't be waiting for dividends on this one.

I am long some US Silver that I bought on the premise that Hecla was going to up their $1.80 bid, but failed to do so. If Hecla took a run at US Silver I could only think they might take another run at them at a later date. If not there is plenty of consolidation in the mining business these days and US Silver will still be in play.

I have also taken a small position in Chesapeake gold CKG.V which is a very choppy trader. Cheseapeake Gold is a Randy Reifel deal who is also on the Board of Goldcorp. One day this deal will be swallowed up by Goldcorp who already owns 9% with Sprott Assett Management owning 4%.

Chesapeake has a resource of 19 MM ounce of gold along with 519 MM ounces of silver and 4.2 billion pounds of zinc.

A Cap-Ex of $3.1 billion will not see this resource get come to fruition tomorrow but in a world of diminishing mining reserves in friendly jurisdictions Chesapeake will one day be snapped up.

The rest of the juniors I have are looking like they are barley hanging on to their Venture Exchange listings.

Americas Petrogas and the curse of Argentina

I like Americas Petrogas (BOE.V) and I like how the company has created shareholder value since I first got in at $0.20/share. Unfortunately the risk premium for operating in Argentina has taken  BOE from a high of $4.50 back to $1.75.

Operating in Argentina under the current regime of Cristina Fernandez de Kirchner has put a cap on Americas Petrogas stock price regardless of property potential or management competency.

Interesting thing is Argentina is looking to cozy up with China to boost their oil and gas production and they thought Repsol was bad, wait until they do a deal with China.

Anyway there was an interesting article in the Oil and Gas Financial Journal mentioning Americas Petrogas.

http://www.ogfj.com/articles/2012/08/argentina-looks-to-boost-shale-oil.html

The mention of Americas Petrogas in the article was as followed:

America's Petrogas also has an agreement with US-based supermajor ExxonMobil. In late August 2011, ExxonMobil signed a farm-in agreement with America’s Petrogas for a 45% stake in the company’s four 'Los Toldos' blocks in the Vaca Muerta. The US company committed to fund $53.9 million in the exploration phase, along with a further $22.4 million should the block reach the exploitation phase.

I do not know what it will take to get the share price of Americas Petrogas back over $4.00 as investing in Argentina only seems attractive to the Chinese.

Seaborne Minerals IPO

There are two types of promoters on the Venture Exchange, the first is a group that takes one company and focuses on creating shareholder value and does a good job at it. The other is a group that runs multiple companies that never seem to do anything but lose value for the shareholder while management lives off the treasuries.
 
I was recently offered an IPO in Seadborne Minerals headed up by the fine folks at Progressive IR, Kris Kottmeier of Stoneshield Capital STS.V fame and Toma Sojonky of Driven Capital DVV.V fame.

Kris failed to raise any significant funds for Stoneshield and subsequently failed to execute to date a 2012 drill program to enhance shareholder value, yet he asks the investing public to buck up for the next deal at $0.15/share.


My question is why start another company? Why not put the properties that you intend to raise funds with into an existing shell to add shareholder value? Unless adding shareholder value is not the intention. Is the intention is to create yet another company to ensure another year of management fees?

 My gripe is with promoters that run with too many shell companies sucking treasury money out of them along the way while the shareholder waits for a return on investment.

Seaborne Minerals seems to be going public with a property that could have easily been optioned to Stoneshield in the Geldenhoof area of BC to enhance the value of Stonshield.

Seeing that Stonesheild and Driven are currently trading at or below $0.05/share I will pass on Seaborne at $0.15/share.

Times have changed in the Venture Exchange world, success will only come to those who make money for others not themselves.