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Chester owns $1.5 million in shares ( 10 million shares) of Independence Resources (formerly senetek). this equates to $.30 per share. Plus owns key Sunshine Mine claims.
No disagreement that US companies must follow SK and Sec Guide 7, my question ( out of curiosity) was where in those regulations do they specifically prohibit a company preparing a NI43-101 compliant report.
Wonder what is next for CGFI ?
Do you think they will be able to generate new buyers ? Or will company just slowly fade away ?
I fully agree they would be some years or much more away from being able to produce from these old mines, though I do not see we have enough information to even ball park how many years, though conceptually could be much less than 17 years.
This by the way part of my objection to how management disclosed or rather didnt disclose information to investors. There is no issue one just speculating on such stocks ,but if company gives impression that mill feed just around the corner ( in fact they claim also $9 million in "orders") my own opinion is that is misleading.
Few exploration properties turn into producing mines.Even less with management like this CFO !
By the way my question was related to what US and not Canadian rules specifically forbid preparing of a nI43-101 report by a USA reporting company. Just curious.
I think you nail on the head that it would cost money any sort of legal action.Though they may not have money to defend as the actions regarding the second in the mill and the Class B shares while perhaps legal, do have a rather poor appearance which in the USA certainly could be basis of a legal action of some sort. But since no money, what would the point be ?
And what does company really own ? The mill has a first and a second against it. And they already have one legal case winding its way through the court system.
I think we agree on most points. Though I am still curious what is the exact prohibition against NI43-101 reports. What is ludricous is after CFO went to all these lengths to impress people that they had prepared a NI43-101 report he then (a) tries to qualify by saying it was prepared according to NI43-101 criteria using wording the conceivably could mean he didnt actually claim a NI43-101 report (b) then the wording contained in the press release showed he didnt evidently understand much about the NI43-101 requirements and guidelines in the first place.
Agree mill not re-opening this year even if they received the permit without conditions as they have quoted $3 million to re-open , and I cant see anyone financing this company with $3 million at this point.
I also brought up the lack of any indication of a steady supply of mill feed. I have no way of judging the potential economics of the exploration properties, though normally one would expect them to be several years away - at best- from production.
But the CFO probably will still try to make a living still, so will be interesting what is the next story he will pitch !
most investors like to buy high and sell low, but this is a time to accumulate and forget the ups and downs for a few mnhs.
There is just something that strikes me as odd about a company where the CFO gets voting control AND for a "loan" gets a second lien on the main "asset" of the company, the mill.(And I am wondering what that "loan" consisted of - was this accrued compensation somehow characterised as a loan?). At the same time as you have well pointed out their poor disclosure.
They might have somewhat experienced lawyers ( though evidently not in the mining field), but that mill transaction certainly doesnt look right.
Good point,if no money why go through the bother of a lawsuit ? On the other hand maybe they can't be indemnified if they violated Nevada Statutes- I wonder if (a) they had under 2,000 shareholders of record (different rules if over 2,000)(b) and circumstances of the Class B share issuance violated any dissenters rights.
Does anyone know who approved the Class B shares ?
The management of this company quite creative for the reasons they give for things.
- DTC Chill : ( I could be wrong but my understanding CFO told someone this ) Because permit not granted ! DTC is not in business of judging merits of a business. While some DTC chills maybe not fair in some cases, it is because DTC sees something that concens them about share issuance past or present.
- Class B shares : issued because of fears of a hostile takeover ! Who on earth would spend the money to launch a hostile takeover of this company ! ( It would be curious the process by which this was approved by the way, and whether Colorado has any dissenters rights).
- Last Reverse Split- Would benefit shareholders ! How could anyone say a reverse of 5000 to 1 ( maybe a 5 to 1) could benefit shareholders !
-"Coventional financing" : How could any CFO with knowledge of current marketplace believe this company could get "conventional financing" ?
A question- is there anyone on this board who still believes mill will re-open and be operating in 2013 ?
I am in complete agreement that the bigger issue than the details we have been discussing is what they point to- the quality of management.I mean really since they were not required to file a NI43-101 and wouldnt qualify for a Canadian exchange anyway, the only reason for them to bring up NI43-101 is to try to impress investors with limited knowledge of this sector. Then they put values on properties without considering CAPEX, extraction costs or anything else, let alone any meaningful explanation whether they were using old reports or reasonable current exploration information.And in any case these questionable press releases didnt stop the slide anyway.(Wonder how CEO as a member of SME signed off on all this).
Their 10k last year also questionable- they have some investors believing the mill would be operating this year, they forecast other working capital needs but not to re-activate the mill and then finally on recent 10q estimate re-activation costs at $3 million.
And someone still buying the stock after 2 reverse splits in less than 12 months ! Wonder what's next - CFO announces a "temporary feasibility study accordng to SME criteria" ?
Interesting discussion, in response-
1. shareholders would like to make 40% to 70% : this begets question if convertibles have so low risk, why arent there more individuals and more companies involved in providing this sort of financing. part of the reason for the huge discounts is to provide sufficient incentive for the buyers of convertibles to provide such money.(forgetting for individuals the transaction costs, and whether they have brokers who would take such stock).
2.companies that have succeeded after using convertibles- i havent seen recent studies on this, my point simply impression the percentage who fail not as high as 99%.
3.rules allowing such financing- I just believe in the free market, if companies wish to finance themselves this way their business. what's better , a say 5% chance it will work, or 100% certain without funds company will fail ? there are some companies on the ropes because of regulatory costs and difficulties in financing lower priced OTC stocks nows.( I mean really, who believes sub penny stocks arent extremely risk speculatons ?)
4. convertible note holders and stock price- convertible note holders you rightly point out make there money when there is volume to sell into, and many companies complain they sell too fast. yes they usually have limits on percentage ownership, but my impression is that do not generally hold stock much past a day or two in general.
5 low price-please explain to me if one receives free trading stock at a 50% discount, why would a low price be of a benefit when they already have discount built in ? i have heard convertiblenote holders say they prefer low priced stocks because of all sheer speculators who trade low priced stocksm, thus some volume always seems to be there.
i guess more to the point with CGFI- do you think after they reverse they will be able to finance with convertibles at the same rate ?
True without many secured creditors(though CFO has a second on the mill) most likely creditors would not seek an involuntary bankruptcy though of course it is possible, and bankruptcy not cheap for a business. If I recall company already has one case winding its way through court system.
Just out of curiosity how would you determine whether company fooling investors, or being inexperienced or poor managers ?
I think the biggest reason this company wouldnt go bankrupt is that it couldnt afford costs or scrutiny of a bankruptcy. Whether they can continue to raise money to cover basic costs of staying in business ( at least $100,00 a year maybe $200,000 for this company), is another question.
Interesting though for quite some time there were those who defended this management no matter what was pointed out.Even considering how tough this business is these days for companies with a DTC chill ( deserved or not), permitting, financing, etc etc , one owould think CFO could have spend even a few days reviewing the NI43-101 and SEC Guide 7 rules, press releases from legitamate junior companies.
I am full of curiosity (a) next PR or 10q indicating why the sudden reverse decision was taken (b) and after the reverse those who have suffered 2 reverse splits whether they come back super strong on this stock again.
I admit I liked the idea they controlled a mill and were winding their way through the permit process, and were in an area that had several former mines. Looking at thier filings and recent press releases just didnt generate confidence management had the ability to pull this off.
No matter what an interesting company !
-The risk of course is (a) company ceases to be a reporting company (b) company is halted or de-listed (c) company declares bankruptcy voluntary or otherwise (d) volume dries up (e) company doesnt comply with other rules which hampers ability of convertible holder to sell shares. While I havent studied statistics on this, through hearsay convertible buyers genearlly assign 10% loss from new convertibles purchased- of course they make it up on the rest ! I simply fail to udnerstand if someone buys a convertible note why they dont "deserve" to make any profit- no profit, no financing for companies who are in that position.
-You are right for example in Canada convertibles as they are done here cant be done- yet hundreds of companies are the TSX venture are facing de-listing this year because they cant sell shares in a PPM below $.05 (or special circumstances $.03). Does that serve shareholder interest better ?
-Most successful convertible holders do not hold stock for 1 to 4 months, 1 day more like it
-I havent seen any study that would show 99.99% of companies using this sort of financing do not succeed but the percentage must be very high that dont.
-It is simply a tool that companies who cant get other financing use. Very risky of course. Would market be better off without such financing ?
- "Great work if you can get it". I agree,but most indiviudal shareholders wouldnt take the risk or bother.
Not at all, in several posts I have mentioned SEC doesnt have resources to follow up on every complaint.However SEC is under mandate to review files of reporting companies every 3 to 4 years,which typically for small company ends up with some comments- and if they pass over to engineering office one could be sure they would have comments about CGFI. What I dont know is whether they post their correspondence to every company- more and more correspondence is filed on Edgar than before, I dont know the criteria for that.
If you speak to companies the last several years has seen a more pro-active SEC plus increasd regulatory activity. Some of the rules - such as XBRL requirements - are plain silly, and the SOX rules,bizarre accounting rules, just overkill.Then add the DTC chill's, clearing houses not taking lower-priced stocks or making it difficult to place them,not that easy for smaller reporting companies. Have all these steps the last few years improved market place for speculators in small penny stocks ? made it easier to raise capital ?
Very simple- let me know ANY brokerage firm in the USA that will allow a customer to naked short a penny stock. If my comment ludricous, I will gladly take it back if you can name 1 broker in the USA who will allow naked short selling of a penny stock.
Market makers can for a very brief period short the stock, though speaking to several market makers I know they say simply usually a few days at most.How many market makers have you discussed this with ?
Last, the overseas route.I have heard this too, and this probably was prevalent 5 years ago and before that. DTC/CEDE has tightened up on brokerage firms balancing the accounts, so my understanding is that this route is being closed though on ocassion does still happen. For example many brokerage firms even offshore having problems even clearing these stocks let alone shorting them.DTC/CEDE has gone through quite a bit of changes past 4 years, which have resulted in DTC chills etc etc.
Any firm offshore will short these stocks ? I am not sure where you would get this from.
No the rules are different for stocks under $5 a share, I am not implying same rules as for big stocks.
Like most urban legends when one looks for the evidence hard to find.
Urban legends are always hard to discount because people just want to believe them.
First for retail investors, please name 1 broker in the USA that will allow a customer to naked short a penny stock like this.
Second,as I wrote market makers can in a very short window sell stock then have a few days to cover. Most dont becasue of the risk, and it effects their net working capital ratios, which reduces the volume they can trade. Some are just processing timing issues.
Third, because of the short window the market makers have, it all evens out unlike years ago.If short one day, market maker needs to cover in any case.All builds liquidity which is good for any stock.
Urban legends are always hard to discount because people just want to believe them.
First for retail investors, please name 1 broker in the USA that will allow a customer to naked short a penny stock like this.
Second,as I wrote market makers can in a very short window sell stock then have a few days to cover. Most dont becasue of the risk, and it effects their net working capital ratios, which reduces the volume they can trade. Some are just processing timing issues.
Third, because of the short window the market makers have, it all evens out unlike years ago.If short one day, market maker needs to cover in any case.All builds liquidity which is good for any stock.
I guess my point is more investors know about such things, the more we can judge in general terms a company's potential. I know some of the comments by those following permit details I have found interesting.
At federal level it is a disclosure system and not a merit system like in Canada or some states. So what should SEC do ? Judge the merit of every investment ? Restrict small companies even further ? Maybe have a system that OTC stocks can only be bought by accredited investors so that those who cant afford to lose wouldnt speculate in these stocks ? I think we would all agree that we would hope the system in place would lead to fair and material disclosure so that investors could make their best judgement, and eventually SEC does seem to catch up on worst offenders.
I dont know the answer, I just expect most penny stocks I will lose money on, hoping that on average a few good winners will make more money than I lose.I expect sub penny stocks are desperate and will dilute to survive- part of issue is regulation, it is so difficult to raise money on sub penny stocks through private placements for example the companies resort more and more to convertibles.Some people posted they wanted dilution to be "manageable"- when the company's own numbers showed they had to dilute steadily just to cover quarterly cash needs.
I dont know how smart CFO is or not but certainly since he has been CFO hard to say he has a track record of success.
But their press releases appear somewhat conservative, and as speculators are faced with low equity prices for mining stocks, choosing one that could turnaround in 2014 is the key IMO.This could be one of them
So where would this naked shorting be occurring ? retail investors cant find a broker who would naked short this stock, and market makers at best could short for 3 to 12 days. What evidence is there that there is naked shorting this stock ?
What do you mean convertible note holders do not "deserve" a profit ? They took a risk and charged for it- no one forced management to go down that route of financing.
If it is unlikely company will get mill in operation as projected in 2013( getting permit without conditions + financing), do you feel company should be putting out a press release indicating it will not meet its projections this year ?
Does anyone now believe it is probable they will get the permit without conditions and this will result in "conventional" financing or otherwise ?
Will CFO reverse his Class B shares ?
I am quite sure that any geologist at the exchange in Canada will state that is expected that any qualified person writing a NI43-101 report should be following professional standards as required by the organization the qualified person is a member of.
Most NI43-101 reports I have seen do outline prior work performed and give recommendations of work and the budget for the same.
Yes of course most exploration work would generally be the same in both countries, though there are a few quirks in how CIMM and SME members may do things in practice as one might expect,and some judgement calls - for example in Canada a geologist will generally consider NI43-101 guidelines and practice more than a USA geologist may consider SEC Guide 7 - because often a geologist in the USA may never have to deal with SEC Guide 7.A Canadian gelogist may recommend extra work in an area he knows the exchange geologist in the past has requested, that an American geologist may not put as much attention too.
In any case minor issues, I quite agree based on what information is out there it is probable that CGFI did not prepare a NI43-101 report,nor a "preliminary" report according to NI43-101 guidelines. Also that SEC would frown upon such assertions ( I am still curious abut the where is the legal prohibition you refer to). Also eventually this company will have a lot of expense and bother delaing with SEC engineering office and probably have to re-file some of their SEC reports and issue some retractions, if it is worth time of SEC engineering office to look at this company.
I do think though you have made your points !
Bigger issue in general in my opinion is this whole issue highlights the type of management CGFI has, and why they have had and will continue to have a credibility problem.But if just a speculation and everyone knows how risky such a stock is, maybe buyers of the stock just dont care.
My post quoted direct from the Ni43-101 guidelines.
As I have been told by the moderator that it is not permitted to more than once the same day write substantially the same thing, I can just refer to my pror posts.
I think we saying virtually the same thing in different ways.
Professional Standards( didnt include details about what a qualified person(or in some places "competent" person is)- to me certainly these reports are supposed to prepared according to professional standards.
(6) Industry Best Practices Guidelines -- While the Instrument sets standards for disclosure of scientific and technical information about a mineral project, the standards and methodologies for collecting, analysing, and verifying this information are the responsibility of the qualified person. The Canadian Institute of Mining, Metallurgy and Petroleum ("CIM") has published and adopted several industry best practice guidelines to assist qualified persons and other industry practitioners. These guidelines, as amended and supplemented, are posted on www.cim.org, and i
As far as work programs :
Item 26: Recommendations -- Provide particulars of recommended work programs and a breakdown of costs for each phase. If successive phases of work are recommended, each phase must culminate in a decision point. The recommendations must not apply to more than two phases of work. The recommendations must state whether advancing to a subsequent phase is contingent on positive results in the previous phase.
- I take this clearly to mean ( as with most if not all NI43-101 reports I have read) that these reports do recommend work to be perfomed- in fact for a listing in canada often this forms the basis of the recommended working capital a new listing should have, i agree a securities issue- but the report themselves contain such recommendations.
As far as the SEC fairly simple , Companies reporting to US regulators must meet SEC Guide 7 requirements.
But I still am curious where is the prohibition you speak of by the SEC (I am not doubting it just would like to know where specifically they make this prohibition).
I quite agree with you a lot of misundestanding about the NI43-101. CGFI press releases interesting as in one place seems they are saying they have NI43-101 report, and in another that the have a preliminary report prepared according to NI43-101 standards. To anyone familiar with reading the reports and press releases concerning Ni43-101 reports, the format and wording of CGFI's press releases instantly make one a bit sceptical of their experience or understanding.
p.s. if you look at my prior posts i made several points about how the press releases themselves are not in line with ni43-101 guidelines even if it is acceptable to report a report "prepared according to ni 43-101 criteria".in any case, those press releases didnt do much good anyway.
actually these fellows received shares even if restricted are supposed to report "fair market value" in excess of purchase price/cash pain. so if someone receives shares valued at X, but can sell only at 50% of X, they have tax impact calculated from the value of X.
Whoever posted that probably isnt familiar with how DTC works, nor brokers in practice.
For each share a broker has they have a debit/credit balance with DTC, which is then offeset by the broker on other side of trade, also with DTC. The net balance of shares with DTC/CEDE then balances to that with the transfer agent.A good first step for any company is to make sure their sharehodler records balances regularly to DTC/CEDE balance.
Second, there is a procedure whereby a company can ask DTC to deliver all shares held to be returend y one certificate- a company can then trace back every certificate placed with DTC.
There can be discrepancies because of timing differences, and in old days especially with frankfurt until they cleaned it up, there were more problems than today. The idea of naked shorting sub penny pink sheet stocks persists for some reason when no broker in USA will handle such a trade for regular clients.
I suppose theoretically someone could place counterfeit shares with a broker and they execute trade before they have cleared.Of the trhee brokers I know who would take this stock (and that is assuming they would take with a DTC chill) none of them would sell the same day.
Companies can pro-actively order both NOBO and OBO lists in conjunction with reconciling DTC/CEDE accounts and identify fairly quickly brokers and market makers trends.
The idea of naked short selling in these stocks persists absent any concrete evidence in how it occurs.Market makers can for brief number of days be short, but not for long.
A few minor points.
NI43-101 professional standards based on CIMM, in USA is SME. While work will probably be the same, it can be reported under NI43-101 seperately on same report.
I still am curious while I agree SEC frowns on promotion use of NI43-101 reports, and filing data derived if not in accordance with SEC Guide 7, can you point me to the "law" that says cant be used ?
Industry Gudie 7 is not only for US companies, it is for any company ( foreign or american) reporting to the SEC.
NI43-101 doesnt outline work to be performed on property ? This is surprizing, I have never seen a NI43-101 report that didnt outline recommended work program- in fact for IPO's in Canada and listing, often NI43-101 used as basis for working capital a company must have. What am I missing ?
I havent heard of that being a principal problem with the DTC chill, though it is interesting to consider.
I think replacing the certificate is interesting, because while it might be standard for new certificates issued, or for replacement, in this case it seems to imply they wish to slow down the process of shares that could tade. Or it is possible they are doing this thinking it could help the DTC chill if it was in relation to old certificates that company cant support why issued- so when replaced they could require support form the owner of the certificate.
I am just guessing here.
Wha is your take on the current bid price- why would anyone be buying before a 500 to 1 reversesplit ?
I agree a company that issues convertble debt does have more risk than a company that does not. I am not so sure about the idea the convertible debt holder cares about the price going up or down; they care about volume- the convertible debt holder buys the conertible note, holds for 6 months, then can convert to free-trading shares at a discount. They make their money when they sell because it is at a discount.
This is a lot different situtaion than even 6 years ago, when brokers could more easily sell shares, and let people cover later.The toxic financing then a lot mdifferent. But the principles the same.
There is no logical reason why management cant add value faster than the effect of more outstanding shares. Any company without positive cash flow needs equity,quasi-equity or debt financing. The idea some investors have that companies shouldn't dilute is unrealistic.
I would say the convertible debt CGFI took on did make situation more difficult, but management's approach as shown through their press releases and filings indicated they didnt have a marketing plan which tied into what they could achieve, hence they couldnt broaden their base of investors to absorb increasing shares issued.
Well i am not sure precise SEC rule aganst NI3-101 report for company not listed in canada but I know they seriously frown on companies promoting this sort of report when they are not required to file in Canada. As far as their press release and the non-compliance indicated in their press releases I posted a lot on this before, and seemed to generate antagonism amongst some members of this board, my prior posts outline my opinions on this.
Yes SEC Guide 7 requires much more disclosure than this company gives, I just posted comments from just one SEC comment letter. At best company when they have a periodic review will have to do a lot of re-statements, or worse a series of retractions. Looking at how they disclose things shows limited experience of the CFO in my opinion- and why serious investors wouldnt provide serious money to this company.
Uplist with IPO ? they would need audited statements, which judging from their filings would be quite extensive and time-consuming to repare, and would result in re-stating their past financial statemennts. Lots SEC questions could be expected from that process. Plus company has no money to pay for all this.
Company would have severe problems doing an IPO, just look at last SEC filings,and recent financial statements If they are development stage company how would they do inception to date accounting ? Or would SEC classify them as a shell company for the years with no revenues ?
Impossible? NO. But would be time-consuming : could take 6 months to a year for audits,could take 6 months to year after that for company to get through registration process. Why would anyone in their right mind do this as opposed to just start fresh company ?
I am not sure you appreciate their financial statements are not prepared according to USA GAAP, so they would need to re-do back several years.I would bet CEO doesnt want SEC scrutiny of a registration prcoess
No new investments for sometime, obvious they will do rather massive reverse split at some time.
Well that is interesting, a "holding company". Holding what ? Is there any evidence of mortgage-lead generation company ? Actual mining properties owned ? Where does this all appear on their balance sheet ? How is company being funded with no revenue?
Type of info SEC requires,per recent comment letter to similar company as CGFI,per SEC wirtten comment letter :
"" It appears you should also expand your disclosure concerning the exploration plans for the properties to address the following points.
· Disclose a brief geological justification for each of the exploration projects written in non-technical language;
· Give a breakdown of the exploration timetable and budget, including estimated amounts that will be required for each exploration activity, such as geophysics, geochemistry, surface sampling, drilling, etc. for each prospect;
· If there is a phased program planned, briefly outline all phases;
· If there are no current detailed plans to conduct exploration on the property, disclose this prominently;
· Disclose how the exploration program will be funded, and;
· Identify who will be conducting any proposed exploration work, and discuss what their qualifications are.
They are not a SEC reporting company so why on earth would they file a 10k ? If you are referring to their annual report to Pink Sheets
-First they do not have audited or even reviewed financial statements. in fact their financial statements are not prepared according to USA GAAP and always contain rather odd entries. For a start why do they have negative assets ? (Evidently CEO thinks saying financial statements prepared according to GAAP means they are).
-Second look at the Pink Sheet guide to reporting, this company certainly doesnt follow all those guidelines.
Is it even clear what mining properties they do own or dont ?
How many years have to pass with no results ?
What happened to Hip Hop business ? To gold mines ? To mortgage lead generaton business ?
As I have asked you before , can you point out one, just one successful business this company has done the last 3 years ? Do you honestly believe that someone will provide $125 million in collateral ?
I am just curious, doesnt have much to do with merits or not of investing in this company. I still believe this is no different than where the company was 2 or 4 months ago- reverse was coming, just an issue of when .And if they follow same path they will get same results in the future. No revenue so they need to finance regular expenses of $100k + per quarter , only apparent option convertible debt- and company IR cant generate enough buying to offset negative effects of such financing.