How an old-style mining scheme works.
From David Baines column in the Vancouver Sun from earlier this week. The Silverado CEO has been milking the stock for his personal enrichment for years - 42 years, to be exact. Silverado has never really been a serious exploration company at all. I bet those are the very same gold nuggets he has been trotting out at investment shows and photographing in his promotional literature for many, many, many years. All Silverado really does is sell very cheap Reg S stock overseas with much of the proceeds ending up in the CEO's pocket through sweetheart "exploration" contracts. As David points out in this, and many other articles on Silverado he has done through the years, this has been going on for 42 years. They have blown through $105 million of investor's money and run into regulatory issues on both sides of the border numerous times. But yet he somehow keeps finding people willing to soak up all that cheap Reg S stock entering the float. This is a good example of an old school exploration promotion. Not like the quick Pump and dumps we see nowadays!
Silverado again on verge of riches, promoter claims Gary Anselmo has been hyping his company for 42 years, but so far he's been more mouth than miner
'I know Silverado (Gold Mines) has been around for, I think, 100 years. Am I close?" Shelly Kraft, the ebullient host of U.S. stock tout service SNN Live asked Vancouver promoter Gary Anselmo during a videotaped interview at the Cambridge Resource Investment Conference in Vancouver on Aug. 20.
"Pretty close," Anselmo replied. "We've been working in Alaska for 42 years. We've spent $150 million on our properties and taken out about 40,000 ounces of gold on a test basis."
Anselmo's patter, oftrepeated, came smoothly and easily. He said Silverado, now based in White Rock, has "two of the largest antimony producers in Alaska." Happily, he noted, the price of antimony had increased six times, to $13,700 per ton, during the past two years.
"We are also taking these quite beautiful gold nuggets out of that property, up to 40-ounce pieces," he said, showing some chunks of gold in the palm of his hand, like a schoolboy showing off his frog to the class.
"Ladies and gentlemen," Kraft gushed into the camera. "Forty-ounce pieces they are taking. You don't hear a lot of that."
"No you don't," Anselmo agreed. "Our one project we just finished spending $40 million. It's ready for production, it's permitted, 30-man camp built, roads all in. Another $4 million and we are turning $3 million a month net -"
"My goodness," Kraft exulted. "You've got to feel top of the world - I'm gushing with excitement for you." "Well I appreciate that," Anselmo said. "We have still got to raise another $4 million to finish our job, so we are still looking for private placement capital for that purpose."
"Well, at this stage of the game, it's got to be easier than first money in. I mean come on now," Kraft cajoled, as though this would be as easy as collecting eggs from a hen.
"That's for darn sure," Anselmo replied.
Well, I'm not so sure. Anselmo, now 68 years old, always seems to be on the brink of success, but he never seems to get there.
Silverado, which he founded, has never been profitable in its 42-year history. During the past decade, it hasn't generated a cent of revenue. Its cumulative losses are now $105 million US, but the book value of its assets is only $2.4 million.
Where did all the money go? Much of it went to Anselmo's private company, Tri-Con Mining Ltd., which conducts exploration work for Silverado on a "cost-plus" basis.
In 2008, I calculated that Tri-Con's split amounted to $425,000 annually during the previous 15 years. So it's been a very lucrative arrangement for Anselmo, but not so much for shareholders.
In 1980, when the company was trading on the old Vancouver Stock Exchange, the stock peaked at $10.50, but soon fizzled out. In 1993, when it moved to Nasdaq, it enjoyed a revival of sorts, trading as high as $3.50. It is now trading on the lowly "pink sheets" in the United States at one-quarter cent per share.
Anselmo keeps playing at the margins, though, selling billions of shares for fractions of a cent, mainly to off-shore investors who hope they can unload their stock for a slightly higher price.
Problem is, much of Anselmo's hype has been misleading. In May 2008, BCSC enforcement staff issued a cease-trade order against the company after they discovered a host of disclosure problems. (The order applies only in B.C., not in the United States.)
In one case, Silverado said it had identified $41.2 million worth of "inferred in-place antimony resource" in just one small segment of its Alaska property.
Under pressure by the commission, it admitted this estimate "does not consider factors such as costs and, as a result, overstates the potential value of the deposit."
Silverado also heavily touted a memorandum of understanding with Mississippi authorities to build a plant to produce coal water (a so-called "green" substitute for oil). In November 2007, Anselmo explicitly stated that the company was "entering the construction phase" and the project was "expected to be onstream as planned."
Under pressure from the commission, he admitted that "no steps have been taken to proceed with building the low-rank coal water fuel demonstration facility" and the company was "no longer pursuing" the project.
After the company came clean with these and several other matters, the BCSC lifted the cease-trade order, but not for long.
In January 2011, the commission found more disclosure problems and imposed a new cease-trade order.
In July of that year, Anselmo admitted the company had "disclosed non-compliant and potentially misleading resource and reserve estimates not prepared by a qualified person and not supported by a technical report."
He submitted a new technical report and asked the commission to revoke the cease-trade order, but it remains in effect. Under the Securities Act, a trade is broadly defined as an actual trade, or "any act, advertisement, solicitation, conduct or negotiation directly or indirectly in furtherance of a trade."
That raises the question: Does Anselmo's promotional patter in the SNN Live video constitute a breach of the cease-trade order?
Anselmo insists he wasn't promoting the company: "Shelly grabbed me out of the audience, he asked me a few questions and I answered," he said in a brief phone interview on Tuesday.
Didn't his responses amount to an invitation to buy the stock?
"I'm not a lawyer," he replied. He isn't much of a miner, either.
At least not yet.
dbaines@vancouversun.com
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