Gold_American_Mining.jpgVastly promoted, Gold American Mining Corp. (OTC:SILA, SILA message board) stock kept the high volumes yesterday. Although by now it looks like the upside potential is temporarily exhausted, the promoters still achieve admirable results.
Yesterday, two different promoters received $17,500 in cash each to send one-time alerts for Gold American's stock. The result was quite satisfactory, the price kept going up, this time by the modest 1.35% to a close at $0.75, and the trading volume of 442,000 remains enormous compared to the average for the stock.
Gold American stock receives strong promotional support since the beginning of May, which was also the time it got actively traded on the OTC market. An almost uncountable number of stock promoting websites have alerted the stock to investors as the "#1 Gold and Reversal Play" and have marketed the company's new business, which is now dedicated to the exploration of precious metals properties.
Despite the new business initiatives of the former Silver America Inc., and the new name since last month, it looks like nothing else has changed in Gold American' financials. Still no revenues are to be seen and the costs will further be covered through the sale of common stock. This makes the promoters' initial accomplishment of a price above $1 seem even more admirable, considering that the stock currently trades nearly 25,000 times above book value.
The dilution threats from the beginning of this month could cause only short-term concerns. Then the company announced that it will sell to an institutional investor 277,727 units, consisting of one share and one half of a warrant for a price of $1.10 per unit, whereby the warrants can be exercised at a price of $1.65.
That implies some strong belief in a long term appreciation of the stock, which made the market buy again, but hopefully the business will soon ensure the fundamental base as well.
Gold America's latest agreement dates back to the end of April, as the company acquired an option to buy a 72% interest in a property in Clark County, Nevada. The details provide information only about the obligations of Gold America, but not about any indications for proven reserves in the property. The company has to issue 2 million shares of common stock by October next year, and has to pay in the future a minimum of $1.1 million in exploration and other relevant cost.
It seems that dilution is a minor price to pay, especially when facing even the slightest chance to receive gold in exchange.
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