Thursday, July 31, 2008

Wave of Acquisition continues

Goldcorp (NYSE : GG, TSX : G ) adds to the wave of mining and advanced mine project buyout this week with the purchase of Gold Eagle (TSX: GEA) for $1.5 billion. It's another undervalued player and the cash-rich major producers are certainly shopping for quality projects that have just been neglected by the market.

VANCOUVER, July 31 /CNW/ - Goldcorp Inc. ("Goldcorp") (NYSE:GG, TSX:G)
and Gold Eagle Mines Ltd. ("Gold Eagle") (TSX:GEA) today announced an
agreement whereby Goldcorp will acquire, through a friendly plan of
arrangement, all outstanding shares of Gold Eagle.
Gold Eagle's principal asset is the world class Bruce Channel gold
discovery which is situated along the prolific Red Lake Trend, adjacent to
Goldcorp's Red Lake gold mine and immediately southwest of Goldcorp's
past-producing Cochenour-Willans Mine. This transaction will enable Goldcorp
to capitalize on its extensive exploration and operations expertise in the Red
Lake district and its considerable human resources and related infrastructure.
"This transaction secures for Goldcorp full control of 8 kilometres of
strike length in the heart of the world's richest high grade gold district,"
said Kevin McArthur, Goldcorp's President and Chief Executive Officer. "Nearly
200 drill holes have defined an impressive gold deposit at Bruce Channel, with
potential for additional expansion over time. Development of this
strategically important zone can now move forward with our adjoining assets as
a single, comprehensive project, sharing mine infrastructure, ore processing
facilities and human talent with Red Lake, thus minimizing capital and
operating costs and maximizing long-term shareholder value. Red Lake mine has
operated for over 50 years, and Goldcorp's continued district consolidation
efforts are designed to sustain this world-class operation for decades into
the future. We are the natural partner to develop the Bruce Channel project
with the geographic footprint preferred by our community."
It's no wonder too, as the gold prices stay at record highs above $900/ounce, gold mining majors are making more money than before (given cost stays at the same per ounce). What will they do with all this additional fund... invest in US dollars and the US which essentially is on a downhill of inflation and smokes-and-mirror economic figures (wasn't unemployment data optimistic yesterday? What changed in the last 24 hours?)

Tuesday, July 29, 2008

Merrill admits defeat, Teck Cominco huge quarter, more buyouts, and the markets

The general market sentiments is an interesting thing, as the monthly consumer confidence numbers, in combination with one or two key commodity figures is enough to set the tone for the day. After all, traders are people, and people inevitable base many decisions on emotion, no?

Still, these daily fluctuations are far too short sighted and are often corrected next day by rounds of buyers remorse... let's wait and see.
"US Consumer Confidence Ticks Up!"

June's revised number was 51, which "ticked" upward to 51.9, releasing a torrent of pent-up bullishness at the starting gate. Whence cometh this rush of optimism? "The percentage of consumers saying jobs are "hard to get" rose to 30.3% in July from 29.7% in June." So, increasing difficulty in finding a job is a bullish indicator, apparently because somebody is still looking for a job, I suppose. Go figure.

Maybe consumers are gaining confidence in another round of "tax rebate" stimulus checks from Congress.

Interesting enough, the banks jumped nicely across the board from 10%+ to Merril's 17%. As if the consumer confidence and a still all time low of home sales and liquidity will help erase all the bad debts from the defaulting loans!

Unfortunately, even at $24/share, it's a far cry from the $90/share holier-than-thou pedestal a year ago when the CEO said no additional capital is required for such a long standing prestigious investment bank.

Merrill Lynch to Reduce Risk Exposure, Raise Capital

Merrill Lynch & Co., in a broad move to clean up its troubled balance sheet, said Monday it will sell a big slice of its toxic asset-backed securities and issue new stock to raise $8.5 billion of fresh capital.

The world's largest brokerage, struggling to right itself as the credit crisis continues, said it will issue more than 200 million new common shares as part of the deal. Merrill (MER: 26.25, +1.92, +7.89%) said it will write-down $5.7 billion because of additional losses on the sale of mortgage securities and hedging contracts.

Chief Executive John Thain, who joined Merrill Lynch last year, had vowed in the past he wanted to avoid using a public offering to raise money. The latest move comes just over a week after Merrill reported a $4.6 billion second-quarter loss, where he raised $8 billion of much needed capital from asset sales instead of diluting the stock by issuing more shares.

In other industry news - Metal and mining giant (Canadian) Teck Cominco announces records profits and another huge buyout news... $15 billion for Fording Coal. Seems like consolidation is already picking up its pace... record profit means a big decision... more acquision or buy more supposedly safe bank shares?

I think I'll stick with mining exploration stocks that's supposed to be risky instead!

Thursday, July 24, 2008

Remember Aurelian? ARU.TO, Kinross KGC - Buyout trend starting already!?

Remember AUR.TO or AUR-TO (Aurelian ResourceS) from my post last month? Well turns out the mining ban (moratorium to be precise - essentially government's attempt to assesss if its' getting taken advantage of by foreign mining companies... my opinion of course!)

Well, from their 52-week low of $3.05 it jumped to $6.60 so far on the TSX.

For the record, they closed at $4.45 last evening.

The reason is quite simple... Kinross Gold Corp (KGC), one of my personal favorites, offered to buy out 100% of's shares today.

Kinross makes friendly bid for Aurelian

Stewart Bailey, Bloomberg News Published: Thursday, July 24, 2008

Kinross Gold Corp., Canada's third-largest gold producer, said it has agreed to buy Aurelian Resources Inc. for $1.2-billion in stock, giving it control of Ecuador's largest gold deposit.

Kinross, based in Toronto, will issue 0.317 of its shares for each one of Aurelian's, the company said on Thursday in a statement. That's 48% higher than Aurelian's closing share price on Wednesday. Aurelian's directors have recommended shareholders accept the offer.

Kinross chief executive Tye Burt has overseen the development of new mines in the U.S., Brazil and Russia, which together will boost Kinross's output by more than a third to as much as 2.6 million ounces next year. The acquisition gives it control of the Fruta del Norte deposit in Ecuador, which contains 13.7 million ounces of gold and 22.4 million ounces of silver.

"This deposit will add significantly to our mineral resource base," Mr. Burt said in the statement. "We intend to pursue a focused strategy to further define the deposit, and believe that this combination can make an important contribution to our future."

Kinross will also buy 15 million new Aurelian shares for $4.75 each to help pay for Fruta del Norte's development. The purchase of that stock is not dependent on the acquisition offer succeeding, Kinross said.

Kinross Warrants

Aurelian shareholders will also receive 0.1429 of one warrant, with each warrant entitling them to buy a Kinross share for $32 within five years.

Aurelian rose 5 cents, or 1.1% to $4.45 on Wednesday in Toronto Stock Exchange trading, for a market value of $606.3 million. Kinross fell $1.80, or 8%, to $20.84.

Ecuador's government has banned all mining and exploration in the country since April 18, when it started drafting a new minerals law. Aurelian said later that month that it would halt all activity on the Fruta deposit until the government allows operations to resume.


What I like about the news is it's a sign of major corporations of the resource world still on the lookout for value investment choices and bottom fishing (John Kaiser, anyone?)

Things will be looking quite interesting when all the analysts and brokers come back from vacation in September for the juniors!

Tuesday, July 22, 2008

Smokes and Mirrors

For months now after the subprime mess hit the mainstream news, astute investors could basically count on the following pattern and make good money at each stop.

Media : "Oh no economy is slowing down and subprime mess is coming!"
Consumer confidence lowers --> Companies earnings down as less people spend money
Analyst earnings fall short --> downgrades companie's price targets
Actual market cap goes down as stock price drops

To stabilize the company and inject confidence back into the economy, the Feds have been lowering the US interest rates to "temporarily" address this issue.

Everytime interest rate's lowered the general market took it as a sign of confidence that the government will endlessly back up financial errors and in some cases, blatant greed.
Fed Lowers Discount Rate to Calm Markets

Fed Lowers Discount Rate to Calm Markets

The Federal Reserve said Friday it has approved a half-percentage point cut in the discount rate - a dramatic move aimed at calming markets roiled by a widening credit crisis.

In a statement explaining the board's action, Federal Reserve Chairman Ben Bernanke and his colleagues said that while incoming data suggest the economy is continuing to expand at a moderate pace, "the downside risks to growth have increased appreciably."

The Fed acknowledged that conditions had "deteriorated and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward." The central bank said it was "monitoring the situation and is prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions in financial markets.

Jim Sinclair, one of the longest reining pioneers of gold value investing has this to say recently:

Posted On: Monday, July 21, 2008, 11:15:00 PM EST

Because Fannie and Freddie Can't Go Down, Gold Can Only Go Up

It is just that simple. Fannie, Freddie, all primary government dealers and all entities with significant counter parties of OTC derivatives cannot fail. One by one they will be rescued one way or another, in the sunlight or in the shade.

Central banks cannot go broke because they have a blank check to reboot their capital if required. What central banks can and will do is destroy the currency of their country.

Gold is not a lubricant (crude), but in the final analysis is a currency. The euro will trade at $2US and gold at $1200 before it moves on to $1650.

All the spin and verbal camouflage cannot stop the implosion of balance sheets.

The Formula is in charge.

This is the real story. This is the total story. This is the only story. All else is noise and propaganda.

It's shaping up to be an interesting summer after all... deals are everywhere, especially in the early stage juniors with quality networks and management... which one will you pick?

Monday, July 21, 2008

Investment Glossary, GXS, BTT, Coffin Brothers, and more!

I'm feeling down today from the rough market... Goldsource (GXS) drops huge on disappointing early results, and difficult market overall. It's also funny to see Bitter Root (BTT.v), the only supposedly stock worth buying from the recent Vancouver Cambridge Show - as stated by The Coffin Brothers - down 30% today.

So much for being influential enough to move the stock price! Do you think the Coffins missed their mark this time?

Here's a great tool for investors to search up their favorite investment jargons - Investment Glossary. More later~


Investment Glossary

Accredited Investor: See Angel

Affiliate (Also referred to as an Affiliated person or insider): an individual who directly or indirectly, using one or more intermediaries, controls or is controlled by, or is under common control of the issuer. In other words, an affiliate is any officer or director of a public company or is a shareholder with five percent (5%) of the shares of the public at the time the shares were issued. Affiliates are subject to greater reporting requirements, prohibitions against trading on information not known to the public, and related regulations whose purpose is to protect the public shareholders.

Affiliated Person: See Affiliate

Analyst (Also called a Financial Analyst): an individual, usually employed by a brokerage firm, who evaluates the merits of specific public companies and industry trends for the purpose of advising investors to buy or sell stock or related financial instruments.

Angel or Accredited Investor: an American private investor or group of private investors. They meet the net worth and income requirements of the Securities and Exchange Commission. They are willing to invest in business ventures in various stages of maturity. Generally, this definition signifies individuals investing their personal funds and often syndicating the remaining financing amount with other private investors.

Annual Shareholders Meeting: a meeting which is required by law. An American or Canadian public company must hold an annual meeting open to all its shareholders. The shareholders must receive ample notice of this meeting and the issues that will be resolved by a vote of the shareholders. The notification of the meeting is usually sent with the Annual Shareholder Report. Common issues resolved at shareholder meetings include the election of Directors, compensation of officers, and issues related to the company's corporate vision. Each shareholder has the right to vote the shares they own. Usually, this means the insiders holding the control block of stock make corporate policy.

Annual Shareholder Report: required by law. This report is prepared by the company and must be distributed to all registered shareholders and to those unregistered shareholders who request it. It includes information about management, operations, facilities, corporate vision, and an audited financial statement.

Authorized Shares: number of shares that the shareholders have agreed will be the maximum number of shares the company can issue. This number is usual fifty million to one hundred million shares.

Bailout: excessive selling by shareholders due to a loss of confidence in the public company.

Bankruptcy Reorganization: an American business, in a state of insolvency, files for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code. The business is permitted to continue operations while restructuring debts and working out a repayment schedule acceptable to a committee of its creditors. (Also see Turnaround)

Barrier: selling by public shareholders, who purchased their stock at or near the peak of the last upward move of the company's share price. This selling usually results from a major decline in the company's share price followed by a recovery to its previous peak. To avoid barriers, avoid irregular trading patterns, particularly ones with sharp share price declines.

Bear Market: period during which share prices generally fall. Investment interest is limited. There are often economic issues such as high unemployment or declining corporate profits. The 1929 collapse of the shares on the New York Stock Exchange led to a bear market. The bear market formed the basis of the Depression that plagued the early 1930's and led to the failure of more than 10,000 American banks.

Best Efforts: an underwriting agreement in which the underwriter doesn't guarantee the sale of the shares to be placed. In essence it says, "we think we can sell your shares. We'll do our best to sell your shares. We guarantee nothing."

Bid & Ask: National Association of Securities Deals (NASD) method of trading shares. It applies to the Over-the-Counter (Pink Sheets), NASD Bulletin Board and NASDAQ markets. The bid is the price the buyer is willing to pay for a stock. It is lower than the ask which is the price the seller wants for the shares. A small, experienced NASD brokerage firm will buy the stock at a price between the bid & ask price. Most national brokerage houses buy their client's stock at the ask price. If you regularly trade speculative stocks, you'll usually save money with a smaller NASD brokerage firm.

Blind Pool: a public company which has raised money without a specific purpose. This was a popular method for private companies to "go public" in the 1980's. Usually the merge was done with a reverse split of the shares of the blind pool followed by the issuance of shares to acquire the private company. Because the public investors in the Blind Pool usually lost money, the SEC opposes the creation of Blind Pools.

Blue Sky Laws: refers to State Securities Laws. Montana, the Big Sky State, was the first State to enact legislation to protect public investors.

Broker-Dealer: refers to any registered member of the National Association of Securities Dealers (NASD). The term is often used to refer to brokerage firms who are NASD members. NASD members trade within the Over-the-Counter (Pink Sheets), NASD Bulletin Board, and NASDAQ trading systems. (Also see Investment Banking Firm)

Bull Market: a period when share prices are moving upward. Investment interest is high. The public views the economy as strong.

Bulletin Board (Also called the NASD Bulletin Board, the Electronic Bulletin Board, the OTC Bulletin Board and, by stock promoters, the NASDAQ Bulletin Board): purpose of the Bulletin Board was to trade quality Over-the-Counter shares of American "reporting" companies and foreign shares legally trading in the United States. Unfortunately, it has degenerated into trading many "exempt" securities and fails to inform the investor they are buying shares in companies whose stock can't trade elsewhere.

Business Incubators: business incubators nurture young firms, helping them to survive and grow during the start-up period when they are most vulnerable. Incubators provide hands-on management assistance, access to financing and orchestrated exposure to critical business or technical support services. They also offer entrepreneurial firms shared office services, access to equipment, flexible leases and expandable space--all under one roof

Business Plan: a written document that expresses the corporate vision about the future of the company. To succeed, your vision must be global. To be credible, your business plan must rest upon the success to date of your private company.

Buyout/Acquisition: a stage in the maturity of a business, or a situation created by special circumstances, where a product line, business segment, or entire business is purchased by an outside company or perhaps by the existing management of the business. The process involves thorough valuations of the target business, sophisticated structuring and extensive negotiations of the terms of the transaction. A firm may specialize in providing these services and may arrange for the placement with other firms and institutions, which may be required to complete the transaction. (Also see Leveraged Buyout and Mergers and Acquisitions)

Cash flow Projections: See Pro Forma

Clean Shell: a reporting company. It has its filings current. It doesn't have debt. There are no lawsuits, nor reasonable prospects of a lawsuit against the company. The insiders retain control of 80%-90% of the issued shares. (Also see Public Shell Corporation)

Comfort Letter: a letter written by an independent accountant to the underwriter, indicating the results of accounting tests performed on the financial data as requested by the underwriter.

Convertible Debenture (Also called an Equity Related Loan): usually refers to loans convertible into equity ownership( shares of the company at a fixed price) or loans collateralized with equity positions.

CUSIP Number: issued by the Cusip Service Bureau. It is the number used by the brokerage industry to distinguish between the tens of thousands of public companies whose shares trade in the United States.

Dealer: See Broker-Dealer

Deficiency Letter: a letter from the SEC commenting upon problems noted in the review of a registration document filed by a company seeking to go public or filed as part of the reporting requirements of public companies.

Depository Trust Company: the company that holds the shares of your company not requested for physical delivery by your shareholders.

Dilution: any increase in the number of shares issued by the company. An increase in the number of shares without an offsetting compensation to the company decreases the value of the previously issued shares. Also, it increases the costs of maintaining a strong share price when the new shares begin to trade. Assuming the company receives good value for its issued shares, it can offset the stock support costs by requiring the issued shares be pooled with the insiders' shares.

Divestitures: the distribution of a company's assets or a business segment by sale, liquidation or other acquisition arrangement. It can also mean a corporation's orderly distribution of large blocks of another corporation's stock held for investment.

Due Diligence: a legal requirement that stock brokers, underwriters and spin-off sponsors must meet to ensure that the statements made by a spin-off company or public company are accurate and complete. The purpose is to ensure the public has full and accurate information about a public company or a private company about to become a public company.

EDGAR: SEC's online public company database. Click EDGAR

Equity: ownership interest in a corporation, usually represented by the shares of stock which are held by individuals or corporations. Also, it's the excess of balance-sheet assets over liabilities.

Equity Offerings: a means of raising funds by offering ownership in a corporation through the issuing of shares of a corporation's common or preferred stock. (Also see, Initial Public Offering and Private Placement)

Equity Related Loan: See Convertible Debenture

Exempt Offering: private companies can seek public investment in their company under specific exemptions of the U. S. and State Securities Acts. The common U. S. Securities and Exchange exemptions are Regulation A & D under Section 504-506. The common State exemption is the SCOR exemption. The Private Company must file a questionnaire and conform with a variety of restrictions.

Failure to Disclose: if you file a report or questionnaire with any State or Federal Securities Agency and it has a material misstatement of fact in it, you commit a felony. (Also see Statement of Material Fact)

Financial Consultant: an individual or firm specializing in locating financing. The consultant has the ability to structure a business plan so that it attracts the needed money. Most consultants offer a stable of related services that reflects their basic approach to raising risk capital. They usually charge a retainer. The fee for their services generally comes from a percentage of the amount of financing obtained. It is usually about 1% of the gross proceeds.

Financial Finding Service: See Financial Consultant

Finder: someone who arranges an introduction between a business person seeking a service and someone they feel might help that business with that service. Most finders know other finders. The business person ends up in a daisy chain where no one can actually help them. Finders charge a fee for making successful introductions. Usually, the fee is 10% of the value of the service to the business person.

Firm Commitment: An underwriting agreement in which the underwriters agree to place the entire underwriting. The underwriting contact has a long list of exceptions that would allow the underwriter to void the agreement. One common clause in many underwriting agreements is the underwriter may withdraw if "market conditions" are no longer suitable for the placement of the shares. It is up to the underwriter to make a subjective determination about "market conditions." For a firm commitment underwriting agreement you should expect to pay the underwriter 1.5% of the gross proceeds, as a non-refundable retainer. This payment is made at the signing of the agreement.

First Round (or Stage 1) Funding: typically funding that accommodates growth. The company may have finished R&D. Funding is often in the form of a loan or convertible debenture. This is the stage in the maturity of a business where the initial growth of the product or service is realized. The initial capitalization money has been spent. The management and operations are in place. The markets initially identified are being penetrated using available resources.

Float: See Public Float.

Form 8-K: form which must be filed with the SEC whenever there is a material change in the affairs of your public company.

Form 10: form filed by a spin-off sponsor in the course of taking a spin-off public. There are alternatives to doing this filing. However, your company is better served to meet the SEC's expectations than to avoid their review.

Form 10K: 1934 U. S. Securities Act requires that every reporting company file this annual report with the SEC. Form 10K is filed electronically. You can secure copies from the SEC's EDGAR website.

Form 10Q: 1934 U. S. Securities Act requires that every reporting company file quarterly reports with the SEC. Form 10Q is filed electronically. You can secure copies from the SEC's EDGAR website.

Form S-1: form which must be filed with the SEC to qualify a private company for an Initial Public Offering. Initial Public Offering (IPO) By filing Form S-1 and meeting other requirements, a private company may offer a specified number of its shares to the public. This is usually done with an underwriter. The result of the process makes the private company a public (reporting) company. Less than half of the private companies that attempt to do an IPO succeed. The usual reason for failure is the costs of the IPO process.

Incubators: See Business Incubators

Initial Public Offering (IPO): occurs when a company registers its stock with the Securities and Exchange Commission and can sell equity ownership in the company to the public. Access is gained to a source of capital which did not previously exist. There are numerous reporting and compliance issues to deal with from this point forward which could involve a considerable expense. Stock that is publicly traded on an exchange provides the owner with an established price and a market in which to buy or sell. (Also, see Form S-1)

Insider: See Affiliate

Intermediate/Second Round Funding: maturing company where a future leveraged buyout, merger or acquisition and/or initial public offering is becoming a viable option. It is a stage in the maturity of a business where the business seeks to expand its product line, expand its facilities, identify and penetrate new markets and continue the growth phase. Further capitalization and credit financing may be required to fund this additional growth.

Intrastate Offerings: a private company may offer its shares under the laws of the State in which it is located. To do so, it must meet the Blue Sky Laws of that State. Attempts to convert an intrastate offering, after two years, to a U. S. public company are often met with SEC opposition.

Investment: transfer of capital or other assets to an enterprise in order to secure a profit for the investor.

Investment Banking Firm: acts as underwriter or agent, serving as intermediary between an issuer of securities and the investing public. In addition to new securities offerings, investment bankers handle the distribution of blocks of previously issued securities, either through secondary offerings or through negotiations, maintain markets for securities already distributed, and act as finders in private placements of securities. Many investment banking firms support broker-dealer operations, serving both retail and wholesale clients in brokerage and advisory capacities. In addition to underwriting and brokerage operations, investment banking firms are becoming more involved in other financial services and financing transactions as defined by each individual firm. Some firms become involved in brokerage operations specializing in private placement transactions and other investment strategies similar to venture capital firms. In some instances, a firm's minimum investment figure will relate to private placements rather than public offerings or secondary public offerings. Firms specializing in "pink sheets" will usually become involved in riskier high-growth businesses and have a lower minimum financing requirement. They will, however, expect high returns on their investments and often require that a company become publicly traded if it isn't currently a public company. (See also Broker/Dealers)

Investor Relations: to maintain a strong share price, your public company must develop and implement a strong stock support plan. The costs of implementing your stock support plan are among the major disadvantages of being a public company. Because you have a better mousetrap, the world won't beat a path to your door. You must convince investors to buy and hold your stock.

IPO: See Initial Public Offering

Issued Shares: the total number of shares the company has issued. Plus, any shares that the company may have a contractual obligation to issue, such as shares that could be issued as a result of the sale of options and warrants.

Issuer: legal term that usually means the public company.

Junior Company: a Canadian term that usually refers to a public company with no or very limited business income. The usual reference is to mineral exploration companies as: "Junior Resource Company."

Later Stage Funding: mature company where funds are needed to support major expansion or new product development. Company is profitable or breakeven.

LBO: See Leveraged Buyout

Legend Stock: insider stock that has been restricted from sale by American Law. It is subject to Rule 144 and often called 144 Stock. Historically, the stock was restricted for two years. The current restriction is 1 year. Canadian law restricts the sale of insider stock for 1 year.

Letter of Intent: non-binding letter from the underwriter to the issuer, confirming the underwriter's intent to proceed with an offering and the general terms of the underwriting.

Leveraged Buyout or LBO: the buyout of a company's existing ownership using borrowed funds. The funds borrowed by the investors purchasing the target company are generally secured by the assets of the target company. (Also see Buyout/Acquisition)

Limits: a brokerage term that means instructions in the buying or selling of stock for a client. Usually, the instructions help the client make money in the market.

Making a Market: efforts by a broker-dealer to maintain trading activity in a specific stock.

Management Buyout or MBO: MBO is similar to an LBO where management of the target company desires to acquire ownership of the company. ( Also see Leveraged Buyout and Buyout./Acquisition.)

Market: a brokerage term for the trading of stock and the industry associated with the trading of stock.

Market Cap or Market Capitalization: the value of a public company based upon the multiplication of the company's share price multiplied by the shares issued in the company.

Market Conditions: refers to the strength of the market or a market segment, like the interest in computer or airline stocks. Market conditions are good in a bull market. They are bad in a bear market.

Market Maker: a broker-dealer who has indicated that they will make a market in the shares of a specific company. The indication does not necessarily mean the broker-dealer will make a market in the company's shares. In theory, a market maker is a wholesaler of the company's shares. You must have at least three market makers to list your shares on the Bulletin Board. You must have at least five market makers to list your shares on NASDAQ.

Material Fact: any issue related to a business that would influence an investor in their decision to buy or sell the securities of that business. (Also see Statement of Material Fact.)

Mergers & Acquisitions (M&A): you want to buy other companies to expand your asset base. In time, you will want a major company in your industry to buy you. As a public company, you should use your strong share price to buy private companies. When it comes time for you to be bought, your strong share price will ensure a sale price far in excess of your public company's value based upon its balance shell. Your business plan should reflect your M&A goals. merger and acquisition are the combination of two companies by the process of joining or sale. If one company survives it is a merger, if both survive, it's an acquisition.

Merit States: the twelve States that require a public company to register with the State Securities Commission before selling stock in their State. They are called "Merit" because they can reject an applicant public company using "lack of merit" as their justification. Unless the company or the underwriter does business in a Merit State, it isn't worth the cost and effort to meet the filing requirements. The company is better served waiting until it trades on NASDAQ or any American stock exchange. At that time, it can trade in every Merit State without making a separate filing.

MESBIC's: MESBIC's are Minority Enterprise SBIC's that function similarly to SBIC's which see, but can only invest in 51% or more minority/disadvantaged individual owned enterprises. (Also see SSBIC.)

Mezzanine Funding: company's progress makes positioning for an Initial Public Offering viable. Venture funds are used to support the IPO.

NASD (The National Association of Securities Dealers): members trade shares on the Over-the-Counter, Bulletin Board, and NASDAQ markets. The NASD includes virtually every American investment banking firm and dealer in the over-the-counter market. The organization imposes regulations on its members ensuring moral and ethical standards are maintained. The organization maintains a quotation system (NASDAQ) for publicly traded securities which are traded over-the-counter (and not traded on exchanges such as the New York Stock Exchange or the American Stock Exchange).

NASD Bulletin Board: See Bulletin Board

NASDAQ: electronically trades stocks. The share volume is greater than the American Stock Exchange. It's divided into two markets. The National Market System (NMS) shares are quoted in many financial newspapers and major general circulation newspapers. There is the Small Capital (Small Cap) Market. To list your company on the Small Cap Market, you must have assets of $4 million, net worth of $2 million, Bid price of $3.00+, a float over 100,000 shares, seven market makers, and over 500 shareholders. Usually, the first stock exchange beyond the OTC/Bulletin Board Market is NASDAQ. Companies with smaller asset size not qualifying for listing on the large exchanges would have their securities quoted on NASDAQ. "Market makers" supply bid and offer prices for the securities quoted.

National Association of Securities Dealers Automated Quotations: See NASDAQ

Newsletter Editor: financial advisory newsletters are a principal source of investors for companies that don't qualify for review by analysts.

Offshore Private Placement: an exempt offering of shares, options, warrants, etc; to non-residents of the United States.

Online Brokerage firm: an NASD brokerage firm that offers to trade stocks for clients who use the Internet. These firms charge very low commissions. A few may offer clients shares in Initial Public Offerings, but most solely trade stock for their clients.

Options: a right to buy stock at a specific share price. The specific share price is called the exercise price. Usually, investors purchase options at a very low price betting the share price will appreciate above the exercise price.

OTC: See Over-the-Counter

Over-the-Counter or OTC: a security that is not listed and traded on an organized stock exchange. It is also a market in which securities transactions are conducted through a telephone and computer network, connecting dealers in stocks and bonds rather than on the floor of an exchange. Securities traded in this manner do not meet the listing requirements of NASDAQ,the New York or the American Stock Exchanges. Rules for trading over-the-counter stocks are written and enforced mainly by the NASD. The basis for the trading are the published Bid/Ask prices of shares printed by National Quotation Bureau, Inc. of New Jersey on pink paper and called "the Pink Sheets." (Also see Bulletin Board and Pink Sheets)

Penny Stocks: shares that do not trade on NASDAQ nor on any stock exchange. The share price is below $5.00. These stocks trade on the pink sheets.

Pink Sheets: a daily publication (so named for the color) of the bid and ask prices of thousands of over-the-counter stocks. Companies whose stocks are quoted here are also called "Penny Stocks." They have smaller asset sizes and share prices. They do not qualify for listing on NASDAQ. (Also see Over-the-Counter, Bulletin Board, and NASDAQ.)

Player: a slang term used in the equity finance industry for anyone who is knowledgeable about and participates in the market.

Pooling Agreement: an agreement by all the insiders in a public company to place their shares in a central depository for a specific period of time. This agreement ensures that none of the insiders can sell any of their stock during the period the public company matures to success. The pooling agreement is often longer than the period the insider shares are restricted. (See Legend Stock.)

Preferred Stock: a class of capital stock of a corporation sometimes paying dividends at a specified rate and receiving preference over subordinate classes of capital stock, such as common stock, in the payment of dividends or liquidation. Preferred stock ordinarily does not carry voting rights and may have various other features which either restrict its residual rights to corporate profits or enhance the rights.

Primary Offering: Canadian term for an Initial Public Offering. Used in the States as an alternative term for an Initial Public Offering.

Private Investor: See Angel

Private Lender: an institution or an individual who provides funding in the form of debt. The term of the debt will usually be intermediate (5 to 10 years). Many of these sources indicate a preference to being contracted by other financing sources and finance professionals through syndication rather than contracted by the actual companies seeking financing.

Private Placement: an exempt offering of securities. In the United States, it usually involves a limited distribution (generally 35 or fewer participants) of restricted stock to accredited private investors (Angels). The sale is usually exempt from SEC registration requirements. The investors execute an investment letter stating that the securities are being purchased for investment without a view towards sale.

Privatization: the process of converting Government-owned industries into private or publicly owned industries.

Pro Forma (Also called cash flow (S/B cash flow) projections): the presentation of financial information such as a balance sheet, income statement or forecasted cash flows where the amounts are hypothetical. These are typically presentations of future expected results based on assumptions and actions to be taken.

Promoter (also called a Stock Promoter): a sales person who convinces investors to buy the shares of a particular public company. Promoters supply a vital service that can maintain the share price of the public company. Too often these sales persons make claims for the public company that are unjustified. The result can be an SEC investigation and the filing of criminal charges against the promoter and the principals of the public company.

Prospectus: the selling document, reviewed by the SEC, offering pertinent information to public investors about a public company. It is commonly associated with Initial Public Offerings.

Public Company: any company that files a Form S-1 with the SEC and raises money from the public. Any company with 300 or more shareholders as defined in the U. S. 1933 Securities Act and elects to become a reporting company. Under the U. S. 1934 Act, any company with 500 or more public shareholders or a company with some public shareholders and assets of $5 million dollars must become a reporting company. A public company is a reporting company. The company must file Form 10K and forms 10Q every year with the SEC.

Public Float (Also called the float): that portion of the issued stock not held by affiliates (insiders) of the public company.

Public Shell Corporation (Also called a shell): a reporting company without assets, but current on its filings with the SEC. Buyers should be wary of intrastate offerings, SCOR offerings and OTC companies that aren't current with their SEC filings being sold as Public Shell Corporation. The axiom of the shell market is: caveat emptor. (Also see Clean Shell)

Quiet Period: if you elect to do an Initial Public Offering, you are legally forbidden from seeking any sort of publicity about your company from the time you reach an understanding with your underwriters to ninety days after your shares commence trading.

Rating Service: see Standard Manual Exemption

Recapitalization: an effort to reorganize an existing company and find new sources of capital for that company. It's often associated with a Chapter 11 filing and efforts to turn around the company.

Register: an agency, often the transfer agent responsible for the issuance of share certificates, which verifies that cancelled share certificates are in balance with the issued share certificates.

Registration: the requirement under U. S. Securities Acts postulating the method for filing information with the SEC.

Registration Statement: the document filed with the SEC containing the information required by Law.

Regulation A (Also called Reg A or a 504 Exemption): Provision under the 1933 U.S. Securities act for exempting some private companies under certain conditions from the filing requirements of the Act. If the Private Company meets the requirements, they are allowed to attempt to raise up to $5 million dollars without filing Form S-1 with the SEC.

Regulation D (Also called Reg D or a 504 Exemption): Provision under the 1933 U.S. Securities act for exempting some private companies under certain conditions from the filing requirements of the Act. If the private company meets the requirements, they are allowed to attempt to raise up to $1 million dollars without filing Form S-1 with the SEC. The Reg D filing format is a simple question and answer format. It allows public investment in your private company.

Reporting Company: any company required to file Form 10K and 10Q or Form10KSB and Form 10KSQ with the SEC. The term comes from the 1934 U. S. Securities Act. In the language of the Act, reporting company refers to any spin-off in which 500 or more public shares become shareholders of a private company. (Also see Public Company.)

Restricted Stock: See Legend stock.

Reverse Merger: the acquisition by a reporting company (Public Shell) of a private company by the issuance of a block of stock that gives the private company over fifty percent (50%) control of the public shell. It appears to be an inexpensive method of going public. Any private company that elects this method of going public commits financial suicide. There are two common problems with reverse mergers. The insiders of the public shell retain their shares. They always sell their shares into any attempt by the private company to strengthen its share price. The result is the private company fails as a public company and the past insiders pocket a million dollars for killing the company. Often private company management believes that SCOR failures, Intrastate offerings and a variety of pseudo-public companies are reporting companies. If the company isn't filing 10Ks and 10Qs with the SEC, it isn't a public company.

Reverse-Split (Also called a rollback): by vote at a shareholders' meeting, this is a decision to reduce the number of shares issued by the public company. It is always part of a shell buyer's strategy. It will alienate the shell's current public shareholders and the shell's Market Makers. It's essential to allow the shell company to develop into a strong public company. Without a shell sale, the decision to do a reverse split is a guarantee of financial suicide for present management.

Rollback: See Reverse-Split

Rule 144: See Legend Stock

Rule 15c2-11: the requirement that market makers keep relevant information about the public companies in which they make a market. Also, it refers to the filing by these market makers with the NASD for trading the company's shares on the Bulletin Board.

SBIC (Small Business Investment Corporation): Government leveraged firms investing in established companies for buyouts, funds for IPO's, strategic partnerships or bridge financing. They are privately owned but licensed, regulated and financed by the SBA. They have the ability to leverage privately raised capital with government funds and make capital available to small businesses which meet standard criteria. SBIC's may buy stock in a new venture, or provide capital through debt or convertible debentures. Since SBIC's must service the debt they borrow from the SBA, investments are typically in the form of loans with favored interest rates coupled with the right to buy stock (See Convertible Debenture). This structure gives the SBIC immediate returns to service their debt. This may not be a good source for start-up ventures likely to lose money in their initial years. The investment objectives are similar to those of venture capitalists. (Also see Venture Capitalists) Small businesses that qualify have a net worth less than $6,000,000, after tax profits of $2,000,000 or less for two years prior, and cannot be investment companies, lending institutions, or manufacturing companies with over 500 employees (unless meeting the net worth and net profit criteria).

SCOR (Or Small Corporate Offering Registration also known as ULOR or Uniform Limited Offering Registration): allows you to raise up to $1 million by filing a U-7 Form with the State in which your private company is located. To meet Federal exemption requirements, you must file a Reg D questionnaire with the SEC.

Secondary Public Offering: refers to a public offering subsequent to an initial public offering. A secondary public offering can be either an issuer offering or an offering by a group that has purchased the issuer's securities in the public markets.

SEC: See Securities and Exchange Commission

Securities and Exchange Commission: the U. S. Federal agency primarily responsible for regulating the trading of stock in the United States. They process the filings of reporting companies. They review Initial Public Offering and other public company filings. They have the power to file criminal charges against those they suspect of felony violations of American Securities laws.

Security: legal term for stock or shares

Second Round Funding: See Intermediate/Second Round Funding

Seed Capital: a source of funding for the early stages of a start up venture where the product, process, or service is in its conceptual or developmental phase. (See Angels, who are the usual source of seed capital.)

Seed/Startup Funding: earliest stage of business, typically no operating history. Investment is based on a business plan detailing the management group's backgrounds along with the defined market and financial projections. It is the first stage in the maturity of a business. It encompasses the point of initial concept upon which the business is founded, and typically is considered to span through the point the business has a product or service in place and is beginning to generate revenue from operations. The company is poised to launch into its marketing plan and a capital infusion is required. This phase may be considered to run even as far as the second or third year of operations. Each individual or institution attaches a slightly different ending point for this stage. The usual sources of risk capital are Angels and business incubators.

Short Sale: the sale of shares that are not owned by the seller. The shares can be borrowed from a depository trust company or they can be created by a broker. The act of short selling, by adding to the float, makes it harder for the company to maintain a strong share price. The stock market is a war between the short sellers and the public company's supporters. Usually, the short sellers win.

Specialist: person who is charged with the responsibility to stabilize shares trading on traditional stock exchanges. The person is employed by a brokerage firm with a seat on the stock exchange. NASD brokers refer to their efforts to create the same effect as "stabilization."

Special Shareholders Meeting: whenever a public company must make a major change in its corporate policy, it must call a special meeting of its shareholders. Three weeks notice must be given and all shareholders notified.

Speculative Stocks: See "Penny Stocks"

Speculator: an individual or firm that buys or sells a stock with the intent of making a short term profit on the trade.

Spin-off: a public (reporting) company that has over 500 public shareholders and comes to exist because an existing public company has distributed shares of the subsidiary or private company to its 500 plus shareholders.

Spin-off Sponsor: a public company with over 500 resident American shareholders who accepts the responsibility for a private company becoming a public company. The legal basis for the practice is found in the 1934 U. S. Securities Act. Thousands of corporate subsidiaries and private companies have used the process. It relies on the filing of a Form 10 with the SEC.

Spread: the difference between the bid and ask prices.

SSBIC (Special Small Business Investment Corporation): set up to fund socially or economically disadvantaged entrepreneurs. (Also see SBIC)

Startup Funding: See Seed/Startup Funding

Statement of Material Fact: a claim made by a public company that would influence the decision of an investor to buy or sell a particular stock. Usually false statements of material fact are felonies under the U. S. and Canadian Provincial Securities Acts. (Also see Material Fact)

Stock Promoter: See Promoter

Stock Support Plan: Your company needs a business plan to outline your plans for development. If you are a public company, you need a stock support plan to outline your plan for developing and maintaining a strong share price. Without a strong share price, you can't use your stock to buy assets that will make your company's balance sheet stronger.

Stabilization: See Specialist

Standard Manual Exemption (Also called the Rating Service Exemption): State Securities Commissions regulate laws that must be followed in every state in which your stock trades. Thirty eight states offer an exemption from filing with the State called a "manual" exemption. The filing exemption usually exists for companies rated by Moody's, Standard and Poor (S&P) and Dun & Bradstreet. It is cheaper and faster to seek an evaluation by a rating service than to file your materials in 38 States.

Street Stock: refers to the shares held by the depository trust company. Also, it can refer to shares being offered by insiders but not through a NASD broker-dealer.

Suitable Investor: defined by the U.S. 1990 Penny Stock Law. It requires that investors unfamiliar with penny stocks carefully consider buying these stocks. The stock broker is required to make new penny stock buyers suitable investors before selling them penny stocks.

Syndication: a group of individuals or companies which has formed a venture to undertake a project that would not be feasible to pursue alone. It usually refers to doing an underwriting or private placement for a public company.

Third Stage: the stage in the maturity of a business where the business has established itself strongly in all of its markets with its products and reputation. It is at this time the company usually elects to do an Initial Public Offering.

Transfer Agent: a firm that keeps the official records of the names and addresses of the company's registered shareholders and handles the transfer of shares from one person to another. Usually, they are also the company's registrar.

Turnaround: the reversal of unfavorable circumstances of a business where an investment opportunity may exist. A firm may work with such a business to restructure the management and finances in order to take the greatest advantage of more favorable circumstances. There are organizations like the Turnaround Management Association that specialize in turning around failing companies.

Unregistered Shareholders: unless the shareholder contacts the company or requests that his broker send the company the shareholder's name and address, the company won't automatically know who owns their stock. These shareholders are the company's unregistered shareholders. In a public company, the majority of the shareholders will be unregistered shareholders. The public company's goal should be to identify their unregistered shareholders in order to communicate with them so as to encourage the stockholder to hold his/her stock.


Underwriter: usually, an underwriter is an investment banking firm or broker-dealer that has agreed to raise money for your company to justify the time and costs of doing an Initial Public Offering. Outside the United States, an underwriter is often a fund with a large number of managed accounts.

Underwriting: an investment banking firm or broker-dealer acting as underwriter sells securities from the issuing corporation or government entity to the public. A group of firms may form a syndicate to pool the risk and assure successful distribution of the issue. There are two types of underwriting arrangements: best efforts and firm commitment.

Venture Capital: the process by which investors fund early stage, more risk oriented business endeavors. A venture capital funding arrangement will typically entail relinquishing fifty percent or more ownership and control of the business. Offsetting the high risk the investor takes is the promise of high return on the investment. The investment is usually in the form of stock or a convertible debenture. As the business matures, an initial public offering may take place, or the business merged or sold, or other sources of capital found. Any of these would occur with the intention of buying out the venture capitalists. Venture capitalists typically expect a 26% annual return on their loan investment at the time they invest in the private company. Venture capitalists typically invest in high growth companies with the potential to generate revenues of $20 million in any one company, but typical investments range from between $500,000 and $5 million. Management experience is a major consideration in evaluating financing prospects.

Venture Capitalist: a firm organized for the purpose of investing in private companies. The infusion of capital is expected to take the private company to the point of qualifying to do an Initial Public Offering, Usually, venture capitalists expect at least 60% equity interest in the private companies in which they invest.

Warrants: See Options

Window: period of time that investors are willing to participate in underwritings. Usually this period coincides with a bull stock market. Immediately after a market crash, it is nearly impossible to raise risk capital from investors. (Also see Market Conditions.)

Thursday, July 17, 2008

Mining Dictionary Tool, LAT.v finds Diamonds, RAY.v permits

In mineral explorations - there are often so many terms and vocabularies required that investors get confused half way through a news release.

I found an useful tool that will help many people decipher news releases from your favorite mining picks.

In other news, mineral explorations is alot like life and chocolates. To quote Forrest Gump

"Life was like a box of chocolates. You never know what you're gonna get."

A joint venture partner with TNR, Latin America Minerals, had an intersting diamond discovery recently. The property was an original gold property - but as with geology - interesting things happen during the earth's formation - and even with all the research done so far - nothing can replace actual drill results.

TORONTO, ONTARIO--(Marketwire - July 16, 2008) - Latin American Minerals Inc. (TSX VENTURE:LAT - News) reports the discovery of 10 diamonds, ranging in size from 0.002 to 0.04 carats on its Capiibary Diamond Exploration Property in north-eastern Paraguay. Photographs of the recovered diamonds are attached to this press release. Additional photographs are posted on the Latin American Minerals website at

Diamonds were initially found in the Capiibary region by local prospectors panning for gold in the 1960s. Some years later, De Beers collected 4 stream samples from the region, of which one contained 6 diamonds and all contained kimberlite indicator minerals ("KIMs"). Recently, Latin American collected 16 samples at various locations in the region of the initial discovery; four samples contained diamonds and 14 contained KIMs which include chrome spinels and garnets. The diamonds are champagne to brilliant white, slightly abraded and several exhibit exceptional crystal structures suggesting minimal alluvial transport. Microprobe work has been completed on the chrome spinels and they were found to fall within the kimberlite stability field. Microprobe work on the garnets is being scheduled.
That reminds me of another serendipidous discovery - GoldSource GXS with their Coal Play in Saskatchewan when everyone else is rushing to Potash and applying for permits and waiting for the boost in stock price when permits are granted like RAYTEC.

Tuesday, July 15, 2008

Things tend to get much worse - before it gets better

IndyMac, Freddie Mac, Fannie Mae, Bear Sterns, & Lehman Brothers. The onslaught of endless financial bad news has taken its toll on the market.

Inflation is rising (gee, you think?), the real inflationary data already confirms it but last quarter's inflation numbers were denied as not much off ordinary. Furthermore, the housing + mortgage crisis is far from over... and jobless level is at a high.

WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke told Congress Tuesday the fragile economy is facing "numerous difficulties" despite the Fed's aggressive interest rate reductions and other fortifying steps.

At the same time, Bernanke, testifying before the Senate Banking Committee, sounded another warning that rising prices for energy and food are elevating inflation risks. This problem looms even as officials try to cope with persistent strains in financial markets, rising joblessness and housing problems.
The situation, he said, poses "significant challenges" for Fed policymakers as they try to chart the best course for keeping the economy growing, while making sure inflation doesn't dangerously flare up. All the economy's problems -- including slumping home values, which threaten to make people feel less wealthy and less inclined to spend in the months ahead -- represent "significant downside risks" to economic growth.

The two companies hold or guarantee more than $5 trillion in mortgages -- almost half of the nation's total. The Bush administration is asking Congress to temporarily increase lines of credit to Fannie and Freddie and to let the government buy their stock. The Fed has offered to let the companies draw emergency loans.

$5 trillions in mortgages and that's a few extra dollars coming out of the taxpayer's pockets.
Gold is the answer for the savvy investors.
The juniors we have been talking about are getting hammered today - with TSX Venture down 300 points. Why?

One possible explanation goes like this --> a simple individual trading account - many institutional traders have margins they can extend to purchase additional shares of a company.
On a day where market drops so much - their margin call is up and the
investor will either need to sell some securities or make additional cash
payments to cover the decreased margin.

Another explanation is due to naked short sellers who
doesn't actually own shares of the company - but profit from the vaule drop of
the company. This practise has received alot of public attention lately and in
fact SEC is stepping in to limit short selling of FMN and FRE.

SEC is finally putting a limit to the barrage of short selling following a liquidity rumor - as it has been played out for so many FI's lately. (read: Bear Sterns - anyone?) Perhaps this will end the sad spiral of so many quality juniors.

Monday, July 14, 2008

IndyMac, Freddie, Fannie, & Feds (BSC anyone?)

It's been awhile (read: less than 6 months) that the Feds have had to release an emergency news update regarding Freddie Mac and Fannie Mae discount mortages.

After all, if you ran a business and you made a wrong decision and bought red wine when your clients preferred white wine... is anyone going to bail you out with taxpayer's money when you go out of business?

Apparently, in socialist America - Sunday night is when companies like FNM and FRE does. Long live capitalism?

Associated Press

Monday July 14, 7:17 pm ET By Martin Crutsinger and Alan Zibel, AP Business riters

WASHINGTON (AP) -- Now that the federal government has thrown a lifeline to mortgage giants Fannie Mae and Freddie Mac, taxpayers could be on the hook for billions more if the crisis of confidence spreads.

There were encouraging signs Monday for the rescue plan, but also signs of concern -- notably on Wall Street, where shares of the two companies slumped further -- that the plan won't be enough.

Other banks are already teetering: National City Corp. shares fell nearly 15 percent on rumors of financial trouble, even though it said it was experiencing no unusual depositor or creditor activity. And Washington Mutual Inc.'s shares fell 35 percent, to a paltry $3.23 amid worries about whether it had enough cash to handle the mortgage market downturn. WaMu said that it did.

And worried customers lined up Monday to pull cash out of their accounts at IndyMac Bank, seized on Friday by the federal government.
Some critics said they fear the Fannie-Freddie rescue effort will make more bailouts inevitable by sending a message that some institutions are too big to fail and thus encouraging risky behavior.

"It sends the wrong message to the world," said Joshua Rosner, managing director of research firm Graham, Fisher & Co. in New York.

One of the worst fears of any banker is what happened over the last year to a bank called IndyMac - a large retail chain of banks in the eastern US states. It traded around $30/share last year... last Friday it closed at a paltry $0.15.

FIFTEEN CENTS. That's less than many of the quality penny stock juniors on the TSX.

Funny enough, almost akin to BSC's announcement on the fated Wednesday before its weekend collapse, Indymac denies it's going to collapse.

Battling rumors that it may collapse, Pasadena-based IndyMac Bancorp
acknowledged Monday that its financial position had deteriorated but described
the fears as overblown and said it was working with regulators to improve its
"safety and soundness."IndyMac, a national home lender burned by the mortgage
meltdown, went public after depositors lined up at San Gabriel Valley branches
starting Friday to pull out their money. Striving to reassure them, the thrift
said nearly all their deposits were insured by the Federal Deposit Insurance

Nonetheless, Elizabeth Brown closed four accounts totaling $200,000 Monday at an Arcadia branch where about 20 customers were lined up at noon, saying: "The only reason I'm panicking is if anything happens, my money is tied up.

"I don't want to take the chance," said Brown, 62, of Temple City. "I'm going to put my money somewhere else, and if they come back, I'll come back."Rick McPherson, 64, said he grew worried after hearing news reports that IndyMac was struggling, and withdrew $1,000 he had at IndyMac. "I'm not certain what happens when a bank fails," said McPherson, a printer from Arcadia. "I don't trust the economy right now."

The company's stock sank 19 cents Monday to close at 62 cents a share. The shares are down 90% this year.IndyMac, which had specialized in making -- then often selling -- jumbo mortgages, sub-prime loans and mortgages with little or no income verification, was hit hard last year when defaults caused the market for such nontraditional loans to collapse. It has since recast itself as a maker of loans that can be sold to government-sponsored loan buyers Fannie Mae and Freddie Mac, but its May loan production, at $2 billion, was down 72% from a year earlier.

The above is the single biggest fear of any banker - bank runs.

A bank run (also known as a run on the bank) is a type of financial crisis. It
is a panic which occurs when a large number of customers of a bank withdraw
their deposits because they fear it is, or might become, insolvent. This action
can destabilize the bank to the point where it becomes insolvent. Banks retain
only a fraction of their deposits as cash (see fractional-reserve banking): the
remainder is invested in securities and loans. No bank has enough reserves on
hand to cope with more than the fraction of deposits being taken out at once.
After all, no matter how sophisticated an investor you are - at the end of the day all that zero and numbers in your online banking / brokerage account is just that - a figure. What does it equal? A whole bunch of treasury bills backed by a soon-defunct government? Dollar bills that the Feds are using freely to bail out multi-billion dollar errors greedy execs made?

No wonder USD is going down and trending down further. (see graph at top)

Of course, those of us in the precious & base metal companies will know that this long term erosion of dollar will mean more sunny skies for gold, copper, zinc, & various metal producers and explorers (lag behind).

Kinross Gold (KGC) is one of my personal favorites. It's up nicely today on further news of USD inflation and free money printing by the Feds for unjustified bail outs.
Kitco's Gold prices is up to $970/ounce. Remember last month when it hovered around $890?

I'd pick up the juniors and profitable producers now... USD is rapidly deteriorating and no improvements in sight. When fiat currency isn't worth anything, would you rather have something that has intrinsic value (gold) or can be used to build something (copper / moly)... or portraits of past Presidents?

Thursday, July 10, 2008

TNR.v - TNR Gold Corp Sues XStrata / MIM. Level II and its uses

Having been swamped at work I didn't get to follow one of the more promising companies on my radar for a day or two. XStrata is known to be one of the biggest mining groups in the world. I'm sure I've talked about them several times in the past - they encompass several mectals and commodities incs - Xstrata Copper, Gold, etc all throughout the globe. They trade on the London Stock Exchange and has a market cap of nearly $70 Bililion last I checked. Remember my post a few days about Minera Andes expanding the mineralization zone??

Xstrata PLC - Has various divisions for base metals, precious metals, and other lines of business.
Share prices is at $3649 GBP/share (multiply by 2x for $USD conversion roughly $7298/share) and market cap of $71,082 Million.

TNR Gold Corp.
- has various properties in Argentina (South America) and involvement in Alaska with Novagold. Promising projects and plenty of recognitions from majors like Barrick in the industry.
Share price is at $0.29 now and market cap is a paltry $22 Million.
Now I can see why Xstrata, the giant, is looking to take candies from the baby (TNR). Will it be this easy? It's certainly an uphill battle but let's take a look at Level II on the TNR chart today. What is Level II activity reporting you ask?
Nasdaq Level II is used when stock trading to provide a list of all buyers and sellers for each stock traded on the Nasdaq exchange. Bids (i.e. offers from active buyers) are arranged in descending price order (highest to lowest) and Asks (the sellers) are arranged from the lowest to the highest price. NASDAQ Level II will enable a stock trader to determine the depth of the market for his chosen stock and can help him to decide whether to stock trade or not (depth is the 'size' of the market for a particular stock - how liquid is it?). In order to use a level II system to any effect, a stock trading player must get to grips with the relative importance of each participant and market maker on his screens. A direct access stock trading system using NASDAQ Level II may make stock trading more fun, as it may make you feel more 'Wall Street'

Here's what a typical Level II quote would look like.

Click the picture and full size it for clarity.

L2 Summary above shows:

Bid Level - this is the price the bid / ask is at for that block of orders. This should be self explanatory.

- this refers to the Market Maker's #. In Canada this could be refered to as Brokerage House #. For example you would have your Wood Gundy (CIBC Brokerage), Nesbitt Burns (BMO), Canaccord Capital, and E*trade listed here.

- The price could be misleading if the size of the orders or trades are small. Investing $10,000 and finding out the daily volume of the stock is less than $1,000 could mean you'll be sitting on the ask (sell) for awhile before you get your money back!

Going further with the TNR example let's take a look at Level II so far:



Price 0.275 0.28 0.285 0.29
0.295 0.3
# Shares 102,500 25,000 253,500 335,500
135,000 30,000
# Orders 2 1 3 2
1 2

Excuse my terrible Word 2007 formating skills. Next time I will do a picture JPG instead.
Above was taken from Stockwatch, which as you can see quite reflects the picture above.

In this case, the bid strongly outpaces the ask... in which case there's a tendency for the stock price to move up!

The total amount people wants to buy (bid) totals to more than 800,000 shares up to as high as $0.295, whereas the amount of stock for sale start at $0.30 at less than 150,000 shares available.

Putting things simply and referring to supply and demand (remember that?)

Going by the graph, if 800,000 people wants something and there's only 150,000 available, what would happen?

A move of the demand line to the right would mean an upwards move on the Y axis (price)

What do you think?

Money as Debt

One of the links I have had on the side of this blog is a video called "Money As Debt".

It's a 47 minutes long video so you probably have to wait until lunch time to watch it, but it gives a great overview of our current monetary system and how the banking system really works. Quite a fascinating watch and certainly gives investors an idea why gold is at its level now.

Watch it and let me know what you think.

Tuesday, July 8, 2008

Stock / Investment Selection Process Part II

Continuing from our Part I - how does an investor fully understand what gleaming gems of a company to invest in this depressing market?

Well, going further, one simple fact is - numbers don't lie.
We look at Financial Summary , and one thing that has to be considered with caution is various accounting terms that may allow deferral of existing loans and liabilities until a later date. Those should be factored in as well.

Financial Summary would typically include things such as:

Various figures from the Balance Sheet - especially major assets, cash on hand (important!!), and pending liabilities and/or loans.

Example - a company wouldn't be going anywhere fast without some working capital (cash) for day to day operations, would they? Typcially assets would include drilling and mining equipment - unless companies contract out to full service contractors.

Liabilities is an interesting issue - it could be from earn-in rights that has not been fulfilled but likely to be (positive results), owed fees for services and goods,

Included in liabilities include any ongoing litigations and what's the company's position?? If the company is likely to win - that could be a positive - likewise the opposite could be a dramatic blow to the company especially when it loses the case.

Example : Company A owned a piece of land and rents out portions of it to Company B. Company B doesn't use parts of the land so gives it back to Company A. Years go by and the area starts to look really good. Company B wants the land back - even though it's been under Company A's title/name for the last few years. Who do you think makes more sense?

Recent financings and share numbers should also be applied into the equation - more dilution to the stock will mean less value for the shareholders unless the company keeps growing!

Summary of the Corporate Philosophy and Business Plan (less than 100 words)

I know we're all investing and rock fanatics here, but I'm sure we all go out once in awhile. Have you heard of this fast food chain called... McDonalds? I hope so as it's a $65Bn Market Cap food giant. My point is though, despite their multifacted business routes - their mission statement is very straightforward.

"McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile."

If a $65 billion dollar company can only afford to do a few things well, how do you expect microcap exploration companies to do 10 different things all at once?

A company - should be focused in its efforts and stick to what they know. You won't see Microsoft (MSFT) venturing to fashion and competing with Lululemon (LLL) by making their own yoga pants anytime soon.


Last I checked, Steve Ballmer was not a Yoga enthuthiast nor did he have much experience in retail especially to the yuppy generation.

If the current CEO of the mining company specializes in explorations and has track record of success with junior companies - I would be more inclined to invest in the company compared to another CEO that was successful in management an accounting firm and wants to try his luck at digging for gold now that it's $900/ounce.

Bottomline - there must be a fit with the management and the goal of the company.

J.Taylor then goes on to ask his potential candidates to Summarize Flagship Properties, which we will get to, next post : )