TORONTO -- If you happen to be working this week, here is material for an actionable office pool.
Gran Colombia Gold (GCM in Canada and TPRFF in USA) on Tuesday -- that is tomorrow -- will shrink its common shares by a factor of 25.
So, if the Colombia gold and silver producer's 15.2 million shares close at, say, 17 cents Canadian Monday, on Tuesday they will open at about $4.25 in Toronto.
I was reading somewhere that about half of the time, a merged stock, or reverse split, results in a lower stock price three months later.
Theoretically, anyone with fewer than 25 shares in the case of GCM will get cash from the company because they won't have enough shares to equal 1 new share.
In the case of Gran Colombia, there will be an effect on the prices of warrants, employee options and so on. I do not believe the reverse split will change the trading prices of Gran Colombia's gold-denominated notes and silver-denominated notes.
There is an entire folklore about reverse splits and how they presumably "telegraph" dire circumstances for the issuing company.
I happen to own GCM shares, having seen Gran Colombia's producing properties several times. The company is owner of Segovia, El Marmato, Zancudo in Colombia, along with one or two others and a large tract of mineral property in Venezuela. GCM is one of our TCR 8 holdings.
Most interesting is that aside from one or two technical questions about the proposed split, during a recent conference call, no large shareholder seemed to object. That held in the May annual general meeting vote, when 98 percent of the holders, including the largest fund manager owing the shares, U.S. Global (GROW in USA) in Texas, approved the split.
More important than all the split chatter when it comes to companies is the way the company is operating. Right now, Gran Colombia continues to lower what were obscenely high cash costs for pulling gold, and silver, out of the rich veins of Segovia.
The future of its other Colombia flagship, El Marmato, almost surely will be resolved this year, probably in the shape of a joint venture with a large gold-silver miner that wants into Colombia. We'll see.
MORE COLOMBIA: I saw more crazy-high grades from Continental Gold (CNL) at Buritica. One piece of core showed 2.15 metres @ 473.6 g/t gold and 186 g/t silver.
The challenge with CNL is that assay numbers do little in a wishy-washy gold equities market to lift the shares back toward its all-time high of $10 in late 2012. Several fund holders went in big on a $75 million financing at $9.55 a share; six months later and the stock is less than half that.
Our take at TCR is that Continental's executives will need to consider selling Buritica, near the city of Medellin, soon … or risk disenchanting its North America and European shareholders. There was talk in 2012 that Continental would be a fit as operator of AngloGold Ashanti's mothballed La Colosa.
Not way.
The new chief executive of AngloGold, 46-year-old Srinivasan Venkatakrishnan, said in May he would prefer a partner for La Colosa, a gold porphyry that is in the district of Tolima. CNL's Buritica is in the department of Antioquia.
If Continental Gold's executives follow through with that line of thinking and take over La Colosa, CNL's shares will sink well below $4. I don't think if that ever was on the table, it is no longer.
The CNL executive/director team of Ari Sussman, Mark Moseley-Williams and Bob Allen know that La Colosa offers these guarantees: administrative snags, tonnes of cash to develop and the center of media attention in a mining-wary nation of coffee, orchid and sugar-cane growers.
Ari Sussman, Continental's CEO, when I broached this subject, said, "La Colosa is exactly the type of project we avoid given it will cost mega money to develop. Our model is to focus on high grade, modest capex underground gold projects."
He added, "Given we have approximately $150 million in the treasury and no debt, we don't feel any pressure to sell Buriticá in this current depressed environment."
I think banks, funds and other large shareholders already are weighing in on that what's next for Continental, which could be producing gold and silver at Buritica by 2015 -- maybe sooner. CNL already produces a small amount of both each week at the underground existing mine.
At this point, anyone in the red by 50 percent or more will be looking for a sale of the Buritica project, with a spinoff of Continental's eight or so other Colombia projects, including the promising Berlin, into a separate entity. Mr. Sussman and team seem prepared to wait out the horrible metals equities market instead.
Continental has a number of social issues swirling around Buritica, including (I am told) as many as 3,000 illegal miners tapping into the area's rich veins. That number, 3,000, is not confirmed. It could be half that, or twice that. Mr. Sussman, reached in Panama City, said the number is 1,000 or fewer.
The governor of Antioquia and others in government have pointed their fingers at Continental and its flagship Buritica, which is thick in a coffee-growing region. I imagine Buritica will become a leading campaign topic in next year's presidential and regional races.
AFRICA: I now own shares of Namibia Rare Earths (NRE in Canada and NMREF in USA). Just to start: 13,000 share at 19 cents Canadian. I likely will purchase more in the next several days.
There is a block of 5.5 million or so shares for sale via Dundee in Toronto; the asking price is probably 20 cents Canadian.
The set-up for a trade here looks reasonable: I know the recent buyers of about 10 million shares at about 18 cents or 19 cents.
NRE's thing is called Lofdal. The experts, including our pal Luisa Moreno in Toronto, say that more than 90 percent of the value of rare earth elements in terms of critical need for defense and sustainable supplies is contained in four elements: yttrium, dysprosium, terbium and europium.
More than 80 percent of Lofdal, at 0.3 percent cutoffs, appears to manifest those four elements. I hope to check it out soon: Lofdal. I like the fact that NRE has $15 million of cash, and its principals have vowed never to raise money in an equity financing, not ever again.
Read more at https://stockhouse.com/columnists/2013/june/5/burning-through-sf-fog--namibia-rare-earths.aspx#i5ML1s5UFlP1KLMx.9
Further purchases: Bellhaven Copper & Gold (BHV). I expect another assay from Bellhaven Copper & Gold within a week. I believe the shares could rise above their recent 16-cent high before the next assay of La Garrucha in Colombia comes out. That is BHV in Canada and BHVCF in USA.
I own 2.3 million BHV shares.
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