Terrible results. Mgmt is horrendous.I don't think I've ever changed my opinion of a company or a management team so quickly. After my talk to IR and DD on SAM last week, I thought I had a pretty good handle on what is going on. Boy, was I ever MISLED (polite way to say I was lied to - tantamount to fraud imo). I talked in detail to SAM IR guy about production, cash costs, etc etc. I was shocked to read the financials and see the difference btw reality and the BS I had been told and the Investor Presentation I was sent.
The financials reveal all sorts of NASTY surprises.
Production isn't going to be back up to expected rates until end of the next quarter (or so they claim). They've had three successive declines in production, each quarter getting worse, with Q4 outright horrendous. (and Q1 may even be worse from the looks of things). Yet their "forecast" was for increasing production? How curious.
Based on the comments in the financials, it appears extremely unlikely they can match last year's production (28,000 Au equiv), let alone ramp up to 40,000 as per their investor presentation. 25,000 oz may be optimistic depending on how bad production is right now (of course, they won't tell us - that would be too forthright and transparent - seems these jokers think it is much better to hide the truth (lie? deceive?) and then "surprise" the market with bad news). And that means cash costs are going up - maybe not as high at $490 as per Q4, but well above $350 - probably in the low-mid $400s is my guess. Based on their huge G&A, it looks like these guys will be lucky to show any earnings in '08 - hard to imagine with $1000 POG.
And despite protestations from management, it's clear management are only out for themselves.
These pieces of chit, err, "top management" reserve the right to award themselves TWENTY PERCENT (20%) of the common stock. That's outrageous and scandalous greed. 10% is bad enough. But 20%? That's shocking. And then to compound things, they have hugely accelerated vesting conditions - 33% in 6 months. 66% in 12 months and 100% in 18 months. Plus they give themselves 5 yrs to exercise them. Shareholder friendly? A resounding NOT!
And to prove these SOBs are some of the greediest baztards around, go look at the "incentive options" they awarded themselves in the last 6 months (presumably for doing such a bang up job to lose money with ~$1000 POG and see production drop ~40%).
They lost $2.52MM in the last 6 months with gold near all time highs. Yet where did the majority of the loss come from? Well, from "top management" awarding themselves about $1.888MM in "stock based compensation" in addition to $449K in "management" fees and salaries. What a crock o chit.
And then look at production. About 37% is "purchased ore" (average for the last 2 quarters - it was 42% in Q4). And from that $4.75MM in revs from purchased ore, they saw a gross "operational" profit (before G&A, etc etc) of a minusclule $88K. The purchased ore kept the production numbers up, but it is almost a complete waste of time and energy. I guess $88K is better than nothing, but it sure limits the ability of SAM to capitalize on rising gold prices when 40% of production provides little to no benefit to shareholders.
And that raises all sorts of questions about their 40,000 oz "guidance". Just how much is from their own operations and how much is to come from "purchased ore"? It is crucial piece of data to know to model earnings (or lack thereof in SAM's case). But of course, SAM doesn't disclose that info. Very curious.
Based on what I learned, I think SAM is more than fairly priced. Significant portion of their production is virtually profitless and offers no upside to increasing gold prices. The remaining portion of production (60-70%) has seen lower grades for 3 (perhaps 4) consecutive quarters. Management is unwilling (unable?) to provide reliable or accurate guidance or contemporaneously inform sheep, err, investors what is going on. Insiders are gorging themselves on "incentive options" and salaries while offering pie in the sky, fanciful projections.