Here''s the deal with SDRG!
OK, Let's see. Just a week ago, the Dragon announced that the Chinese government took a 3%-4% position in the company, in effect giving up 60+ million Ag equivalent ounces of 122b (the Chinese 43-101) compliant resources in order to gain that position. At the time, the stock was trading at $2.52, on its way up to $2.82.
Also at the time, gold was $670 (vs. $683 today), silver was $13.75 (vs. $13.65 today), and the HUI was 354 (vs. 352 today). Oh yeah, zinc was about $1.50/lb vs. $1.60/lb. today, and the dollar was about 82.5 vs. 81.4 today.
Since that time, somehow the will of junior mining investor owners decided to break for some completely unapparent reason, with SDRG being more the rule than the exception. To illustrate, even before the audit delay announcement, the urge to sell all rallies had been strong, with the stock amazingly falling to $2.45, vs. $2.52 before the announcement.
Now we have the audit delay announcement, and in a relatively weak Precious Metals share market, we've seen the stock fall all the way to $2.17 on a series of relatively low volume days, repeating the ongoing trend of rising on high volume, falling on low volume. As noted in the press release, the delay doesn't have the slightest connection to a material "issue" at the company; to the contrary, the China announcement last week, not to mention the big Mexican discovery announcement of the week before, exemplifies just how strong the company's operations are as we speak.
The company's auditor has simply been overwhelmed by the complexity of SDRG's rapidly growing operations, particularly in China where the language barrier is high and the accounting standards highly unfamiliar. The auditor, SP, clearly underestimated the job, and as a result has not been able to finish in a timely fashion as they have been paid to do.
Given SDRG's accomplishments of the past year, and particularly of recent months, I find it nearly comical that anyone would believe the audit delay announcement is anything to be worried about. Heck, SDRG wasn't even required to press release the audit delay, but as a responsible company aiming to grow into a major global producer, they thought it was the prudent thing to do. And look at the reaction the stock gets.
Next year, I'll bet dollars to donuts that SDRG will use a big, international auditor, particularly given that their till will be rich following the upcoming Toronto IPO.
As for the current situation, the company is operating business as usual. Marc just called me from China at 6:00 am China time, and no he hadn't been to sleep yet. He is that diligent a worker, and that committed to investors, particularly himself as he owns 28% of shares outstanding.
The excitement in his voice shows how optimistic he is about SDRG's future, particularly regarding the relationship he has built with Sino Top, the company's Chinese partners. In fact, the buzz around China has grown so strong about the story, that just this week Merrill Lynch Asia courted Marc about listing SDRG on the Hang Seng Exchange in Hong Kong. The company is not yet qualified for this venerable index, but mark my words one day it will trade there.
Just remember the company's 43-101 report from Mexico revealed a resorce of around 30-35 million Ag equivalent ounces given the current prices of Ag, Zn, and Pb, and the recent release indicated that this resource is now closer to 50-60 million Ag equivalent ounces, making the company's Mexican resources alone larger than probably 95% of all Mexican juniors.
Also, the company has about 300 million Ag equivalent ounces of 122b resources in China, which as we speak are being converted to 43-101 compliance (the first of nine will be completed by the end of April). Not to mention the Hubei acquisition, which should close later this year, giving the company a mine that now produces more than 1 million ounces of Ag per year.
The market cap of just about $135 million is so pitifully low given the company's resources, its status as a producer (currently in China and shortly in Mexico), its position as one of just three foreign companies licensed to produce silver in China (a position that is nearly unreplicable), and its position as a soon-to-be-listed Toronto issuer, is similarly comical.
It won't stay that way for long. In short order we will likely have shaken out the weak hands that fear nothing but fear itself, and charge back to new highs. Take a look at the three-year chart of the Dragon, and you will see a company you can be confident in.
yoyoyo
p.s. How do I know so much about the Dragon? I'm just a very large investor with a background as a sell-side analyst at a major Wall Street bank. I understand this industry as well as anyone out there, and am very hands-on with my investments. Best of luck all longs, and good luck to any bashers that want to try refuting this post.