So sad what this sector has becomeThe constant trashing of gold and silver by the U.S. government, coupled with the absolute corruption of the Canadian "banking" industry has absolutely obliterated the sentiment in the junior mining sector, to the point that there is literally no more intelligent discussions, only baseless bashing. In fact, there are barely any posters any more, except for a-holes such as ziggy and people like bagger that have a specific agenda.
Throughout the last year, SDRG has had to deal with the duel issues of a collapsing junior share market (and collapsing junior capital market) and a nasty shareholder that appeared hell-bent on destroying the company, from my view. Marc has made some mistakes along the way, but most of those mistakes related to the aforementioned issues, and no one has worked harder to help shareholders, IMO, than him.
Now that it looks like that a-hole shareholder is OUT, and at the worst level of junior mining sentiment I've seen in my career, Marc pulls off an absolutely amazing deal and people are still listening to the bashers?!?!
To start, bagger's comments about selling low and buying high could not be more ridiculous. A year ago, Marc increased SDRG's stake in the nine Erbaohuo properties from 60% to 90% for a measly two million shares when the stock was at its highs around $2.50. So call it $5 million if you'd like, but I call it 2 million paper shares today valued at $180,000. Now he is selling 40% of eight of the properties and 20% of the other for $4.5 million of CASH.
Additionally, at a time when the capital markets for junior markets have essentially closed, not to mention a time when SDRG has been in such a state of management flux, Marc has sold THE CHINESE GOVERNMENT an $8.5 million PP at roughly $0.24 at a time when the stock was trading at $0.17 WITH NO WARRANTS! Obviously, not only are the Chinese extremely intrested in the Erbaohuo properties, but have plenty of faith in Marc and Silver Dragon (they will now own around a third of SDRG). And people are complaining?!?
There are so many positive points from this deal, I hardly have enough time/room to list them, such as:
1. The Chinese government not only takes the majority (60%) ownership of the eight exploration properties, but they will likely take over their operation as well. This reduces the amount of SDRG resources required to work the properties, essentially enabling them to be a passive 40% shareholder in what could turn out to be one of the great silver resources in the world. Not only that, their capex requirements are greatly reduced. Their published target plan was to drill $6.6 million in China this year, but now as a 40% owner will only need to spend around $2.6 million.
2. By keeping 70% of the flagship Erbaohuo property, they clearly aim to produce it as they initially proposed, which will bring internally-generated cash flow into the company.
3. They can move forward on their plan to produce Mexico as well, per the press release from two weeks ago. And obviously the Chinese believe in Cerro los Minitas as well, lest they wouldn't be buying $8.5 million worth of SDRG shares. So we could be seeing production from both Mexico (100%-owned) and China (70%-owned) in a very short period of time, IMO.
4. Now that they have all these funds, they can add the "layers of management" discussed in the recent PR, which obviously means major mining type operators/executives.
5. They also will have enough money to qualify for the TSX (1.5 years of estimated capex/opex), if they so desire. Per the offering document earlier this year, I believe their proposed Mexico spending this year was just $1-$2 million, so total 2008 capex/opex plans are likely to be just $3-$5 million, compared to the hefty $13 million they will now have on their balance sheet!
6. I'd be shocked if a member of the Chinese government does not joint their board ASAP, given that they now own roughly a third of SDRG.
7. Political risk for the company is DRAMATICALLY reduced, as the Chinese government's large investments in the company virtually assure that they will treat SDRG fairly in the foreseeable future.
So bash if you want here, but anyone that does sounds like a complete moron!
yoyo