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Few things are ever certain in the penny stock game. But in the next few weeks we are sure to be hearing a lot about Siga Resources Inc. (OTC:BB SGAE, Stock Forum) and its British Columbia placer gold project.
That’s because the U.S. Bulletin-board-listed junior recently hired Las Vegas, Nev.-based Crown Equity Holdings Inc. (OTC:BB: CRWE, Stock Forum) to do six months worth of media relations and advertising work. It paid for those services by issuing two million restricted shares to the Nevada firm.
In fairness to South Lake Taho, Calif.-based Siga, it had no choice but to go this route. According to regulatory filings, it is generating zero revenue and had only $19,704 in cash at the end of 2010.
But it is far from clear that a stepped-up promotion campaign will be enough to support a stock price that has remained above the 60 cent level for all of this year, in spite of the company’s obvious lack of financial resources.
Trading at 63 cents on Tuesday, Siga currently has a market cap of $28 million, based on 44 million shares outstanding. The stock trades in a 52-week range of 65 cents and 44.5 cents.
Siga reported a net loss of $103,004 or
.00 per share in the three months ended January 31, 2011, (compared to a year ago loss of $8,703 or
.00 a share) after issuing 200,000 shares, (worth $90,000) to company directors.
Due to its lack of cash, Siga has been unable to fund exploration work at the Valolo gold claim in the Republic of Fiji one of the company’s two main exploration properties.
The other is the Lucky Thirteen placer gold project near Hope, B.C, which Siga said it wants to develop in an equal joint venture with privately-owned Vancouver company, Big Rock Resources Inc.
With no funding for Valolo – the property that Siga was set up to explore -- the company said it was hoping to start Phase 1 no later than the late spring of 2010. With Phase 1 costs estimated at $10,900, the company said it hoped to fund that work through advances from company directors.
It’s hard to see what this company can achieve by spending only $10,900, an amount that would barely cover the cost of travel expenses for company officials, let alone meaningful exploration work.
Regulatory filings show that Siga was able to acquire the Fijian asset, including a geological report for just $5,000. But because there has been no exploration activity and Valolo has no established gold reserves, the company said it can’t be sure that the cost of acquiring the asset can be recovered.
Meanwhile, under a deal announced on May 30, Big Rock has agreed to spend US$400,000 for an initial evaluation program on the Lucky Thirteen project, which has seen intermittent production dating back to the Fraser River gold rush in 1858, according to Big Rock’s website.
Siga said it acquired Lucky Thirteen with the aim of putting it into production. The purchase price for Siga was $1.5 million, payable by July 15, 2015 to Peter Osha, who retains a 3% net smelter royalty interest in the project. (This could prove challenging for a company with under $20,000 in cash).
Having set up a joint venture firm to operate the project on behalf of the partners, Big Rock committed to providing $8.5 million to put the property into production.
On its corporate website, Siga said an analysis of the geology and past production testing records indicates that the joint venture will target an area of interest, containing 21 million tons of sand and gravels to a depth of 20 metres below sea levels.
An analysis of available records shows that the target area contains economic gold and anomalously high platinum group metal values, Siga said.
However, because of the small number of recorded samples and uncertainties about the nature and location of many early samples, it will have to collect new data for analysis purposes.
Big Rock does not say how much gold has been produced from placer mining between 1858 and 1991. It isn’t clear how much revenue the joint venture will be able to generate at Lucky Thirteen, which covers 168 hectares and is located near the Trans-Canada Highway on the north bank of the Fraser River in southwestern British Columbia.
So any investment in this company appears to be something of a shot in the dark.
Meanwhile, on May 30, Siga appeared as a “spotlight” stock on the StockGuru website. StockGuru says it strives to cover companies which are “worth the attention of its readers.”
However, StockGuru’s Siga spotlight feature contains all of the usual disclaimers, including a warning about the highly risky nature of the stocks that appear on its website.
“Never invest in any stock featured on our site or emails unless you can afford to lose your entire investment,’’ added Crown Equity Holdings on a disclaimer attached to a Crown Equity newswire video that also featured a Siga profile.
In the disclaimer footnotes, Crown Equity confirmed that it has received two million restricted Siga shares and expects to pick up 2.5 million free trading shares of Siga from a third party in exchange for media advertisement and investor relations services.
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