Clifton Star Res Inc CFMSF

More management mediocrity; nothing has changed

[CSIGroup]

Clifton Star management mediocrity...nothing has changed

Recent private placement analyzed

Clifton Star has announced the settlement of old litigation against Osisko. They received a settlement in the form of cash and a private placement by each of the two companies (Yamana Gold and Agnico Eagle) that bought Osisko last year. The private placement portion was done at $.60 a share. Does that mean that Clifton Star is now worth $.60 a share? Of course not.

It is questionable whether Clifton Star management negotiated such an impressive settlement or whether it was just the two other companies wanting to get the legal matter off their books. This settlement was only possible because prior management originally negotiated with Osisko for a loan to Clifton Star worth $22.5 million and the loan was independent of the fate of the joint venture between the two companies. Although Osisko decided not to continue the joint venture, they were still legally on the hook for the $22.5 million loan when demanded by Clifton Star. Osisko's posture towards the situation was to wait it out, knowing that litigation would probably be too expensive and time-consuming for Clifton. What changed is that Osisko was bought out by Yamana Gold and Agnico Eagle. Both companies had to show the lawsuit against them in shareholder reports and filings. They each must have finally decided it was time to get this nuisance off their books and pay Clifton Star to go away. If so, it had nothing to do with present management, whose lack of negotiation skills alienated the owners of the Duparquet project and eventually cost Clifton Star 90% of the project.

What about the $.60 per share for the private placement portion of the settlement? That is just a figure of arithmetic. Both companies wanted to keep their percentage ownership of Clifton at under 10%. Had the per-share price of the placement been set at the then-current Clifton Star market price of $.10, they would have together owned well over 50% of the company. They didn't want that; they just wanted a passive investment in the company at under 10% each. The only way to accomplish that was to set the deemed share price of the placement units at $.60 each. This does not imply that either company really thinks the units are worth that much. The stock is not trading at $.60. It is trading at around .20 per share, about 31% below its .29 per share cash value. This shows that there is no real confidence in present management. They just got very lucky in collecting an $11 million windfall. Not all companies trade at or below their cash value. If a company has valuable assets, or there is the belief that management has substantial ability to negotiate and develop assets, the stock price can trade well above cash value.

Almost forgotten is that a special shareholder meeting has been set for June 16, 2015. Shareholders will vote between the current directors and a dissent board of new directors. Current management has done everything possible to avoid even acknowledging the existence of the dissent board, whose members are described in detail here:

https://www.marketwired.com/press-release/activist-shareholder-seeks-to-replace-board-of-clifton-star-resources-inc-1975198.htm

If the present sub cash value price of the stock is any indication, the current directors will be voted out soon.