Golden Eagle Intl MYNG

interesting article

[~lurker~]

Heard off the street: Penny mining stock turns to fool's gold for many Sunday, September 24, 2006 By Len Boselovic, Pittsburgh Post-Gazette Three years ago, when Golden Eagle International President and Chief Executive Officer Terry Turner spoke to members of South Hills Country Club who had invested in his Bolivian gold mine, gold fetched about $355 an ounce. Given that it breached the $700 mark in May and is currently trading for nearly $600, you would think the Pittsburgh investors, who owned between 5 and 10 percent of the company's 290 million shares, would have found their pot of gold by now. They haven't, another reminder of the perils of penny stocks, a market frequented by speculators as well as patient souls whose faith in their fellow man is unshakable. "Mark Twain said, 'A gold mine was a hole in the ground with a liar standing next to it.' I'm not that liar," Mr. Turner told The Post-Gazette during his June 2003 visit. Action at Golden Eagle's hole ceased a year later, when local unrest in Bolivia halted production at the company's mine. Natives on the homefront are restless, as well. Mr. Turner recently defeated an attempted coup or, as the company's Securities and Exchange Commission filing termed it, a "reasonable misunderstanding" over whether directors voted Mr. Turner out of office at their Aug. 24 meeting. Mr. Turner says the vote never took place. He's suing Kevin Pfeffer and two other directors behind the failed coup. Court filings include e-mails from Mr. Pfeffer that demonstrate a lack of trust -- to put it mildly -- in some quarters. "You were replaced as of last Thursday," Mr. Pfeffer wrote Mr. Turner on Aug. 30. "If you take any official actions for the company since that time I will put you in prison ... when the audit is done, that's where you're likely heading anyway." An hour later, Mr. Pfeffer wrote Mr. Turner: "You are going to have to pay back stolen, diverted, misdirected and misspent funds. Do you want to wait for the results of the audit or do you want to settle this now?" Mr. Pfeffer declined comment. Mr. Turner says Mr. Pfeffer's allegations aren't true. "I think we have a philosophical difference over how the company should be growing and progressing," Mr. Turner said. The allegations aside, it wouldn't take much to cobble together a case for removing Mr. Turner. Despite rising gold prices, Golden Eagle's shares have fallen from 16 cents to the price of penny candy, closing Friday at 1.1 cents. Golden Eagle, which has lost more than $30 million over the last five and a half years, raised the specter of bankruptcy in its most recent quarterly report. It was hurting for cash three years ago, a shortage that has grown more acute. There's no revenue from its idled mine and Mr. Turner says prospects for resuming operations there aren't good. "Right now, we don't hold out a lot of hope," he says. The company has sold reams of stock to keep it going, issuing about 500 million shares since the Pittsburgh road show. SEC records show the buyers included two South Hills backers: the country club's head pro, Sam Depe, who put up $10,000 in July 2005 to purchase 1 million shares for a penny a piece, and member Don Fox, who paid $5,000 for 500,000 shares the same month. "We're all very disappointed," says Mr. Fox, 70, a semi-retired sales consultant who estimates he owns about 2 million shares. "The company looked at one time like it was getting ready to take off and then there was a major upheaval. Most of us are just sitting on the outside hoping something good's going to happen." An affidavit filed in connection with Mr. Turner's lawsuit by Joseph Kohler, the South Hills member who led the charge into Golden Eagle shares, indicates about 90 club members are Golden Eagle shareholders. "I think it's going to work out," says Mr. Kohler, 85, who is backing Mr. Turner. "I trust the man very much and I think in the long run we're all going to be very grateful to him," he says. The cash shortage crimped operations so much that gold and copper lying in wait at a second Bolivian mine -- worth an estimated $300 million at today's prices -- was taken off the books after the SEC questioned Golden Eagle's listing the reserves in its 2004 report. The issue was whether Golden Eagle could list reserves if it didn't have the money to pull the ore out of the ground. The company says it won't book the reserves until there's "a high degree of certainty" it can finance operations at the second mine. "We don't have anything pending with the SEC. They were very cordial with us in working on the reserve issue," Mr. Turner says. As things currently stand, the number of common shares Golden Eagle can issue is capped at 800 million, meaning it can raise $100,000 selling the 10 million unissued shares at current prices. It needs 100 times that amount to develop the second mine. So it's seeking $10 million to $14 million in funding from the Overseas Private Investment Corp., a federal agency that doesn't rely on taxpayer support. "They have been very positive and work with us," Mr. Turner says. His optimism, along with that of Mr. Kohler and other Golden Eagle diehards, is remarkable in light of the company's dismal performance. But when penny stocks and gold are involved, greed often disregards reason and faith trumps the facts. As the wise old prospector played by Walter Huston leading the futile search for gold in the move classic "The Treasure of the Sierra Madre'' says: "I know what kind of ideas even supposedly decent people get when gold's at stake." (Len Boselovic can be reached at [e-mail] or 412-263-1941. )