I think we can expect to hear a lot more about Focus Gold Corp., (OTC:BB: FGLD, Stock Forum), a U.S. Bulletin Board company which is supposedly sitting on top of a billion dollars worth of gold and base metals across a patch of property in Mexico.
The Newport Beach, Calif.,-based company, which has a Toronto office, is trying to recover from a drop to 45 cents Friday from as high as 97 cents in recent weeks, giving Focus a market cap of $26 million based on our count of 58 million shares outstanding.
Research Driven Investor kicked off the campaign saying the stock is poised for a 100 to one gain on the back of the “super bubble” in gold and major discoveries in Mexico, Canada and Ireland. These look set to “push Focus onto the world stage as a tremendous success,” it said.
The New York micro-cap investment newsletter was paid $50,000 by a third party (Extreme Access Media) to deliver a one day promotion on June 21 of this week. Research Driven Investor also predicted that Focus could be sitting on $1 billion worth of gold and hundreds of millions of dollars worth of copper on the Huicicila gold-silver project in Nayarit, Mexico,
I think this is clearly outrageous.
According to the company’s regulatory filings, the Huicicila property is without known reserves as defined under U.S. Securities and Exchange guidelines.
Focus said American Smelting and Refining Co. (ASARCO) worked the property in the 1930s and outlined a small proven and probable reserve of 45,274 tons at an average grade of 31.2 grams per tonne gold, 401 grams per tonne silver, 0.66% copper and 3.4% lead.
The company then admitted that the reserve is not complaint with NI 43-101 standards and should not be relied upon.
(A May 27 technical report on the Huicicila project, which the company said was prepared in compliance with 43-101 standards has not been reviewed or accepted by the Toronto Stock Exchange. Until that review and acceptance takes place, it is not officially in compliance with N1-43-101, the report said).
However, in a June 6 “commentary,” Ubika Research said the potential exists for a big porphyry deposit on the Huicicila properties that could attract bigger miners who are active in Mexico.
In a disclaimer at the bottom of the report Toronto-based Ubika disclosed that it has made this assertion without visiting the exploration site or doing any independent physical assessment of Focus Gold.
Ubika also said it had received compensation in the form of fees and 100,000 common shares of the junior. (Ubika is a research firm that works with companies to give them capital markets exposure, a company analyst said.)
Headed by Grant White, a Toronto-based investment banker, Focus Gold appears to be little more than a highly speculative exploration play. It was previously known as Gold Bag, Inc. before changing its name last month.
In a recent interview, White said his goal is to have a diversified portfolio of early stage gold assets in interesting geological settings.
But that doesn’t make Focus much different from hundreds of other juniors that are trying to make a go of it by doing the same thing.
In Canada, the company has the right to explore 16 mining claims in the Timmins, Ontario, district known as the Watabeag and Russell Creek properties--under an agreement with Victoria Gold Corp. (TSX: V.VIT, Stock Forum).
Both have been the target of previous gold exploration, but are as yet without known reserves.
Under the agreement, Focus issued 250,000 shares to Victoria and committed to spending $2 million on exploration over the next three years.
But as the company is generating zero revenue and had only $329,746 at the end of February, [compared to $529,551 in current liabilities], it will need to raise more money to meet it its exploration commitments.
In February, the company said it had agreed via subsidiary Focus Celtic Gold to acquire exploration licenses in Ireland and Scotland through the acquisition of unlisted U.K. company Metallum Resources Plc.
The agreement requires Focus to purchase 73.8 million shares of Metallum for 10 British pennies a share via the issuance of Focus shares, based on a trading price of between US45 cents and US70 cents.
The deal is contingent on Focus Gold’s having US$2 million in working capital available for investment in Focus Celtic and there has been no announcement about when this deal will close.
Meanwhile, during the years ended February 28, 2011, and 2010, Focus said it its sole means of meeting cash flow requirements was through the sale of common stock, loans and donations from directors and officers.
According to regulatory filings, White indirectly owns 3.4 million shares of the company via a Barbados investment company called GRW Global Investments. Under his employment contract, White also has the option to purchase four million shares at 50 cents a share until February 2016.
In an interview, White said the key challenge facing the company is to be selective, do the right deals and be prudent with its cash.
But given that promotion campaign has done little to arrest the recent decline, in the absence of major news, it is outrageously difficult to see what’s in the bag that would drive the stock back to its former heights.