Gold, silver, copper resources increase on new estimate: Scorpio Mining.
Breaking news from Scorpio Mining (TSX: T.SPM, Bullboard) this morning revealed that the junior mining company, with operations in Mexico, had completed a new resource estimate. There have been “substantial” increases to measured and indicated resources, which include silver, gold, zinc, lead and copper.
CEO Peter J. Hawley made these comments:
“The significant increase in mineral resources in the measured and indicated categories in less than one year shows that our resource base remains very strong and confirms the success of the aggressive definition and exploration drilling program completed in 2007. Our production team will now focus on establishing a new mineral reserve estimate and mine plan for the next two years of production. The stringent application of mining and economic criteria and the associated dilution factors for this mineral resource estimate supports our expectation that mineral reserves will be substantially increased and confidence levels enhanced once the mining plan is completed.” (Go to press release.)
Buzz on the Scorpio Bullboard has been focused on a recent debenture issue, in which Scorpio raised roughly $26 million for continued growth and operations at its 100% owned Nuestra Senora project. On May 3, TripleG2 said:
Why is it that we learned of the debenture issue from Breiger on BNN? Why hasn’t the company come out with a news release to say that not all the warrants were exercised and, as a result, they had to issue debentures (7% interest and convertible at $1.55, in accordance with the NR issued on April 9, which raised this possibility). What the hell! Isn’t this material information that all investors would want to know about? Breiger said that they would prefer to hold the debentures and earn 7% while they waited. From what I understood, he, and presumably others who participated in the debenture issue, are selling some of their common stock, and that’s why he said there will be pressure on the stock for a few weeks.
The words of TripleG2 above prompted blackty to ask the investor to expand on the analysis and include an explanation of how debentures are different from warrants, and after first disclosing that he or she had no expertise on the subject, only opinion, TripleG2 obliged:
There are slight differences in the definitions you can find on the internet, but essentially, a debenture is simply a debt instrument (an IOU). In this case, SPM sold IOUs in a private placement in return for money (we don’t know how much because the amount was to be dependent on how many warrants were exercised – again, a number we don’t know). Let us assume, for the sake of an example, that SPM sold $10 million in debentures.
In return for giving $10 million to SPM, the buyers will receive 7% interest on $10 million, paid semi-annually. The maturity date of the IOUs is the third anniversary of their issue, so let’s say they will mature on April 30, 2011. (See April 9 news release – Yahoo finance.) All the while, the buyers will be earning 7% interest. On or around April 30, 2011, SPM will have to give back the $10 million to the buyers, if they have not already converted the IOUs into shares by then.
Yesterday (Monday), Rawcolt expressed displeasure with the financing: “Just the worst possible result when debentures are used in this way with share warrants. This financing is going to hang over our heads for the next 2 years - This absolutely sucks! I sold 25% of my position after the news just out of anger.”
As of 9:15am EST this morning, the only reaction to the just-released news of increased mineralization at Nuestra Senora has come from ticktalker, who reposted the news release on the Bullboard. Whether it has a positive effect on investors’ spirits in the wake of the debenture issue or not remains to be seen. Check in on the Scorpio Bullboard to find out.
