Prospector basks amid rosy forecasts in Mexico and the U.S.
by Peter Kennedy
Gold American Mining Corp. (OTC:BB: SILA, Stock Forum), a junior exploration firm that has featured on numerous investor alerts, has also caught the attention of Stockhouse bullboard writers who are advising would-be investors to be wary.
In a recent posting, Stockhouse blogger Clint007 says he received a highly promotional report on Gold American and its exploration properties in Mexico and the U.S., but doesn’t know where it came from.
It turns out that the report is by John Myers, a Calgary investment writer, and self described mining guru, who was paid US$25,000 by the company, according to a disclaimer at the bottom of his report.
Myers describes Gold American as a possible takeover target for Canadian gold mining giant Goldcorp Inc. (TSX: T.G, Stock Forum), and says the stock is headed to $10 within the next 18 months.
This hard-to-fathom forecast comes with the suggestion that investors are getting exposure to $8.1 billion worth of gold and gold equivalent when they buy into Gold American.
This is an outrageous estimate for a company which is involved in early stage exploration and has yet to drill on any of its three properties, including the Keeno Strike in Clark County, Nev., the Guadalupe in Zacatecas Mexico, and the Las Escondida in Sonora State, Mexico.
Gold American shares are quoted on the O.T.C. Bulletin Board, which is home to legitimate businesses, but is vulnerable to abuse because of low regulatory scrutiny, according to the British Columbia Securities Commission. Issuer requirements are not onerous, it said.
Martin Eady, a director of corporate finance at the British Columbia Securities Commission likened the O.T.C Bulletin Board to the old Vancouver Stock Exchange (VSE). “You are more prone to finding the Bulletin Board as more of a wild west that the old VSE was renowned for,’’ he said.
Given that Gold America’s stock price has tumbled to 74 cents on Tuesday from a 52-week high of $1.45, investors aren’t nearly so optimistic.
At current levels, the Reno-Nevada-based company has a market cap of $223.3 million, based on 290 million shares outstanding.
By comparison, Yale Resources Ltd. (TSX: V.YLL, Stock Forum) the Vancouver junior that is running exploration at Guadulupe after granting Gold American an option to earn a 90% stake in the project, was trading at 7 cents (Canadian) on Tuesday. Yale currently has a market cap of $5.3 million.
Another report displayed prominently on Gold American’s website says the Keeno Strike property could contain up to $3 billion worth of gold and silver.
But in a disclaimer at the bottom, it says the report is a commercial advertisement that was distributed by Cohen Independent Research Group and readers should not be using it to make any investment decisions.
When reached in New York, Gold American spokesman Andrew Barwicki was quick to distance the company from rosy forecasts in the Myers and Cohen reports.
“We are not in a position to say how much value is on any of our three properties,’’ he said.
Barwicki said the company paid for both reports but insisted that “these are independent reports, we don’t tell them what to write.’’
While the reports play up the fact that Gold America is exploring in prime silver and gold-producing regions in the U.S. and Mexico, Barwicki said it doesn’t mean the company’s properties will prove to be economic. “Absolutely not!” he said.
“Just because we are surrounded by other large projects doesn’t necessarily mean that we are going to be successful,” he said.
Financial statements for the three months ended April 30, 2010, reveal that Gold American posted a net loss of $864,675 or 1 cent per share in the quarter, compared to a loss of $5,568 or $0.00 a share a year earlier.
On April 30, 2010, Gold American had $41,002 in cash.
