The British Columbia Securities Commission has cease traded East African gold explorer as investors await the outcome of a “production first’’ approach to mining.
British Columbia’s top securities regulator has cease traded shares of Ruby Creek Resources Corp. (OTC:BB: RBYC, Stock Forum), an exploration company headed by former Vancouver-based mining engineer Robert Slavik.
The move comes three months after Ruby Creek was featured in a Stockhouse Short Report that looked at Slavik’s regulatory history.
The British Columbia Securities Commission said the cease trading order, which applies only in B.C., was attributable to the company’s failure to file comparative financial statements for the year ended August 31, 2011.
Ruby Creek shares were quoted at $1:00 on the U.S. OTC Bulletin Board this week, a 33 per cent decrease from levels seen in October when the stock was being promoted by Micro-Cap Review Magazine. It currently has a market cap of $42 million, based on 41.7 million shares outstanding.
Ruby Creek is the majority partner (70% ownership) in a group of properties that cover 1,500 square kilometers and are located in southern Tanzania, East Africa, about 150 kilometres north of the Mozambique border. It acquired the rights from Douglas Lake Minerals Inc. (OTC: BB: DKLM, Stock Forum), Gold Standard Tanzania Ltd., and vendor Mkuvia Maita.
(In the past year, Vancouver-based Douglas Lake has seen its stock price tumble to 9.6 cents from 80 cents).
Ruby Creek caught Short Report’s attention last year after saying it plans to take a “production first” approach to mining in Tanzania, one that seemed risky because the company has been unable to quantify gold reserves on its properties or establish that it can extract and process gold economically or at a level sufficient to support operations.
This makes it difficult to assign a present or future value on the stock.
A production first approach is a departure from usual practices in an industry where extensive exploration and drilling is undertaken before production begins, a move that gives the company and its shareholders a degree of certainty as to what is available in the ground to be mined economically at prevailing commodity prices.
As we have noted before, Ruby Creek has generated zero revenue since its inception in British Columbia six years ago. According to a 10-Q report filed with the U.S. Securities and Exchange Commission this week, the junior posted a net loss of $1.92 million or 5 cents a share in the quarter ended November 30, 2011, compared to a loss of $831,284 or 4 cents in the previous year.
The latest results bring total cumulative losses to $9.9 million.
In January 2011, Ruby Creek says it acquired a 10-year mining license for 10 square kilometers on ground located beside the northwest border of its joint venture property.
“Although we have received our first mining license and plan to commence production in the next few months, we expect to continue to incur operating losses for the foreseeable future,’’ the company said in the 10-Q filing.
In an October, 2011 report that may have been a paid advertisement, Micro-Cap Review said Ruby Creek has the equipment available to produce 600 plus ounces of gold per-month by the end of 2011. It anticipated that up to 35,000 ounces is achievable by calendar 2012 at a cost of under US$400 an ounce.
But given that Ruby Creek has yet to outline any reserves, those numbers seem difficult to substantiate and there is no mention of them in the company’s latest 10-Q filing.
Still, the cease trading order in B.C. may well be the least of Ruby Creek’s problems.
The junior said it has learned that Douglas Lake and Maita have allegedly been permitting an unnamed third party to continuously conduct prospecting activities and allegedly convey or sell these prospecting licenses and joint venture rights to third parties. In effect, this could create multiple owners for the same property and putting future ownership claims at possible risk.
These are rights that Ruby Creek believes it acquired under agreements related to a portion of the joint venture ground known as the Mkuvia property.
Ruby Creek said it is currently investigating through local counsel the registration of prospecting licenses that form part of the Douglas Lake joint venture to a third party without Douglas Lake’s approval, in unclear circumstances.
As a result, the company said it has not made a $450,000 payment to Douglas Lake as required under agreement reached on June 16, 2010 or issued 75,000 shares to property vendor Mkuvia Maita.
Meanwhile, the company said it will take all necessary actions to protect its interests.
Readers should note that when reached by Stockhouse, BCSC spokesman Richard Gilhooley said he couldn’t predict what impact the 10-Q filing will have on the cease trade in B.C. “All I can say is that right now it remains in effect,’’ he said.
