The Calandra Report: AMSE, LKAI, Kaizen and EPM

Thom Calandra
0 Comments|March 24, 2014

Welcome new members of our TCR Family. (See below.)
 
American Sands Energy (OBB:AMSE, Stock Forum) concluded its sale of $3.7 million of preferred stock (with two purchase warrants per unit), and the Utah energy company also eliminated $1.75 million of debt via a conversion of that red ink into black equity.
 
Will Gibbs, CEO and a member of the clan that controlled about 1,800 acres of heavy oil sands properties, says AMSE's so-called "rolling" financing, in stages, raised enough money to complete test drilling at its Sunnyside targets and to file a mining permit with regulators.
 
American Sands Energy seeks an operating permit for its drilling and oil extraction project, which will need further financing. The just-closed financing leaves AMSE with an x-factor more of shares. Before the financings, American Sands had about 30 million shares outstanding. All-in, fully diluted is now 70 million shares, says chief financial officer Daniel Carlson.
 
Conversion price for these transactions was 35 cents a share.
 
Naturally, AMSE will receive cash from shareholders upon the exercise of warrants. Those warrants attached to the preferred are strike prices of 45 cents and 70 cents and are good for five years.  See 8-K as of March 13.
 
American Sands is using a solvent that it licenses to separate oil and other hydrocarbons from sand. The idea here has been that AMSE, given the size of its compliant resource and holdings, was a fraction of the $120 million market worth (common outstanding) of another Utah operator, US Oil Sands (TSX:V.USO, Stock Forum).
 
Now that the gap is closing, I am going to sell a portion of my AMSE holdings of 21,000 shares. After this report reaches our TCR audience.
 
The stock Monday is bid 85 cents USA. This still leaves the company at about half the market value of US Oil Sands. I will be holding 12,000 shares in anticipation of seeing the Sunnyside operation in the spring or early summer.
 
LKA Gold (OTO:LKAI, Stock Forum): The operator of Colorado's Golden Wonder mine is reporting year-end 2013 gold grades -- sold as ore to two smelters -- about twice the level of those from all of 2013. See: article.
 
So far, LKA has been a high flier for TCR family. (As has been AMSE.)
 
LKA Gold's Kye Abraham, a Washington state stock-broker and longtime miner who has run LKA for more than a decade, says the 829.76 ounces his crew pulled from the mine in Q4 2013 had grades of more than 1 ounce per metric ton. The ore goes to smelters in Arizona and Colorado.
 
Don't get too excited yet. In the eight years closing 2006, one ore chute produced 130,000 ounces of gold with grades as rich as 16 ounces of ton. That's what you get from volcanic vents.
 
Kye Abraham tells me his crews are trying to locate a second ore chute. That's been going on for years. The chute might or might not be in the No. 6 Level of an area called North Raise. Or shoot, maybe it is somewhere else. "We know it is in there and probably confined to a relatively small area," he says.
 
In the meantime, those bulk ore shipments -- some 29 of them hauled by truck since 2009 -- netted LKA about $4 million. That money -- more in a good gold price and less in a bad gold price -- thus far is going to exploration, and of course to salaries and general expenses. The smelters are owned by Kinross and Freeport McMoRan.
 
Speaking of Raise, Mr. Abraham and his LKA are seeking a financing at some point, and they are candid about it. I have heard from longtime shareholders, who include the Blanchard family of New Orleans fame, author Doug Casey and commentator Mark Skousen. LKA used to be a tax-shelter until Mr. Abraham converted the partnership into a stock company, with its shares currently on the penny-dreadful OTC Bulletin Board. 
 
I hope the equity raise does not occur until the tiny company's stock reaches $1. Or more. Right now, Kye and his son, Zach Abraham, tell me there are about 14 million shares all in. That makes this company at minor miner.
 
I hope to see Golden Wonder in the next two months. The stock is now bid 68 cents, and I am holding my (paltry) 3,500 shares.
 
EPM Mining Ventures (TSX:V.EPK, Stock Forum): Don't look at me. Just because I purchased EPM shares at 15 cents or so Canadian does not make me a seer.
 
What do I know about sulphate of potash (SOP)? Not much.
 
As stated in TCR, I am receiving advice here from very clever financial analyst. I have read EPM's materials.
 
Brine deposits are the lowest capital and operating cost potash mines in the world. Not many of those brines exist as ongoing operations. High sulphate potash is a specialty fertilizer for select vegetables and fruits. EMP operates in Utah. 
 
EPK shares (and EPKMF in USA) are probably among the world's cheapest potash shares. At 20 cents a share, the company EPM is worth about $20 million. Trading activity the past six trading days is doubling or more EPK stock's average volume for the past two months. Still cheap enough to purchase.
 
Considering: Right now, I am looking at purchasing more shares of Kaizen Discovery (TSX:V.KZD, Stock Forum). This is one that is using its Japanese connections, a la multi-language attorney and Kaizen CEO Matthew Hornor in Vancouver, to team up for Pacific Rim metals properties (copper, nickel, molybdenum, platinum group metals). More to come. I spoke with Matthew this morning. He went to law school in Japan and did undergraduate at University of Southern California in East Asia Studies. Kaizen in Japanese means something along the lines of discovery, or discovering new and better ways of making things. It is an epistemological term, if you ask me. Japanese businesspeople use kaizen to talk about assembly lines and such.
 
Educate me, please. All I know is that every time I am in Japan, the layers of distribution for everything from a whole salmon at the fish market to a silk scarf jacks up the price threefold to fivefold. But hey, it is all wrapped so pretty. This is the symbol: (改善).
 
I own KZD shares via a conversion of my former Concordia Resources shares from several months ago, and am catching up on the "narrative" here. Kaizen and Mr. Hornor are connected to the Ivanhoe Mines complex, but not by umbilical cord.
 
Finally our $25 offer: Please see the $25 TCR offer. Thanks to a European bulk buyer of TCR subscriptions, we have, or shall I say had, about 30 or so deeply discounted subscriptions for sale at $25 each. They are intended for strategic investors. We have 5 left. Thank you!  See: http://ceo.ca/2014/03/23/tcr-offer/
 
Get your red-hot TCRs.  TCR will rise to $110 yearly on April 2, 2014.
 
For select previous TCR issues, please see: http://ceo.ca/author/thom-calandra/.
 
Also, thank you Stockhouse.com for after-delivery propagating of these reports. Thom's portfolio of about 52 tickers is available under tcalandra at the Stockhouse portfolio function.
 
The current TCR 8: Atico Mining, Colt Resources, Angkor Gold, NuLegacy Gold, Gold Standard Ventures, Gran Colombia Gold**, Solvista Gold, Pilot Gold; of these, Colt, Angkor, NuLegacy, Gold Standard and Solvista are cheap enough to purchase here; I am waiting for Pilot to digest its current financing; I am puzzled, as ever, by Gran Colombia Gold's consistently dismal stock performance; and once again, finally, I am a long-term believer in most metals, including gold and platinum. Best speculative purchases outside of our longstanding TCR 8? EPM, Kaizen, Bitterroot Resources
 
**Gran Colombia Gold's Q4 report is out a week from today. A conference call staged by the company is scheduled for April 1: at http://www.media-server.com/m/p/gfqszw6r.
 
Thom Calandra  
@thomcalandra for Twitter

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