Metro Gold Mine Mineral Resources, Inc. – No Pink Linkadmin
Metro Gold Mines Mineral Resources, Inc. (Pink Sheets: MGMX) finds itself in an odd position. The Company’s shares trade on the Pink Sheets, yet Pink Sheets refuses to publish quotes for the Company’s stock. This is how Pink Sheets puts it:
Pink Sheets believes adequate current information must be publicly available during any period that the issuer or affiliates of the issuer are directly or indirectly engaged in promotional activities having the effect of encouraging trading of the issuer’s securities in the OTC market. Pink Sheets has observed that such promotional activities are occurring for this security, but that adequate current information may not be available. Consequently, Pink Sheets has removed the quotes from this website until such information is made available by the issuer to the investing community. investors are encouraged to use care and due diligence in their investment decisions.
As Pink Sheets appears to recognize, aggressive promotional activities may tend to exaggerate a Company’s performance or prospects. If the Company has not provided adequate current information about its activities, investors lack the ability to place the promotional hype in proper context.
Promotional activities are nothing new to the Company, which sometimes refers to itself as MGM Mineral Resources. The Company has been generating press releases and collecting promoters since changing its name from Anglo Andean Mining and emerging from obscurity on May 1, 2006. See, Metro Gold Mines Mineral Resources, Inc. – Is This MGM Grand? Those promotions appear to have had considerable impact on the flow of MGM’s common shares. As we previously reported, trading volume for MGM stock soared (to almost 21 million shares on May 3rd and nearly 23 million shares on May 4th) after the Company issued a series of press releases signaling plans to mine for gold in Columbia.
The pattern has continued publicity followed by trading spikes. A May 10, 2006 press release sought to distance the Company from controversy. The press release claimed that the Company was not responsible for a battery of ”spam” emails touting its prospects. After all, as MGM recognized, it is only in the ”initial stages” of a venture it hopes will prove successful.
MGM also assured investors that no material operating event had precipitated a recent slide in the Company’s share price. MGM’s share price had plummeted from 11 cents on April 29th (on the eve of the Company’s name change) to 3 cents on May 10th. It has since continued its descent and now trades at approximately 1 cent a share.
The Company noted that many ”external factors” can contribute to such volatility. In fact, shares of obscure penny stock companies which lack a history of revenues or operations rarely are governed by ”material events.” More often, trading is precipitated and dominated by a handful of market makers and the designs of those who hold, and may wish to sell, large blocks of stock.
If the Company was seeking to slow the hype, its message was lost on the promoters and the marketplace. Share prices increased from 3 cents to 4.5 cents the next day. That price bump was noted by Internet promoter Marketgainer.com, which describes itself as a ”one stop shop for international small-cap investors looking to stay a step ahead of the markets.” Marketgainer.com issued a May 11th press release repeating, virtually verbatim, the Company’s May 10th statements.
Over the next several days, the Company received similar support from another trio of Internet touts, OTCPicks.com, OTCstockexchange.com and OTC Advisors.com. each of which repeated the Company’s May 10th cautionary statements, and then ”“ inexplicably – picked MGM as a stock to watch ”“ even though the Company’s ventures, by its own admission, remain in their infancy.
On May 19, 006, MGM rejoined the press releases parade, announcing that it had signed a Letter of Intent to acquire the Manantiales property, another potential gold producing mine in Columbia. While the Company (as it had with its previous acquisition) noted the gold-production capacity of the region, and the potential of the new property, it did not quantify the economic potential of the Manantiales mine.
The absence of details did little to deter interest in MGM stock. Almost 29.5 million shares changed hands on May 19th ”“ almost a 600% increase from the previous day.
A June 1, 2006 press release had even more dramatic effect on the demand for shares. On June 1st the Company announced that it had ”expanded” operations by opening new offices, launching a new website, and ”moving forward” with its La Esperanza and Manantiales properties.
Once again, no news proved to be good news for MGM ”“ or at least for those wishing to sell MGM stock. Although these ”expansions” did not signal any material development of the Company’s operations, trading volume was torrential. Almost 44.6 million shares of MGM stock were traded on June 2nd, as the stock price bounced from 1.5 cents to 2.3 cents (hitting 3 cents a share the following day, June 3rd). In the days that followed, OTCPicks.com and OTCStockExchange.com, continued to beat the drum for MGM, reiterating the Company’s claims of ”expansion.”
On June 5, 2006, the Company announced that it had finalized acquisition of the Manantiales property. MGM did not indicate the terms of that acquisition or the cost of the property. Nor did it enumerate the potential financial implications of the purchase ”“ either in terms of the projected cost of developing the mine or the possibility of revenues. In short, investors once again had no meaningful information upon which to assess the prospects of the Company.
And, while the Company did reveal that the property had been purchased from the family of MGM’s CEO, Jairo Giraldo, it did not explain what measures were taken to assure that this was an arms-length transaction that protected the Company’s public investors. Indeed, investors could become concerned about the propriety of future negotiations. The Company conceded that it expects to purchase additional properties owned by other MGM directors and their families, on terms that are ”palatable for both MGM and the respective director and their families.” The specter of potential conflicts of interest looms heavily over such prospects.
Other promoters quickly joined the chorus. Smallcapstockalert.com and Stockwire.com issued news releases picking MGM as a stock to watch. Bellweatherreport.com jumped on the bandwagon as well, noting MGM’s ”recent ”significant corporate development” and conjecturing that the Company ”could have news very soon.”
The next ”news” hardly seemed newsworthy. On June 20, 2006, MGM issued a press release announcing that the Company had been featured in one of Columbia’s ”largest and most respected newspapers” ”“ which it did not name. According to MGM, the article confirmed that the Company is a ”national entity for gold production and extraction.” The Company also said that it had arranged to obtain explosives for its mines, was constructing a road near La Esperanza, and planned to build several facilities, including a bathroom and storage facility on the Manantiales property.
Once again, MGM failed to indicate what these efforts would cost or how it planned to pay for them.
The Company also addressed the fact that the Pink Sheets had ”shut down” the quotation system for the Company’s stock. MGM claimed that the action by Pink Sheets was precipitated by spamming and unauthorized promotions and that the Company’s legal counsel ”“ who was not named – had been delayed in responding to the Pink Sheets’ concerns because of a serious medical operation.
More than two weeks later, Pink Sheets continues to decline to post quotations for MGM shares. In the interim, the Company issued a June 26th press release claiming that an ”internal geological study” of La Esperanza mine confirmed ”Measured Resources” of over 800,000 ounces of ”gold-silver bearing materials” (which would have a current value of over $450 million), and ”Indicated Resources” of 1,220,000 ounces of gold-silver bearing material (which would have a current value of $650 million).
MGM did not offer any context for these numbers, indicate whether its survey had been verified independently, or explain how ”gold-silver bearing material” translates into marketable ore. Such details did not seem to matter to some investors. Almost 28 million shares traded on June 26th.
Pink Sheets may have a point.
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