Just wanted to get your take on Silverado Gold Mines (SLGLF). It looks like it could have some huge upside potential at just $0.02 , with very limited downside risk. Good news releases are coming out. Silverado Gold just hired a brokerage firm “D&D Securities Company” to help promote the stock and raise money. SLGLF looks like it wants to break thru the $0.02/share resistance. Should I buy here or wait for a pull back? The stock is making higher highs and higher lows. Your thoughts are greatly appreciated.
The email was so in-expertly “dressed up” to look like communication between friends inadvertently sent to my inbox that I decided to take a look. The first site I found on the web was one of those investment advisors who invests by the shape and direction of a plot of share price versus time. He concludes on the basis of a superficial analysis of the shape of the time-price curve that Silverado is a good buy and will do even better. Sounds very encouraging.
Sadly, the next site I found was a column by David Baines. I copy and quote (without his permisssion but with his understanding I trust) for his is an insightful and scary report. Here is a part of what he says:
The stock market is a mysterious place. There are lots of companies that trade on the junior markets that never make money, but they manage to stay alive and keep trading. The best example is Silverado Gold Mines Ltd. It was formed in 1963 — 45 years ago — and it has never had a profitable year. Since inception, it has lost more than $86 million US. Yet its chairman, president and founder, 64-year-old Gary Anselmo, lives a very comfortable life. He lives in a $883,000 house in Richmond, he drives a 2006 Corvette, he eats at the finest restaurants and flies first class wherever he goes (he says because of a back injury). Anselmo boasts, quite truthfully, that he takes no salary from Silverado, but this is not the whole truth. Over the years, he has earned millions of dollars through his private company, Tri-Con Mining Ltd., which acts as the operator for Silverado’s two main projects — the Nolan gold project near Fairbanks, Alaska, and its newer “green” project, a process for making coal water (an environmentally friendly substitute for petroleum-derived fuels). Tri-Con bills the company at the rate of cost plus 15 per cent for overhead, plus 25 per cent for exploration services or 15 per cent for development and mining services. Over the years, this arrangement has put millions of dollars in to Anselmo’s pocket. During the nine months ending August 2007 (the company’s last reporting period), Tri-Con billed Silverado a total of $4.26 million. If just 15 per cent represents profit to Anselmo, that amounts to $639,000. Keep in mind, that’s for the last nine months only. Where does all this money come from? Every once in a while, when the treasury gets low, Silverado issues more shares for cash. Over the years, it has done this many times. There are now 778 million shares outstanding. And that’s after a three-for-one share consolidation and a 10-for-one consolidation. The net result is that the company has manufactured more paper than a toilet paper factory.
If what David writes is true, and we have no reason to discount what he writes, we have here a prime example of the ability of the shrewd operator to con the public for a long time. Just do not get too greedy. I cannot understand how the folk who are supposed to regulate and oversee this kind of stuff in British Columbia are unable to come to grips with this abuse. Are they in it too? Or are they like so many of those regulators in the USA, too timid, to inept, or just too lazy to do anything? Or is the corporate structure of Silverado such that those who should act, cannot act—and those who can act cannot be bothered to act because the fraud is too tiny to merit attention?
Regardless, we are left with a depressing new Investment Rule:
Do not invest in mining companies that manage to loose money for 45 years.