re: investor survey on management board

There are so many ways for a “clever sod” to play the game the mind boggles. The market has no respect or trust in the way SBS is run because anything but what we are told seems more plausible. Took over 4 months to assay Zara core because of trouble with the core cutter they say? The story below seems more plausible.

Late December geologists report internally the last 4 holes at Zara look pretty barren! Shares have gone for a run on the back of “engineered” JV partner Call Option and rally in the junior market. Cash is running a bit low so directors, suffering from chronic insecurity after years of hand to mouth funding, make an opportunistic grab for cash to sure up their long-term funding (salaries & expenses sorted).

Capital raising announced, directors will take up their full allotment as a show of confidence. Processing of assay results is postponed for as long as possible to allow cap raising completion, including placement of inevitable rights shortfall. Attractively priced rights guarantees broker support for 20M initial and subsequent shortfall placements. Easy money for the “buy wholesale – sell retail” suits that flick their allotments straight back on market for no risk +20% profit.

Only one director with a lot of shares to stump up for and he isn’t in the habit of putting hard earned into exploration companies. His shares are derived from the time proven practice of pegging ground in your own name and vending it into one of your companies for a large issue. With free a 1:4 attached option, the 8c rights only cost 7c really but he wants his money back and the shares are trading +10c. Trouble is he can’t sell before the final 4 barren drill holes are announced because it looks pretty ordinary, or he may fall foul of insider trading laws.

He is good mates with the Paradigm blokes, long term supporters who will help him out so that everyone has a win. First make sure they get plenty of the cheap issue as thanks for the support. Let them know you want to sell your 8.5M shares down the track after the assay results are released. You would be obliged if they could sell 8.5M shares on your behalf into the rising share price between now and then. A market cross “on the cheap” balances Paradigm’s share holding after the assays are released and the resultant trading profit can be squared away “out-wide”.

Best public outcome for a director: not seen selling on a high (where he would be accused of taking advantage of his position) and not selling at a loss (where he would be accused of lacking faith and bailing ship). There many possible explanations I’m sure, but the bottom line is he took his “risk” money back out of the company unlike mugs in the market.

Mums and Dads end up buying the promises on-market for retail prices only to see it all come back to the wholesale price support level when nothing is delivered. Retail investors are ultimately the ones who raise capital for juniors and who hold long term. Unnecessarily large capital raising under false pretences and the inability to deliver on any deadlines have shredded managements credibility. The large amount of cheap script issued to short-term broker clients has swamped every effort the SP has made to lift and now the chickens are coming home to roost.

There are question marks over the valuation “game” being played. Is it for real? Why does it take 5 months when it is only a simple thumb-suck exercise anyway? This no mining study, just a blue sky lets look at similar projects on the market, how longs’ a piece of string type stuff.

Where are the buyers? Anyone who bought the story in the last 6 months has already bought shares and at a price higher than 8c. The cheap issue shares were flicked out into the attempted price rallies. So, all the believers are full having bought into the rallies and averaged down on the dips. Anyone in HC still buying the dips? Pregnant pause…I didn’t think so. SBS has lost momentum and any faith or good will.

Everyone here is either looooooong term like Oly or waiting for the Asmara valuation to lift the price to take some (all) money off the table. If most people here are waiting for the valuation then perhaps most everyone is waiting for the valuation. But if most people have bought the rumour to sell the fact, who is going to buy the long pending fact when it arrives and we all want to exit at the same time?

I can hear the cogs grinding. That’s right; it will go nowhere. Fear and greed drives the share price and all I see developing is fear. I repeat, who will bid the shares up knowing it will be sold back down by the multitude fed up investors waiting to get their money back?

Valuations mean nothing if there are more sellers than buyers. Short of a takeover there is no means of deriving value once the market has turned sour on a company. Value can be destroyed by management through dilution and wastage just as quick as good projects try and add value. Given the remoteness, country risk and patchy assay results at Zara, a $1M road into Zara for large rig access seems extravagant and irresponsible given that realistic size potential has not yet been demonstrated.

Advise for management:

Minimise dilution by raising funds in smaller tranches in rising prices.
Achieve rising prices by setting and meeting short term goals (drilling, valuations etc). Do not make promises that can’t be met.
Avoid over-spending on gambling GEO_QUESTS (Zara).
Stop the conflict of interest. All of SBS woes come down to dilution from capital raising all aimed at spending on Kennedy’s owned Zara.
Stick to the game plan. Picked up good ground during the downturn and farmed out into JVs. Let the LV partners do the spending, cut back the cash burn and let JV results do their thing.

Obviously still piss_ed but feel better for the exercise. Good luck all.