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8/2/08

Anatomy of a Canadian Stock Promotion (part 3)


In part one and part two (access here), I laid the background to the series of posts. It's now time to reveal the lucky(?) stock chosen by Otto as the company to follow in the next few months as its management and key players use their tried and trusted promotional abilities to sell the stock to the retail market.

The company is Dorato Resources (DRI.v).

Dorato Resources (DRI.v) is a junior explorer-stage gold mining company that has recently moved off the restricted stock lists and on to the TSX Venture exchange. Its focus is on a very prospective area of North Peru which lies on the border of Peru and Ecuador and close to existing properties on the Ecuador side that include Aurelian's Fruta del Norte project. The whole area is known as the Cordillera del Condor.

This series will take things a step at a time, as there are a lot of separate parts that make up this stock promotion exercise. But as a general overview of the posts that are to come let's point out the following right now (in no particular order).

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1) Many of the people behind Dorato Resources have worked previously in at least four other companies. Those companies are known as the 'Cardero Group' and are:
  • International Tower Hill (THM) (ITH.v), an explorer stage junior with its main properties in Alaska and Nevada.
  • Cardero Resources (CDY) (CDU.to), an explorer stage junior with properties in Peru, Mexico and Argentina
  • Wealth Minerals (WML.v), an explorer stage uranium junior with its main property in Argentina
  • Trevali Resources (ZINC.C) an explorer stage junior with its main property in Peru
2) Dorato has obtained many of the concessions from the same person that sold previous concessions to at least one of the companies mentioned above.

3) The concessions are prospective, and the upcoming drill program is very likely to intersect high grades of gold bearing mineral in at least one of the targets. This can be said now thanks to previous work done in the area by AngloGold Ashanti (AU) and also the ongoing artisan (garimpeiro) mining that takes place at the sites.

4) Dorato has recently hired an expert Investor Relations company to help promote the company. This IR team is headed up by the same person who covers investor relations for CDY and ITH, a certain Quentin Mai.

5) Although the concessions are very prospective, they also have considerable drawbacks. Not least is access to the target areas, which is currently limits the company to using an expensive helicopter to lift drilling machinery and personnel in and out. Roads are basically non-existent and would be very expensive to construct. Also, the area is likely to be considered environmentally sensitive, and anti-mining campaigners are likely to pose a considerable problem to DRI in the longer term.

6) Importantly, the original seed capital for the project is due to fully vest at the same time as the (probably) eye-catching drill results are published, which is likely to be some time in early 2009. This will give those people who bought into the seeding private placement (which include the previous owner of the concessions) the chance, if they wish to do so, of selling at least some of the stock held at the same time as buying interest is high amongst retail investors.

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So there we have the basic idea. As this series continues, I will go into further detail about each of these points. We will also be able to follow Dorato's PR campaign as it develops. In fact, if you check the company website (here) or perhaps the yahoo page dedicated to DRI.v (here) you will see its first three press releases have already been released, setting the scene somewhat for the campaign to come.

So in out next episode, we'll start looking at the details. Finally, I've been advised by people who know about these things that the following piece of legalese is a very good idea, so here we go: I would like to remind you that at no will I point make any sort of recommendation to buy or sell any DRI.v securities. I would also like to make it clear that to the best of my knowledge the promotion techniques used and to be used by Dorato are totally legal. Finally, I would like to make it clear that I am not passing any moral judgement on Dorato Resources, and will try to avoid any insinuation of judgement in future posts in this series. My aim is to educate readers about some of the ways promotion campaigns are used and the company structures behind them.

Other posts in the series
Anatomy of a Canadian Stock Promotion (part 1)
Anatomy of a Canadian Stock Promotion (part 2)