This is the report written on Liberty Silver (LSL.to) (LBSV.ob) that appeared in last Sunday's edition of The IKN Weekly, issue 179. The only thing to have changed are the two price charts, because I didn't save the ones from last week and have used the ones available on yahoo today which show the same thing, just a couple of extra days down the line. The rest is verbatim.
...downloaded the SEDAR files, checked through them and suddenly LSL was past first base and onto second, but this time as a potential short. And when I saw the name of the person who was running the show from backstage, a certain infamous Bobby Genovese, it went straight to home run. With the price running above $1.50 on Thursday on strong volume and no real news and listing in the USA on the OTCBB (that does most of the volume) and on the TSX as LSL.to (note, not a Venture exchange listing) this had the makings of a great shortable story to put before you today and one that many of you (I admit not all, because shorting Canadian stocks isn’t child’s play and much easier if you’re an accredited investor or inside an insto) would be able to play to the downside.
As the LSL NR later that day (24) (after the bell in fact) confirmed the halt and added some flavour to the reasons behind it
Most of those 65m very cheap shares are held by Robert Donald Bruce Genovese, known to friends and foes alike as Bobby Genovese or sometimes simply “Bobby G”. We’ll call him ‘Genovese’ from here on because I have no desire ever to be on first name terms with this scumbag. Genovese also bought a fair whack of LSL shares over the OTC market in the period December 2011 to January 2012 at prices at or around one dollar (25) at the same time as a placement that raised $4.6m (the qualifying placement for the company’s TSX listing) was running on the stock, units priced at 50c. From these transactions, we know that he controls at least 10% of the company but that’s almost certainly the tip of the iceberg and he holds a lot more of these shares. Based on information from reliable sources, Genovese holds at least 48m shares of LSL that come from the original transactions and forward splits that set up the company structure we see today. However, it’s necessary to state that this 48m holding is not officially known and in fact the lack of disclosure on Genovese’s part is likely one of the main reasons the SEC halted the stock pre-bell Friday morning, so in the course of the next few days I’d expect clarification on this matter.
‘Clearly Canadian’ is not his only pump and dump scam either, not by a long chalk. The last 20 years is littered with the remains of companies he has promoted, pumped, dumped and cashed in with, all to the retail shareholders’ chagrin. The table above is from the mentioned report (I asked for and was denied permission from the authors to pass on the whole PDF, but was granted permission to sample from it, including the sampling of this table). For further reading I also point you towards to this report (26) by Carol Remond of Dow Jones Newswires dated November 2009 that goes into the world of Genovese and some of the scams that he has successfully led. Genovese is now by all accounts a very wealthy man, but he’s made his money the parasite’s way.
- The Trinity property has been optioned from Renaissance Gold (REN.to). The deal cost LSL $25,000 up front, has a few cash payments along the way and the company now has four years in which to spend $5m on its development in order to earn 70% rights.
- The heart of the Trinity property isn’t much more than a mined out deposit. It was mined by the Borax Company of USA in the period 1987 to 1989, when that operation mined out the best rock in the centre of the deposit grading around 6oz/t silver (around 185 g/t) in oxide host. When the best was mined, Borax decided that the silver price at the time for what was left was too low and they closed down the operation.
- That’s still true today. Borax and others put in a lot of drill holes in and around the Trinity property, trying to find more of the good grading stuff, but nothing doing. What’s left there today is a non-43101 compliant historical resource that’s understood by the 2011 technical report to grade at an average of 0.7 ounces Ag per tonne. There’s plenty of rock there that grades to that average, but the whole resource is based on the halo of lower grading material that was left behind when Borax had finished the good material.
- According to optioners REN.to (a serious exploration company), the interest that Trinity may hold is at depth, with the potential to drill under the low grading oxide halo and into the underlying sulphide to potentially discover a copper style porphyry system that wasn’t on the agenda of Borax in the 80s or others later. However, Genovese and LSL have stated that the company can put together a PEA based on the drilling done to date alone and that it’s not necessary to drill any more. This clearly implies that the very limited drilling program done by LSL earlier this year, which included just two twinning holes to check previous assay results from the historical drilling program instead of the 12 holes that third party technical report compilers Mine Development Associates (MDA) recommended, is all that LSL thinks it needs to get a PEA and then move to “fast track production” when added to the historical drilling that shows a lot of meterage but was done for another purpose, namely to find better, higher grade oxide with which it could extend mine life.
- Now for an idea of project economics on this low grading oxide halo material. At the moment, both LSL and the third party technical report compilers MDA are using a conceptual recovery level of 75% for the silver held at Trinity. This means that processing a tonne of rock will earn you perhaps $18, at best in payable metal (based on 22g Ag grade, 16g recovered, $35/oz Ag price). From this you pay mining, processing, smelting, G&A, tax and interest on any loan. Look, on paper it might be possible to process that rock and make a marginal profit, but off the top of my head I can think of a dozen, nay two dozen other development stage silver projects that offer far, far better ballpark economics than that and none of them have a market cap anywhere near $70m, let alone $126m.
- As for the valuation consider one thing, simply for perspective: According to the price at which LSL closed Thursday ($1.58), it’s $1.4m in cash and 70% of Trinity (assuming it makes the optioning-in commitment) is worth $126.4m by company market cap. Meanwhile, its 30% partner REN.to has a market cap of around $30m, but it also has another 30 exploration targets on its books (26 of those in Nevada/Utah), working capital of $6.3m (IKN estimated, with June 30 filings showing working cap of $7.36m and a company with modest underlying burn rate) and top class geols running its show (it was spun out of AuEx Ventures and is headed by Ron Parratt, known in the trade as world class especially on Nevada).