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9/21/08

Anatomy of a Canadian Stock Promotion (part six)

Time for part six of the series. In the last two parts of this series we saw some (not all) of the positives and negatives that are worth taking into account about the projects being moved forward by our subject company, Dorato Resources (DRI.v). Part six begins to look behind the scenes at the company structure. I say 'begin' because there are a lot of bases to cover, but as time is still on our side (the promotion is not likely to climax before the first quarter of 2009 for reasons that will become apparent) we can take the issues piece by piece.

To understand Dorato Resources, it's essential that we understand a little about 'The Cardero Group' an umbrella that covers five different companies, namely
  • 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 and some exposure to Peru
These five companies have a lot in common, even more than first meets the eye in fact. Let's look at some of the key players inside the group and see what positions they hold in each company:

Hendrick Van Alphen
President and CEO of Cardero
President and CEO of Wealth Minerals
Chairman International Tower Hill

Michael Kinley
CFO Cardero
CFO International Tower Hill

Jeffrey Pontius
CEO International Tower Hill
Director, Wealth Minerals
Director, Dorato Resources

Larry/Lawrence Talbot
Director Cardero
VP & General Counsel, International Tower Hill

Anton Dreschler
President, Dorato Resources
Director, International Tower Hill
Director, Trevali Resources

Carlos Ballon
Chairman and Director, Trevali Resources

Mark Cruise
President and CEO, Trevali Resources
VP Business Development Cardero

Michael Bartlett
Director, International Tower Hill
Director, Wealth Minerals

Quentin Mai
VP Corporate Communications, International Tower Hill
Investor Relations, Cardero
Investor Relations, Dorato

Rowland Perkins
Director, International Tower Hill
Director, Dorato Resources

As you can see, a happy family that is interconnected on many levels. Also, please note that up to now we're only looking at official directorial or management positions and not any shareholder interest at the companies. The Cardero Group is headed up by Henk van Alphen, but perhaps the most interesting person in the list, as far as Dorato Resources is concerned at least, is the person with just one director's position, Carlos Ballon. Mr. Ballon is a resident of Peru and an experienced geologist in his country. However, as well as being Chairman and director of Trevali he is also the person who sold the vast majority of the concession options to Dorato Resources.

In the deal to buy the Cordillera del Condor concessions, Dorato agreed to hand over 10.15m shares to the vendors and also make staged cash payments over three years. This means that Dorato will only hold the option to buy for the three years in question (now 2 1/2 years and counting, approximately) until all payments are met. Once all obligations are met DRI.v will be able to say "100% owned", and not before.

Of those 10.15m shares issued, Carlos Ballon personally received 6.35m shares, which means he personally owned over 60% of the properties handed over to DRI.v. But added to that are the 3m shares that Dorato issued to Compania Minera Afrodita S.A.C, a Peruvian minerals company that is wholly owned by none other than Carlos Ballon. The Afrodita part of the agreement also involves paying $8m over the period ($1m of which is already paid out).

So to tidy this up, Carlos Ballon, Chairman and director of another company in The Cardero Group, sold a very large proportion of the Cordillera del Condor concessions to Dorato Resources and (between himself and his company) received 9.35m of the 10.15m shares issued for the purchase. Therefore combining his personal holding with the shares held by his company Afrodita, he owns around 30% of Dorato Resources total shares out (though there are around 34m fully diluted). He has also received $1m of a total $8m scheduled cash payments over the three year period in question (via Afrodita).

All very cozy, and a nice example of "keeping it in the family". But the most interesting part of this is that Carlos Ballon and the Cardero Group have already done this kind of deal before! When Cardero bought its Peruvian iron projects back in early part of this decade (and we'll be talking about those Iron projects in later posts in this series), vendor of the properties to Cardero (CDY) was a certain Carlos Ballon, resident of Peru and owner of Compania Minera Afrodita S.A.C.

Coincidence?

Related Posts
Anatomy of a Canadian Stock Promotion (part one)
Anatomy of a Canadian Stock Promotion (part two)
Anatomy of a Canadian Stock Promotion (part three)
Anatomy of a Canadian Stock Promotion (part four)
Anatomy of a Canadian Stock Promotion (part five)


Disclosure: I would like to remind you that at no point will I 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. The aim is to educate readers about some of the ways promotion campaigns are used and the company structures behind them.