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 into 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.
Of course, people will only buy a stock if they feel they can unload it at a higher price. There are two ways to get the stock price higher. The first is for the company to do something productive. In this regard, Silverado has been a flop.
Every project the company has undertaken has ended in failure. In 1985, for example, Anselmo was touting the Mount Grant gold mine in Alaska, claiming it had "the potential for being one of the highest recovery producers in North America."
Commercial production began in November 1985, but a little more than a month later, operations were suspended "after initial operating results did not meet expectations."
The company shifted focus to its Nolan Creek project. In October 1992, Anselmo said projected earnings for the year ending November 1994 would be $8.96 million US. In fact, the company lost $3.1 million U.S.
Anselmo is still flogging the Nolan gold project, but he has also jumped on the "green" bandwagon. In 2000, he announced that Silverado would establish a plant in Alaska to produce coal water.
He claimed Silverado could produce coal water for the equivalent of $7 US per barrel of oil, which would position the company "as a world leader in the commercial development of such fossil fuels, not only in Alaska, but in other areas of the world." (If you're going to be a world leader, it may as well be the whole world.)
In any event, here we are: eight years later, and Silverado not only doesn't have a commercial plant, it doesn't even have a demonstration plant.
During the nine months ending August 2007, the company didn't generate a single cent of revenue, but there are no signs of austerity at Silverado's spacious, glass-sculpted offices on the 18th floor of the Terasen Gas building at 1111 West Georgia.
During the same period, it racked up $5.6 million in expenses, including $967,609 in management services, $891,982 in consulting fees, $722,009 in advertising and promotion, $668,367 in office expenses and $191,584 on reporting and investor relations.
As I mentioned, there are two ways to boost a stock. The first is to do something productive, which Silverado has not. The second way is to give the impression that you are doing something productive. In this regard, Anselmo has been an expert.
In 1980, when the company was trading on the old Vancouver Stock Exchange, the stock peaked at $10.50, but soon fizzled out. In 1993, when it moved to the Nasdaq, it enjoyed a revival of sorts, trading as high as $3.50.
Not content to leave the stock's fate to mother nature, Anselmo has used many different tout services to boost the share price. Among them has been Robert Chapman, a U.S. newsletter writer who has been the subject of cease-and-desist orders in nine different states and was handed a 10-year stock market ban in B.C. in 1989.
Despite his best efforts, Silverado was not able to maintain Nasdaq's minimum stock price and was relegated to the dreadful OTC Bulletin Board in the United States, where it is now trading at six cents.
If we are to believe Anselmo, the flagging stock price is not the company's fault. It is the fault of that ubiquitous stock market bogey-man, the naked short seller (people who sell the stock short without first borrowing the shares, or making an "affirmative determination" that the shares can be borrowed).
This is an illegal practice, one that is difficult to prove but often cited by promoters who need to find somebody or something else to blame for their companies' flaccid performance.
Despite these predators, Anselmo is convinced he will prevail. "We're on the path to becoming successful," he insists. "We're very close. It's been a lifelong battle, but we will not quit."
Such gallant words. Winston Churchill in a Corvette.
dbaines@png.canwest.com
SILVERADO'S 10 (MORE) LOST YEARS
Silverado Gold Mines Ltd. has lost more than $85 million US since its inception in 1963.
LOSSES
1997 / $4,414,772
1998 / $16,938,903
1999 / $1,449,391
2000 / $1,872,116
2001 / $1,677,974
2002 / $3,755,401
2003 / $8,519,169
2004 / $4,304,232
2005 / $3,394,107
2006 / $7,683,002
9 months to August/07 $5,330,229
Losses since inception $85,633,725
Figures in U.S. dollars
Monday, February 18, 2008
Subscribe to:
Posts (Atom)