To find out why management believes you should invest in the company, I recommend you
to always study the latest company's corporate presentation yourself - before making an
investment decision. Click here to see if the company recently has updated their investor
presentation from May 2014.
I believe the Rice Lake Gold Belt offers great potential for the company. The company has 3.4
million ounces of high grade gold (over 5 g/t) in all resource categories, plus brownfield
The company announces an action plan to achieve profitability: apparently they do not generate
any profit at this moment and profitability can only be reached when the implementation of
management's action plan will be successful.
The first point from this action plan was to focus on the most profitable ounces. Although this
might be necessary for the company to achieve profitability, I much rather like to see management
reach profitability by selling average ore grades, as I expect (much) higher gold prices for the
The company also mentions 73.8 million in long term debt, but didn't disclose when this debt is
due, what the interest payments will be and if management will be able to repay this
San Gold announced today that Greg Gibson has been appointed CEO. Gestur Kristjansson will
continue in his current role as President. "We have made tremendous progress since March. Our new
mine plan has been in place for more than a month now and we are already seeing the benefits of the
strict controls that have been implemented. As CEO, I look forward to taking a more active role
operationally as we continue to transform the Rice Lake Complex into a profitable producer," said
Mr. Gibson. Mr. Gibson is most recently President and CEO of Kerr Mines, Chairman of Temex
Resources Corp., a director of Mag Copper Ltd. and a director of SGX Resources.
I believe it's strange to announce that Mr. Kristjansson will continue in his current role as
President, because the company never announced that he has been appointed as President in the first
place (see the press release, dated March 18, 2014). In addition, I can conclude from Mr. Gibson's
statement that the company is still trying to become profitable as of June 10, 2014. When I read
that one person holds several directorships, I always wonder how committed this person is to the
stock I'm analysing. I will try to answer this in my Key Management Evaluation.
San Gold announces that it has acquired 6,351,000 common shares of SGX Resources Inc. at a
deemed price of $0.05 per Common Share pursuant to a debt settlement agreement dated as of the date
hereof. The Common Shares were issued in settlement of $317,550 owing by SGX to the Company. The
acquisition results in the Company beneficially owning and controlling an aggregate of 43,047,256
Common Shares, representing approximately 32.1% of the issued and outstanding Common
Two of the founding members of the company are the founding members of SGX Resources
as well (Mr. Hugh Wynne and Mr. Dale Ginn). Mr. Greb Gibson, the CEO of the company, also holds a
directorship at SGX. At the moment, SGX has no relevant resources in the ground. On their latest
balance sheet as at March 31, 2014 I found $119,058 in current assets and $1,214,999 in current
liabilities. Therefore, I believe the additional investment in SGX is a very bad investment. I
consider the total ownership in SGX to be worthless.
During the quarter, the Company produced 12,083 ounces of gold and recognized a
quarterly loss from operations of $2.8 million and a total and comprehensive loss of $7.7 million.
Exploration expenses decreased by $4.6 million and general and administrative expenses decreased by
$2.2 million. Additionally, capital expenditures were reduced by $7.0 million or 37% compared with
Q1 2013. These savings, however, were offset by a total reduction in revenues of $9.4 million or
39% compared with last year.
During the quarter, the Company recognized a non-cash impairment charge of $83.1
million resulting in a net loss of $91.7 million for the quarter and $111.3 million for the year.
Excluding the impairment, the net loss was $8.6 million for the quarter and $28.2 million for the
year. The reduction in the carrying value of the Company's assets reflects changes in market
conditions and lower gold prices.
Mr. Kristjansson replaces Ian Berzins, who has served as President and Chief Executive Officer
of the Company since March 2013 and as Chief Operating Officer since May 2008. While Mr.
Kristjansson serves as the acting Chief Executive Officer, Mandeep Rai, the Corporate Controller of
the Company, will serve as acting Chief Financial Officer.
Why is Mr. Ian Berzins replaced and who will take over his duties as COO?
I include the following biography from my personal archive about Mr. Berzins:
"Mr. Berzins is a mining engineer with 30 years of experience in the mining industry having
worked in gold, oil sands, coal and base metals. He previously held senior management positions
with Sherwood Copper, Albian Sands and Suncor Energy and served as General Manager at several gold
mining companies including Harmony Gold (Canada) Limited, Echo Bay Mining (Lupin Operations) and
Miramar Con Mine. He is registered as a member of the Association of Professional Engineers and
Geoscientists of the Province of Manitoba."
When you read Mr. Dale Ginn biography as well, you can assume that Mr. Dale Ginn and Mr. Ian
Berzins have a history together, as they have both worked for some of the same companies in the
past. I assume that Mr. Ginn - being the co-founder of the company - was impressed with the
qualities of Mr. Berzins, wherefore he asked him to strengthen the management team at the
San Gold issued US$23,750,000 senior secured convertible notes (the "Notes") at 11% for 3 years.
Each Note is convertible into common shares of San Gold at the option of the holder at a price of
US$0.2545 per share at any time while the Notes remain outstanding. The Notes will not be listed
for trading on the exchange. In addition, San Gold entered into financial offtake agreements with
each of the subscribers for Notes whereby such subscribers would receive settlement payments based
on 40% of the gold production from San Gold's Rice Lake operation for a period of three years. San
Gold anticipates that it will determine whether or not to seek formal approval for the second
tranche of the offering in the next few months. The second tranche of the placement for an
additional US$36,250,000 principal amount of Notes and US$5,000,000 of Common Shares of San Gold,
is subject to various conditions, including regulatory, stock exchange and shareholder approval and
San Gold's requirement for additional funds.
This announcement comes as a complete surprise to me, considering San Gold's press
release of January 23, 2014 in which no additional financing requirements where announced, nor
seemed necessary. I am certainly curious how management plans to invest this money exactly and if
these investments will lead to a higher return than 11% on invested capital to cover the interest
charge. It's also not clear to me if the offtake agreements are settled at market prices, or if the
noteholders receive a discount to market prices, or if they are settled at a predetermined
During 2013, extensive definition drilling and detailed mine planning resulted in an increase in
proven and probable mineral reserves to 405,400 ounces, grading 5.24 grams per tonne. As of
December 31, 2013, the total measured and indicated resources are 555,600 ounces and the total
inferred resources are 2,899,200 ounces. The increase in reserves has allowed San Gold Corporation
to complete five years of detailed mine planning and they expect to achieve a further increase in
the mineral reserves as 2014 progresses through the conversion of the large inferred mineral
A new zone of gold mineralization is emerging with a strike length now in excess of
400 metres and a width of more than 100 metres. This new zone is expected to be easily integrated
into the existing mine plan and can be developed in the near future. Drill results included 10.6
g/t Au over 11.0 metres and 10.5 g/t Au over 6.9 metres.
The Company produced 75,218 ounces in 2013, consistent with the Company's full-year
guidance of between 75,000 and 85,000 ounces. The Company is forecasting production of between
80,000 and 85,000 ounces of gold in 2014 at cash costs of $800 to $900 per ounce and capex of
approximately $36 million.
Thus, conservatively assumed SGR is targeting an average gold price of at least ($36
million / 80,000 ounces =) $450 + $900 (cash costs) = $1,350 for 2014 (in Canadian
San Gold issued 32,000,000 units at a price of $0.125 per Unit for aggregate gross proceeds of
$4,000,000. The Units were all purchased by Sprott Asset Management LP on behalf of various funds
managed by it. Each Unit consists of one common share of San Gold and one-half of one warrant. Each
whole Warrant is exercisable into one Common Share at a price of $0.18 for a period of two years
from the date of issuance. Primary Capital Inc. acted as a finder for the Offering and received a
finder's fee of $200,000, which was paid in Units at a deemed price of $0.125 per Unit.
Accordingly, an additional 1,600,000 Common Shares and 800,000 Warrants were issued to Primary
San Gold Corporation announced today that its Board of Directors has appointed Mr. Bob Brennan
as Chairman of the Board and has accepted the retirement announcement of Mr. Hugh Wynne from his
directorship. Mr. Wynne is a founder of San Gold Resources Corporation (a predecessor to San Gold
Corporation). Mr. Wynne remains a very significant shareholder of the Company and a great mentor to
current directors and management. Mr. Brennan was appointed to San Gold's Board of Directors in
August of 2012.
San Gold Corporation is pleased to announce the appointment of Mr. Greg Gibson as a director of
the Company, effective today. "Greg is a welcome addition to our board of directors. He has
extensive industry experience with a visionary ability to identify and enhance the value of high
potential mineral properties like our flagship Rice Lake Mining Complex. Greg's views on corporate
strategy, especially underground gold mining in Canada, are very much in line with our own and I
look forward to his contributions," said Ian Berzins, San Gold's President, CEO and Chief Operating
San Gold Corporation consolidates 114 additional mineral claims (app. 17,450 hectares)
with a 100% interest in the Rice Lake gold belt for a total consideration of 2,380,952 shares and
$200,000 and a 2% royalty on any future production. Additionally SGR will be required to spend
$100,000 per year on work commitments for the next four years.
The debenture bears interest of 8% per year (thus: $4 million per year, paid semi
annually) and matures on March 31, 2018 or - at the holder's option - the debenture can be
converted into common shares at a conversion price of C$0.50 per share.
Mr. Jensen is a mining engineer with 34 years of experience in the mining industry
having worked in zinc, copper, lead, nickel, gold, silver, uranium, coal, asbestos, potash, and
diamonds. Most recently, he was Vice President, Engineering, with Breakwater Resources Ltd. where
he worked alongside Mr. Pirie. Mr. Jensen has also held senior management positions with Black Hawk
Mining Inc. and Canadian Mine Development. His experience has ranged from on-site production
engineering to senior head office engineering positions and most recently corporate development. He
is registered as a member of the Association of Professional Engineers of the Province of
My Conclusion Regarding this Company Announcements Evaluation
Based upon the information provided in the company's investor presentation and press releases,
management has not convinced me to buy the company's stock at current prices. I conclude that
I have too many questions left unanswered. I will ask management to comment on my commentary by email,
especially regarding Mr. Ian Berzins sudden replacement.
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