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Painting Yourself into a Corner

Bob Moriarty
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Jan 23, 2015

Currency wars continue unabated. On January 21st the Looney dropped an incredible $.02, down $.05 in the last month. As I write the Dollar Index is up a remarkable 2% for the day. With $5.3 trillion dollars on transactions in the currency markets daily, that means someone took a $106 billion hit today. Like the 38% move in 12 minutes in the Swiss Franc last week, we are seeing a series of loose cannons careening around the deck that will soon sink the ship.

I'm 68. I can't recall a single day in my lifetime where the value of the US dollar changed 2% in one day any more than I can recall the SF or any other currency changing 38% in 12 minutes.

The IamGold/Sanatana saga continues. The market obviously wanted to see IMG give up the attempt to take the Watershed property from Sanatana via devious means. IMG bottomed at $1.62 a week before the decision to drop their claim on November 10th rather than face a humiliating defeat in court. It's up 150% since then.

In addition IamGold fired their entire Project Development team the same day they dropped the easement. They announced the mass slaughter but didn't feel it necessary to mention the more newsworthy withdrawal of the easement petition. Included in the bloodletting was Paul Olmsted, Senior VP of corporate development responsible for the original purchase of Trelawney and President of Trelawney.

In April of 2012 IamGold announced the takeover of Trelawney Mining for $608 million. In the end they paid $76 an ounce for the Côté Lake gold deposit after announcing an updated resource of just over 8 million ounces at between .84 g/t and .88 g/t.

The Côté Lake project is surrounded by the Watershed property, subject to a joint venture between Trelawney Augen Acquisition Corp (IamGold) and Sanatana Resources. Sanatana was required to spend $5 million in exploration to earn 50% and can get an additional 1% by completing a PFS (Pre-Feasibility Study) by March of 2016. STA has spent their $5 million and now own 50%.

Once they file the PFS, IamGold is on the hook to pay their 49% of the excess (above the $5 million required to get 50%) already spent by STA. That's a total of $9 million so far. If IMG doesn't belly up to the bar, they get diluted down.

It was this ground that IamGold was trying to take through use of an easement petition claiming that it was required for IamGold to have the Watershed property to put the Côté project into production. It was necessary right up until the moment a judge insisted they provide some legal basis for the request which they declined to provide.

IamGold President Steve Letwin has painted himself into a corner entirely of his own doing. On December 23rd of last year he climbed way out onto a limb suggesting that he was hunting for acquisitions but was open to being acquired as well. "We're not in any rush, I think the longer we wait, the more the opportunities will be there." He continued, now becoming a prophet, "Our reality is gold could stay in the $1,100 to $1,300 range for another five years."

That quote comes under the "open mouth, insert foot" provision. It took a slight four weeks for gold to burst through $1,300 and while Steve Letwin is kicking back and relaxing, the rest of the industry is out buying up assets.

The company has a $650 million series of Debentures paying 6.75% that expire in 2020. The IamGold 6.75% debentures trade at about 78% of face. Should IamGold not complete a takeover within one year of their selling Niobec for $530 million, they must buy back the debentures at par.

Mr. Letwin's actions are certainly working against the interests of IamGold. The company bought Côté Lake for $608 million and then insisted that they deserved to be given the Watershed Project rightly belonging to the JV between Sanatana and IamGold. When asked for a legal justification, they folded.

Until IamGold comes to some resolution of the issue of the easement with Sanatana the fact they claimed they had to have it conflicts with there being real value at Côté Lake. If they really need it and can't pluck it through the courts, why don't they just try to buy it with the $800 million in cash on hand? They either have to have Watershed or were part of a legal scam. I can't see any bigger companies wanting to buy into that can of worms any time soon.

For a variety of reasons, Sanatana investors have been through a wild ride over the last 18 months with the price being as high as $.29 to as low as $.025 when a major gold fund dumped millions of shares on the market. Sanatana has won every legal battle, continues to advance the project and frankly, has IMG by the short and curlies. If Steve Letwin believes IamGold has any value to another company in a buyout, he needs to settle this issue. Problems ignored only grow.

Sanatana is an advertiser, I have bought shares in the open market and I am biased.

Sanatana Resources
STA-V $.07 (Jan 22, 2015)
SADMF-OTCBB 127.7 million shares
Sanatana Resources website

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Bob Moriarty
President: 321gold
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321gold Ltd

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