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