Sanatana Vote is Now
Back in January I wrote a piece titled, "Iamgold finishes off Sanatana" where I detailed what I thought of the pending deal between Sanatana and Iamgold. Basically when Iamgold couldn’t steal using the legal system they have managed to force Sanatana to the very edge of bankruptcy so Iamgold could plunder the Watershed project with a stink bid.
That’s very funny because Iamgold spent over a million dollars in legal fees claiming they just had to have the surface rights to Watershed in order to put the Cote gold project into production. Now they are willing to throw some pennies at Sanatana shareholders knowing that either STA does the deal or goes belly up.
Going belly up is a far better alternative for shareholders.
The basic terms of the deal announced in January calls for a payment of $2 million in cash and an additional $3 million in confetti money maybe someday down the road. I just got the information circular in the mail and while I rarely do anything but chuck the buggers in the circular file, today I actually took the time to read the notice of special meeting for Sanatana scheduled for March 4, 2016.
After reading it I have realized that my initial belief that I should vote against the sale of the Watershed project was dead right.
As of the 2nd quarter financials effective as of September 30, 2015, Sanatana was $1.3 million in the hole. So any payment of $2 million would have to first of all pay off that $1.3 million, some of which is owed to officers and directors. Naturally they don’t want to lose money on Sanatana so they are all fully in favor of Sanatana giving away the project for $2 million in cash. They don’t want to feel the pain of investing in Sanatana and losing it all.
Instead, they want you to feel the pain and suffer the loss so they don’t have to.
I kept reading. There is a neat provision in the deal that calls for the Chairman of Sanatana to get a 5% commission on the transaction. So take another $100,000 off the $2 million. And then there is the messy issue of the company spending money from September 30 until now just to keep the doors open. Sanatana is probably spending about $200,000 a quarter to stay alive so let’s go wild and say they have incurred an additional $350,000 between the last financials and today.
So adding the $1.3 million they were in the hole, a $100,000 commission to the Chairman and $350,000 in continuing expenses, that adds up to $1.75 million gone and the grand total of $250,000 left to find a new project, execute some ground survey work and do a major drill program. Good luck with that.
When I learned in January that Sanatana intended to give away their primary project because management had totally run the company out of money, I realized that what I wasn’t being told was a whole lot more important than what I was being told. In short, Peter Miles wasn’t really lying to me, he just wasn’t telling the truth. While I’ve had a dozen or more phone calls with him in the last six months, he never told me the company was on the verge of bankruptcy.
Actually the information circular has a lot more truth that all shareholders need to know. Namely that the company picked up a diamond project starting in February of 2014 named the Green Lake project. Don’t go looking for any pictures on the website or information about the project, there is little or none. As far as management is concerned, the project really doesn’t exist. Except for the fact that Peter Miles was at least a part owner of the group that vended the project into STA. I can’t find the details of the deal and I don’t think they are anywhere on the site.
But what was an eye opener was a short portion of the MDA on Sedar dated September 30 talking about the Green Lake diamond project. It appears that the company is obligated to spend an additional $1.275 million on the project by December of 2016. So the company is going to have the grand sum of $250,000 to pay quarterly obligations of maybe $200,000 and $1.275 million by the end of the year.
The same company that is giving away a project they invested about $10 million in for $2 million cash wants shareholders to vote in favor of the deal. They couldn’t raise money in the last two years when they had a $.29 stock and they expect shareholders to believe they can raise money after they have given away their best project.
Currently the market values the company at about $600,000. In actuality the company is bankrupt or headed that way.
Shareholders have one real alternative. Since the company has no value today and obligations they can’t possibly pay, shareholders have the option of voting against the sale. Let the company go bankrupt, after all, it already is dead in the water. Let Iamgold try buying the project they swear up and down they have to have to put Cote into production.
I’m voting my shares against the deal today. I’m not rewarding any of these prick bastards. I was buying shares at $.19 when I realized it was a perpetual call on gold as long as management could keep the doors open. I averaged all the way down. Why not? This was a pure bet on the price of gold. All management had to do is keep the doors open.
If you and I are going to lose money, why not share the pain with the incompetentswho screwed this whole project up?
One very real alternative is that the prick bastard on the other side of the deal, namely Steve Letwin of Iamgold, realizes it would make a lot more sense to make a deal with Sanatana with real money rather than chancing a higher price of gold and maybe others bidding on the Watershed project a few years down the road. Iamgold has money in the bank, they don’t need to steal this project. He can pay for it with real money now or roll the dice with the bankruptcy court later.