Another $3 Million Pump – Sanborn Resources Ltd (OTCBB:SANB)
It’s the same old scenario: take a publicly traded company that’s in a pretty poor financial state, change the name, the business and the ticker symbol, split the stock, increase the number of authorized shares and wait for the pumpers to go wild. Before the last step, of course, there needs to be a third party to pay for the campaign and in the case of Sanborn Resources Ltd (OTCBB:SANB) they were quite generous – the total budget is $3 million.
Have a look at our database, however, and you will start to argue that there are absolutely no emails right now. That is indeed the case, but as we have seen over the last couple of months, newsletters are not the only vehicle that the pumpers use. In the case of SANB a person by the name of Anthony Scopel published an article on a website called Financier Times in which he discusses different things like the drop in the price of gold, why investing in small cap mineral exploration companies is a good idea and, of course, he talks at length about the opportunities of a potential SANB investment. Do the names Anthony Scopel and Financier Times sound familiar?
Well, if you follow our articles closely, they should. The same people published an equally optimistic article on Northumberland Resources Inc (OTCMKTS:NHUR) (who, by the way, wiped out around a quarter of their price yesterday) and just like the one for SANB, it contained a disclaimer at the bottom which states that Mr. Scopel’s optimism is part of a promotional campaign worth $3 million. The thing that confuses us most is the fact that while the footer of the website states that it’s owned by an entity called Pub Capital, the disclaimer notes that Central A Marketing are the ones managing the huge budget. Whoever runs the campaign, the amount of money shed on the promotion means that everyone is expecting some great results and, at first glance, it would appear that the pump is off to a great start – SANB closed yesterday’s session around 15% above its previous value. But are things really so simple?
Not really. The ticker opened the session at $0.44 – exactly the same as the close – and throughout most of the day, the shares were traded above that figure. This means that while they are now more expensive compared to the previous value (recorded last Friday), some day traders (of which there were many) still had to swallow the losses. What about the ones who are willing to stick around for a bit longer?
Well, if you have read through the article, you might think that SANB really are onto something. They have the mineral rights, they have the management team, they are a junior mining company and according to famous Hungarian-American investor, George Soros, junior mining companies are going to explode in case the gold price takes a turn for the better.
The only problem with that is, they will actually need to start digging the gold out of the ground, and having in mind that until not more than three months ago, they were dealing with the retail sale of pieces of art, we reckon that it’s still way too early to bet on their success.
Another thing that we’re not too sure about is the management team. The pumpers’ article speaks in details about the Mr. James Davidson’s (SANB‘s CEO) past successes, but they somehow fail to mention the fact that he is also listed as the CEO of two other small cap ventures – California Gold Corp (OTCMKTS:CLGL) and Valor Gold Corp (OTCBB:VGLD). That, on the one hand means that he has to be extremely good at multitasking, but we also wanted to see if Mr. Davidson’s “side projects” have been promoted in the past. It turns out, they have and the charts don’t look too pretty. The pump for CLGL took place in March 2012 and back then the ticker reached around $0.12 per share. Yesterday, they closed the session at $0.01. The story of VGLD is even more painful – the promotion pushed the ticker all the way to around $1.50 in October 2012 but right now they stand at around $0.16.
Will SANB fair any better? We’re struggling to see how this could happen, especially considering the performance displayed by NHUR over the last couple of weeks. As we mentioned, they got promoted by the same people and while the price was pushed up to around $1.60 on May 20, it all came crashing down really soon and right now, just a month and a half later, they are standing around 64% below that price.
Worst-case scenario? The SEC has suspended a total of three penny stock ventures that were put under quite a lot of promotional pressure over the last month or so – Polar Petroleum Corp (OTCMKTS:POLR), Biozoom Inc (OTCBB:BIZM) and Norstra Energy Inc (OTCMKTS:NORX). If that happens to SANB, as well, things could turn really ugly. That is why, weighing the risks carefully is absolutely essential before making any decisions that might prove costly.
