Kerry, Your link didn't work for me.. wouldn't want anyone to miss this opportunity. The all a twitter group is pretty excited about all the free publicity they received today. The Cricket Thicket is the hook for me, think I'll place a market order first thing Tues.
usatoday.com
Investors sift prospects
from dreams
DENVER - Golden Eagle International
has no corporate offices or full-time
employees. It's being sued by federal
regulators and trading in its stock has
been suspended until Tuesday.
Although it lists a Denver address, CEO
Terry Turner works mostly from his Salt
Lake City home. Sabrina Martinez, head
of investor relations, fields calls on her
cellular phone or at her suburban Denver
art shop, the Cricket Thicket.
A portrait of a
fly-by-the-seat-of-your-pants start-up
firm? Perhaps. But Golden Eagle could
be sitting on a $46.5 billion pot of gold.
Many investors are ignoring Golden
Eagle's regulatory problems and skeletal
corporate framework. Instead, they're
banking on the fortune hunter's story the
company reported May 22 - a
world-class gold find in the remote
Bolivian jungle. The story is part
Romancing the Stone and part Indiana
Jones, captivating both for its romantic
allure and potential windfall - roughly the
value of gold mined during the California
gold rush of the late 1840s to 1850s.
Golden Eagle's site is far more remote
than Sutter's Mill, however. It's
accessible primarily by 9-hour drive on a
winding, dirt road 75 miles north of La
Paz in the storied Tipuani River Valley.
Gold has been mined there for 1,000
years, and musket balls from warring
Spanish and Portuguese conquistadores
still litter the area. If the discovery pans
out, it could be a speculator's delight,
pushing an obscure penny stock into the
investment stratosphere.
The Securities and Exchange
Commission, skeptical that Golden
Eagle's claims might be fool's gold, put a
10-day halt on stock trades. Regulators
question the accuracy and authenticity of
Golden Eagle's reported find - 6.4 million
ounces of proven reserves and possibly
up to 157 million ounces. Based on
current spot gold prices of about $296 an
ounce, that would value the find at $2
billion to $46.5 billion.
"We pounced very quickly," says Dan
Shea, director of the SEC's Denver
office. "Investor interest in gold stocks
hasn't stopped, despite a big drop in gold
prices."
In the post-Bre-X mining world, the SEC
is wary of start-up companies reporting
vast precious metal deposits. For good
reason: Hundred of individual investors
and professional money managers were
burned in 1997 after Vancouver,
British-Columbia-based Bre-X reported
a huge gold find in the jungle in
Indonesia. That sent Bre-X shares from
about 20 cents to more than $200 before
crashing when the discovery turned
hoax.
"We're very careful to see that another
Bre-X doesn't happen," Shea says. "In
Golden Eagle's case it doesn't mean that
there aren't those assets there. Our hope
for investors is that all that glitters is
gold."
While the SEC isn't commenting directly,
the trading suspension came after
investigators and an SEC geologist
questioned Turner and mining
engineer/geologist Guido Paravicini for
three days. They're trying to determine
whether Golden Eagle is playing
fast-and-loose with geological reports or
committing mining fraud, or has a viable
claim.
Turner, who has repeatedly cautioned
investors in news releases and the
company's Web site
www.goldeneagle-mine.com that
Paravicini's findings are not conclusive
and that Golden Eagle doesn't have the
capital to mine the site, says he supports
the trading halt.
"Although it casts all kinds of negatives
on the company, we welcome the
scrutiny by the SEC," he says. "This isn't
a Bre-X situation. This is a mining
district where 32 million ounces have
been produced by miners since pre-Inca
times."
Word of Golden Eagle's find propelled its
shares from 13.5 cents to 32 cents May
22, a one-day gain of 137%. Had it not
been for the fallout from Bre-X, Turner
says Golden Eagle might have raced to
$100.
Legal woes
Such a run-up is conceivable despite
Golden Eagle's checkered past. The
company was incorporated in 1988 as
Beneficial Capital Financial Services,
which provided seed money to emerging
growth companies. According to
company filings, the efforts generated
less than $25,000 in revenue. The SEC
says Beneficial, essentially a shell
corporation, was acquired in November
1994 for $75,000 by a wealthy Colorado
couple, Mary Erickson and her husband,
Ronald Knittle, who became CEO. They
renamed it Golden Eagle in February
1995 and focused on mining.
Erickson declined comment, and Knittle
could not be reached. The bulk of the $3
million the company has invested in the
Bolivian mine site has come from
Erickson's family trust, according to
company filings.
Bad timing?
Golden Eagle reported the Bolivian gold
discovery just two weeks after the SEC
filed a lawsuit against the company,
Erickson, Knittle and other former
insiders. The federal lawsuit alleges that
from 1994 through mid-1996, insiders
fraudulently hyped Golden Eagle stock,
lied about the value of mining interests in
Arizona and California, and reaped
about $662,000 from the sale of
unregistered stock.
Turner says the prime reason Golden
Eagle issued word of the Bolivian find in
May was to squelch speculators and
gossip on Internet chat lines and Web
sites such as the Silicon Investor.
"The timing was coincidental to the
lawsuit. We were between a rock and a
hard place," he says.
"There were reports about the find 10
days before we issued a statement. We
felt there was a breach of security," says
Turner, who has helped bring some
notoriety to the stock by twice appearing
on Morton Downey Jr.'s syndicated
television show, Invest America.
"If we'd had a negative report, we would
have been criticized of holding that back,
too. We didn't think we could have hung
on to the information we had. We tried
to act responsibly," he says.
Turner, who joined the company in
1997, says none of the defendants
named in the lawsuit, except Erickson, is
still with the company and notes that
some of the allegations raised by the
SEC are nearly 4 years old. He's
confident the lawsuit will soon be settled.
Yet the SEC suggests Golden Eagle still
appears to be flirting with security law
violations. The lawsuit charged the
company with falsifying corporate filings
and failing to file timely reports. As of
Wednesday, Golden Eagle hadn't filed its
1997 10K annual report nor its
first-quarter 1998 report. Turner blames
the filing delays on Bolivian accounting
methods. Golden Eagle reported
operating losses of $2 million in 1996
and $815,000 in 1995.
Internet rumormongering
Hundreds of e-mail messages regarding
Golden Eagle were exchanged on Silicon
Investor's bulletin board weeks before
the company's May announcement.
Turner calls the exchanges a "feeding
frenzy and distorted reports of this being
the largest find on the planet." Hundreds
more followed after the June 23
stock-trading halt. All told, more than
7,100 messages have been exchanged.
Many people remain bullish on the
company, taking bets on how high the
stock will go once trading resumes.
Paravicini, whose career spans 35 years,
including 19 as chief geologist for
National Bolivian Mining, a gold and tin
explorer, is perplexed at the backlash
generated by his findings on the
4,810-acre mining site.
"I've never been questioned like this
before," he says. "I suppose these
discoveries are hard to accept, even to
Bolivians." Most of the gold mining in
the region has been rudimentary and, at
best, just 20% to 50% of the gold has
been recovered, he says. More than 100
samples were taken from the site, he
says. Using high-technology methods
such as cyanide leaching, Paravicini says
the site could profitably produce a
world-class deposit.
Paravicini is an independent mining
engineer and geologist hired by Golden
Eagle for his standard $4,500 to $6,000
a month. He says he has no stock or
options in Golden Eagle.
Turner says Paravicini's findings are
backed by Albert Trites, another
independent geologist hired by Golden
Eagle more than a year before
Paravicini. Trites determined the site
held about 5 million ounces of gold. He
refused comment.
Don Hausen, who retired as chief of
mineralogy for Newmont Mining in 1990
and now is one of three technical
advisers paid unspecified consulting fees
by Golden Eagle, visited the site last
September. "It's a unique and unusual
deposit," Hausen says. "An experienced
company wouldn't have trouble
recovering it."
But Borden Putnam, a geologist with
securities firm Robertson Stephens, says
there hasn't been enough site exploration
to validate the gold find. "There's not
enough data to support this kind of claim
and classify it as proven," he says. "You
would have had to spend $10 million to
$15 million and drill 5,000 to 10,000
holes."
In an effort to assuage regulators,
investors and potential joint-venture
partners, Golden Eagle will soon hire an
independent mining firm to examine
Paravicini's findings and perform
feasibility studies. "In the post-Bre-X
world, we've made every effort to get
this right. We've tried to put sufficient
warning caveats out. And we've tried to
act responsibly," Turner says.
Investors seem willing to accept the
risks.
"I'm convinced there's gold down there,"
says Mark Strodtman, a Greeley, Colo.,
businessman who owns about 1 million
shares. "I've met Guido. He has integrity
and family values. That means a lot."
Among other true believers is Doug
Lapp, a Niagara Falls, N.Y., electrician
who owns 406,000 shares. "Basically, all
this is a crap shoot," he says. "But I think
they're trustworthy. I believe they've
found gold."
By Gary Strauss, USA TODAY |
