When a stock is about to go up and you can't buy more ,when now the dam thing starts to get a lot of press,and the price should rise.lol
To: Mr Metals (7181 )
From: Turboe
Thursday, Jul 2 1998 9:13AM ET
Reply # of 7283
usatoday.com
07/01/98- Updated 11:10 PM ET
The Nation's Homepage
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
Next
Previous
Respond
|
