|If the board can handle an upcoming one-for-four reverse split, participants may wish to "invest" 16 to 18 cents a share in Avalanche Minerals AVH. |
I got enthusiastic about this microcap Wednesday, thanks to the ever-vigilant RocketRed. I read that the man who discovered Aurelian's gold, or at least co-discovered it, is stepping on board. Then I am looking around for why and I learn that AVH committed itself on April 3 to buying an existing, working, high-grade gold mining operation with exploration potential, in Colombia. The cost of this purchase is roughly equivalent to the entire market cap of Avalanche -- $10 mm.
The immediate news being buzzed about Wednesday was that Dr. Keith Barron, basically the geo who found Aurelian's gold in Ecuador, had become loosely affiliated with this very young drill play called Avalanche Minerals, formerly Avalanche Networks.
The new company, which will soon change its name to something else, was a shell that used to be a dot-com and just became a mining stock in September. Avalanche is active in Ecuador and very recently has become involved in Colombia.
Barron discovered the huge gold field that has become the basis for Aurelian resources ARU moving from being a bottom-fisher stock to its present status as a multi-billion dollar market cap with imminent takeover potential by one of the biggies. He resigned from the Aurelian board rather suddenly, we all thought, and simultaneously announced he had become a consultant to Avalanche and had received options on 400,000 shares, price unspecified.
On Avalanche, I paid 18 cents, which was too much. I was buying into a temporary price bubble created by the gradual dissemination of the news of Barron's departure from the board of Aurelian plus his new affiliation with this microcap Ecuador-Colombia play. By the end of the day AVH had settled down to 16 cents, so I am already under water. The whole company has a market cap of about $10 mm.
GOLD IN COLOMBIA, ALREADY BEING MINED
Their claims that most of us would find it easier to learn about are called the E-group claims in Ecuador, a nice big chunk of poly-metallic land. While E Group must be very important to Avalanche AVH future, it would seem to me that the newly-arranged-for purchase of the Colombian property (announced just a few days ago) is more coincident with Barron's flip and therefore stands a chance of being at cause.
Also, I notice that the price tag on this Colombian prospect is equal to the entire market cap of Avalanche -- roughly $10 mm. Therefore, I speculate, it would be handy to have somebody with deep pockets, like Barron, taking an important amount of ownership via a special PP.
This property does not even have a clear project link yet on the Avalanche site. You find it by clicking on News Releases. The announcement opens up as a word document and is the only news release on the site.
Check out the grab samples pulled by Dr. Karen Volp.
And it is already being mined underground in a rudimentary way.
Looks to me like they are pulling out about 14,500 troy ounces a year, which means it is grossing $1.3 mm.
Click on Investors, then on "News Releases."
Check out the grab samples being pulled up top while they mine high-grade down below with picks and shovels.
PART TWO -- THE REVERSE SPLIT COMING UP
Avalanche AVH share consolidation planned:
Buried in April 3 release on Colombian mine acquistion:
"Avalanche also announces that it will, subject to Exchange and shareholder approval, implement a share consolidation on the basis of 4 old shares for one new one. In conjunction with the share consolidation, Avalanche will seek shareholder approval to change its name. Avalanche expects to call a special meeting of its shareholders on or about * to obtain shareholder approval for the consolidation and name change."
There were 59 mm shares out as of Feb. 1, 63 mm on a diluted basis. They raised 1.5 mm by selling 15 mm units at 10 cents to pay the first installment on the Colombian acquisition, due shortly.
So roughly speaking there are now 74 million shares out, and 93 mm fully diluted. Add 2.5 mm in new options and you are at roughly 96 mm.
The reverse split should mean 24 mm shares fully diluted, and priced at c$0.64 (four times the current c$0.16).
Speculators generally do not like reverse splits, because they feel they are being deprived of the big share numbers, but this one makes tremendous sense. Why? To get the share structure down to a convincing and attractive number (say 24 mm shares fully diluted) going into the next raise, which i am sure they would like to be a big one, since they have to pay for the Colombian property fairly soon and they want money to explore both it and the E-claims in Ecuador, which are also beckoning. For this PP, they will want to reach out above the bottom fishing audience. I think they think that the 64 cent starter price will go over a buck on its own. Then the PP would be at a buck or more. Say you did 12 mm shares at a buck, you'd end up having a good supply of cash and would leave the the shares outstanding at just 37 mm or so, fully diluted.