SDRG stock tanked yesterday by another 15% from the previous closing price and closed the market at $0.085 for a share, one and a half cents above the hit new 52-week low at $0.07. Just like on Friday, the trading volume remained enormous with 4.03 million traded shares, or almost nine times the average trading volume for the stock.
Last Tuesday, the apparent reason for SDRG rapid value losses got also revealed. A disclosed already in the last 10-Q forthcoming lawsuit against the company related to the sale of 50% of its equity interest in Sanhe Sino-Top Resources & Technologies Ltd. in 2008, or the Langfang proceeding, seems to have just now hit the market.
SDRG explanatory press release states that since December 9, 2010 the company’s shareholders are receiving a notice claiming that the shareholders who filed the lawsuit will seek to invalidate the 2008 equity sale and that a committee of 50 Chinese investors that invested in the company in 2006 are alleging Silver Dragon management of some illegal activities. Further, according to the company a person named Ms. Fanny Chan is responsible for all of the “false and unsubstantiated” allegations against the company since 2005. Already in those times, SDRG shares seem to have been strongly promoted.
Maybe that notice was just the occasion on which the stock had to lose part of the market value that was not justified by the company’s fundamentals. Silver Dragon is in the exploration stage since its inception in 1996, has in all the years generated a total of $65,000 in revenues and an accumulated loss of over $33.2 million. Although the company announced recently that its Erbahuo silver mine in China will start production in the second quarter of 2011, it is still not known how many years will SDRG need to monetize its mining assets and make a profit.
