What would you do if you were running a gold exploration and development company and you had announced a joint venture purchase of a property potentially worth billions, and no one traded a single share?
Well, maybe you’re not the boss of the company, you just have shares in it. At any rate, one of your options is to to pay for a promotion, and someone did pay for Lone Star Gold Corp. (OTC:LSTG).
No LSTG shares have changed hands since Jul. 26. Not even when the company announced it had signed a definitive agreement for a joint venture with Metales HBG Sa. de C.v to purchase a 70% working[BANNER]
interest in the La Candelaria property. According to a geological study conducted in 2009, there could potentially be billions worth of gold and silver.
The PR was issued last Thursday, but there was no trading activity then and on Friday. At least two promoting outfits have been hired to make LSTG known. Onediscloses a $30 thousand compensation and the other $20 thousand. Both were paid by Winning Media.
Back in June, LSTG was still known as Keyser Resources, Inc. and did a 20:1 stock split, which brought its OS to approximately 115 million, so the market cap at the current price is around $92 million.
Depending on whether there is really gold and silver on the property, and on whether LSTG will be able to develop it, this cap can be extremely low or extremely high. Without the La Candelaria, LSTG doesn’t have much. Their latest quarterly for Q1 shows the company had $12 thousand in cash and about 593 thousand in notes and interest receivable.
LSTG has agreed to pay $240 in cash, 250 thousand shares of the company, and it has agreed to a work commitment of $450 thousand over the first three years in connection with the JV on the La Candelaria. How the company intends to get the money needed is anybody’s guess, although in this situation the two most probable options for a no-revenue company are debt or equity financing.
Traders would do best to use caution when evaluating the upsides and the downsides. LSTG may or may not become anything more than it is today.
