Internet Update
Dateline: 05/21/99
Quick now! What was the most active stock on the TSE yesterday?
The answer is Sikaman Gold Resources Limited. But can you tell me why? Did they strike gold? Did they hit the motherlode?
The answer to that is no and yes. They did not strike gold, but boy, did they hit the motherlode! The motherlode known as the Internet!
Yesterday Sikaman and 1315986 Ontario Corporation concluded a deal for the gold miner to purchase 100% of the numbered company for ten million Sikaman shares. The deal gives Sikaman control of two Internet plays: NorstarMall.ca, an online shopping mall slated to open July 1 as Canada's first broadcast Internet mall, and E-Vision Interactive, a website design, hosting and management service.
Over 19 million shares changed hands as the stock gained 14% from $0.25 to $0.285.
Sikaman is just one of a number of mining companies that have decided to "mine the net" instead of the good earth. For these companies it just makes good economic sense. Resource prices have been in a protracted slump, though there has been some recovery of late. For a mining company engaged in gold exploration, the vagaries of the gold market with its yoyo like gyrations has added even more woe to their plate.
As I recounted in my review of Chris Bunka's excellent Outsider's Guide to Speculative Stocks, when a penny stock declines, its principals sometimes engineer a new play to pull the company out of the doldrums. Sometimes such a play takes the form of a reverse takeover - a company that wants to go public buys out the shell corporation, and subsequently changes the name and the game.
Sikaman isn't a reverse takeover, but it certainly is a change in the play.
Here are a few other mining companies that have changed their fortunes by embracing the Internet.
American Gem Corporation: This Toronto based company operates a sapphire mine in Montana and was trading as low as three cents a share in March. On March 15th it announced it would start selling sapphires and other jewelry online. The market was slow to react and it stayed at three cents as recently as March 26th. But in April traders caught wind of the deal and the stock soared to over a dollar. It slid back to thirty cents and then soared to $1.13 on news that American Gem would acquire Northern Securities, a small brokerage firm, which it hopes to transform into an online brokerage. The stock closed yesterday at $0.69.
Vic Alboini, President and CEO of American Gem, says "We're not a mining company anymore. We're an Internet company." Mr. Alboini will be stepping aside in favor of two top executives they lured away from PSINet Inc. to manage the company. He will stay on as Executive Vice President and Chief Financial Officer.
Dejour Mines: It's hard to find out what Dejour Mines did in the mining field before it became a putative Internet stock with its purchase of an interest in fledgling Internet courier InstantDocuments.com of Dallas, Texas. Its website is still under construction. A news story from March 26 about the courier acquisition reveals that "it owns interests in mineral properties across Canada and Latin America". But a look at documents filed with Sedar reveals it is, in fact, a junior gold exploration company.
Dejour initially bought a 5% interest in the Dallas company in mid-March with an option to increase its stake to 50%. On May 10th it announced a merger deal had been reached. The stock traded as low as four cents a share in January. It was trading at ten cents just before the InstantDocuments.com deal and then surged to $1.07 before settling back. It closed yesterday at $0.63.
Rux Resources: Another junior gold explorer, Rux announced in April its acquisition of an option to buy 8.3% of Dallas based Business Web Inc.. (These mining companies seem to like Dallas based companies!) It also licensed the right to use Business Web's proprietary software to host Internet trade shows. Stan Bharti, CEO at Rux, says the company plans to use its mining expertise to create an online business-to-business meeting place for the resource sector.
Rux's stock traded as low as a half cent a share in March on the Canadian OTC market. After the deal it shot up as high as $0.50 and closed yesterday at $0.18.
Cornucopia Resources: Another gold mining company, Cornucopia announced on March 2nd that it was going to sell off its gold mining interests and acquire privately held Stockscape Technologies Limited which operates the Stockscape.com financial website. The plan included delisting from the TSE (which it has done) while remaining listed exclusively on the American OTC. Upon shareholder approval by the end of June, it will consolidate shares at ten to one reducing the shares available from around 40 million to 4 million. It will change its name to Stockscape.com, and it will change its trading symbol accordingly.
The stock was trading on the TSE as low as three cents a share before the announcement and jumped to ten cents right after that. It has traded as high as $0.20 since the announced plans and closed yesterday at $0.125 US.
Victory Ventures Inc: This junior resource company had a number of interests in mining ventures in Canada and Mexico and in April acquired a company called Webdex Data Corporation in exchange for stock and a forgiveness of a substantial debt owed by Webdex to Victory Ventures. The most interesting asset owned by Webdex was the Internet domain name "investment.com". Immediately after that on April 16 the company announced a "strategic alliance" with privately held Stockhouse Media Corporation to develop the investment.com property. Stockhouse runs one of the best and most respected financial sites on the Net with Stockhouse.com.
On April 29th, the Vancouver Stock Exchange announced that it regarded the Stockhouse "alliance" as a reverse takeover.
So there we have it. Six mining companies, now six Internet companies! All of them have gained substantially on the change. Some of them probably stand to gain considerably more. Do your own due diligence and maybe you'll find one of these stocks could be your motherlode!
| Stock | Exchange | Symbol | Year Low | Year High | Yesterday |
| Sikaman Gold | Toronto | SKG | 0.02 | 0.495 | 0.285 |
| American Gem | Toronto | GEM | 0.025 | 1.13 | 0.69 |
| Dejour Mines | Toronto | DEJ | 0.02 | 1.07 | 0.63 |
| Rux Resources | Canadian OTC | RUXR | 0.005 | 0.50 | 0.18 |
| Cornucopia Resources | OTCBB (US) | CNPGF | 0.016 | 0.297 | 0.125 |
| Victory Ventures | Vancouver | VIP | 0.02 | 1.44 | 0.95 |
I will be adding a new sub-index to my Canadian Internet Stock Average page of the stocks mentioned today. I may leave out Cornucopia since it is not traded on a Canadian exchange.
Small Cap Stock Links - my collection of Net Links on small cap investing.
Internet Article Index - links to all the articles, charts and information on Canadian Internet stocks at Investing: Canada.
Canadian Internet Stock Average - my charts of Canadian Internet stocks and how they have fared since January First.
Disclosure: The author owns shares in Cornucopia Resources and Victory Ventures.
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