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Junior Mining Companies and the 'Temple of Doom'

by Melissa Davis - 5/27/2010 8:20:36 AM

Ever since AmeriLithium (OTC: AMEL.OB) purchased some mining assets from GeoXplor -- a Vancouver outfit led by the so-called “Indiana Jones” of the lithium trade -- the company has taken investors on a wild and, at times, thrilling ride. If history repeats itself, however, AMEL investors better not count on a happy ending to their journey.

After all, GeoXplor has sold mineral claims to several other microcap companies that met with rather ugly fates. Even worse, government records show, GeoXplor founder Clive Ashworth has been previously banned from the securities industry for an alleged scam – which resulted in criminal convictions for two stock promoters – involving yet another resource company.

Nevertheless, Ashworth continues to win over junior mining companies and those who promote their risky stocks alike.

“When I say that Clive Ashworth is the ‘Indiana Jones’ of the lithium industry, I’m deadly serious,” Breakaway Stocks recently gushed in a paid tout of First Liberty Power (OTC: FLPC.OB), one of many microcap mining companies that have inked deals with GeoXplor in recent years. “Ashworth has staked claims to 90% of the RICHEST LITHIUM DEPOSITS IN AMERICA … I’m not saying this to entertain you, but to hand you potentially the single greatest stock market gain you’ve ever banked in your entire life.”

James DiGeorgia, the paid promoter who famously reversed his bullish call on Big Bear Mining (OTC: BGBR.OB) earlier this month, has been touting FLPC as well. In a report distributed with financing from New Amsterdam Value Services – the same backer behind an expensive promotion of AMEL – DiGeorgia predicted that FLPC could become his “next 1,000% winner” by jumping from $1 to $5 a share.

FLPC has in fact seen its stock soar during the company’s brief history as a mining venture. Formerly known as Quuibus Technologies, FLPC transformed itself into a resource company when it purchased some lithium claims from GeoXplor on Christmas Eve. FLPC officially began trading under its current symbol on March 1, with its stock – fueled by aggressive promotions -- rocketing from 15 cents to 97 cents a share since that time.

By now, however, AMEL has enjoyed a similar rally that failed to deliver lasting gains to investors. In mid-March, just days after AMEL began trading under its current stock symbol, the company proudly announced that it had acquired some valuable lithium mines in Nevada. (The company not only purchased those claims from GeoXplor, regulatory filings show, but it also retained GeoXplor to survey and explore the properties.) The day after that announcement, AMEL almost tripled – jumping from $1.10 to a record high of $3 a share – before losing most of those brief gains to end the session at $1.35 a share.

The stock continued to fall after that, hitting a low of 85 cents last week, but has since bounced back to $1.05 a share with the help of lingering hype. 

At this point, AMEL itself is recycling some of the same old news that so effectively fueled the company’s stock in the past. By now, however, AMEL critics have uncovered some dark secrets – connecting AMEL to a slew of failed penny-stock ventures – that could scare investors away this time around.

AMEL did not respond to questions for this story.

Temple of Doom

Long before Ashworth founded GeoXplor and sold mining assets to the likes of AMEL and FLPC, he had built an entire career out of cutting similar deals with other obscure players in the resource industry. On its official website, GeoXplor paints a rosy picture of Ashworth’s track record.

“From 1980 to the present, (Ashworth) has been involved in every major staking and commodity ‘rush’ spanning four continents and almost four decades,” GeoXplor brags, “and been a provider of mineral exploration services to a multitude of junior and major mining companies.”

TheStreetSweeper hoped to ask Ashworth for more details about his accomplishments, but he failed to respond to messages seeking comments for this story. As a result, TheStreetSweeper never got a chance to ask him about a telling omission in his official bio.

Before launching GeoXplor, Ashworth ran a similar company known as Ashworth Explorations. As the head of that firm, government records show, Ashworth was sanctioned in 1993 by the British Columbia Securities Commission (BCSC) after allegedly selling some mineral claims to an outfit known as Canada Orient Resources and then participating in a kickback scheme involving the company’s stock.

“Ashworth and others, directly or indirectly, engaged in a scheme relating to a trade or acquisition of Canada Orient Resources Inc. securities,” the BCSC stated at the time, “when he knew or ought to have known that the scheme would perpetuate a fraud.”

Later on that year, The Globe and Mail reported, the BCSC punished Ashworth by revoking his trading rights and banning him from serving as an officer or a director of any publicly traded company for the following 10 years. Of the three “prospectors” sanctioned in that case, the newspaper revealed, Ashworth fielded the harshest penalty by far. Meanwhile, the newspaper noted, two stock promoters – Joseph Hooi and Robert Voong – wound up convicted of criminal charges for their role in the investment scam.

In that case, the newspaper observed, those involved allegedly planned to launch a stock-manipulation scheme from the start.

“Mr. Hooi testified that although Canada Orient’s stated corporate purpose was mineral exploration, its real purpose was to facilitate his and Mr. Voong’s stock trading,” The Globe and Mail reported. Indeed, “he said that, when the company’s shares were listed for trading in 1988, stock promotion became the first item on the agenda.”

With Ashworth as its leader, GeoXplor has inked numerous deals with other junior mining companies hoping to boost their share prices. Quite often, however, those companies have ultimately faded away. At this point, many of those stocks – including Northwestern Mineral (OTC: NWTMF.OB), Anglo-Canadian Uranium (OTC: ANGUF.PK), Golden Patriot (OTC: GPTC.PK), Bluerock Resources, Amerpro Resources (CDNX: AMP-A.V.) and Electric Metals (CDNX: EMI-A.V.) – fetch almost nothing if they even trade at all. 

As a newer GeoXplor client, still benefiting from paid promotions of its stock, AMEL itself has managed to avoid that fate so far.

Company Makeover

This spring, around the same time that AMEL inked its first deal with GeoXplor, the company began to reinvent itself.

First, in mid-March, AMEL hired Matthew Worrall to replace Henry Bush (a 24-year-old with a degree in French) to serve as the company’s CEO. When formally introducing its new chief to the market later on that month, AMEL portrayed Worrall as a “successful corporate leader” who would bring “a wealth of financial and management expertise” to the company.

While older than Bush, however, Worrall possessed no more mining experience. Rather, at 36, Worrall had spent most of his professional career working as a manager for Boatworld instead. Nevertheless, with 20.4 million shares of AMEL stock, Worrall now ranks as the proud owner of one-third of a brand-new lithium company.

Less than a week after Worrall assumed control of that AMEL stock, he was cheerfully touting favorable “outside” reviews of the company. At the time, Cohen Independent Research had just established a $3.63 price target for AMEL’s stock. According to an official disclaimer, however, Cohen had also received $15,000 from AMEL for its report on the company.

Nevertheless, with AMEL sitting at $1.38 a share, Worrall rushed to announce the “independent” analyst report.

“When it comes to ‘blowing our own horn,’ AmeriLithium can only do so much,” Worrall stated when promoting the favorable review. “We basically put the information out there for potential shareholders to consider and evaluate – except now they can also benefit from seeing how CIR considered and evaluated all the information on our emerging company.

“And with a target price of $3.63, it will be very interesting to see what happens in the days to come.”

AMEL soared to $1.72 a share on massive volume that same day. The stock, still trading briskly, went on to hit a record-high closing price of $1.80 the day after that.

Since then, yet another paid analyst – Ernest Schlotter of SISM Research in Switzerland – has announced an even higher target price for AMEL of $5.10 a share. The favorable coverage, financed by AMEL itself, helped push AMEL back above the $1 mark but failed to provide real momentum for the shares.

Fancy Address

As the CEO of AMEL, Worrall has clearly done his part to promote the company.

At times, however, Worrall has seemed a bit lost in his new role. When AMEL officially introduced its new leadership team in late March, for example, Worrall pointed to the company’s new address – of all things – as a key driver of future success.

“With our new HQ location in Nevada,” he stated at the time, “we are well positioned to develop the company into a leading player in the North American lithium industry.”

If anything, however, AMEL’s new headquarters – located at Kingsbury Executive Suites near Lake Tahoe – could set off some alarms. According to its official website, Kingsbury specializes in leasing cheap office suites to firms that wish to secure a Nevada address without disclosing some of the pesky details required of company owners in larger business hubs (such as Reno or Carson City) nearby. When touting the area’s lenient business rules, Kingsbury specifically warns potential tenants that they must reveal far more information – which could expose them to damaging lawsuits – if they choose to locate somewhere else.  

Kingsbury advertises some other unusual services as well. The company offers to “repackage” mail received at its building, for example, and then forward it to tenants that actually operate from different locations. The company will “re-mail” items for its tenants, too, so that outgoing mail carries a Nevada postmark regardless of its actual origination point.

“Your business NEEDS a Nevada address,” Kingsbury emphasizes on its website. And “we understand that image is everything!”

By now, many firms – including several connected to the shady penny-stock world – have rushed to capitalize on Kingsbury’s offerings. One Kingsbury tenant, Pearl Innovations, owns a big stake in a microcap company known as Machine Talker (OTC: MACH.OB), for example. As reported in an earlier story by TheStreetSweeper, Brian Altounian previously served as a director at MACH and is now partnering with Imaging 3 (OTC: IMGG.OB) CEO Dean Janes to launch an entire portfolio of high-risk penny stocks.

BestGrowthStock, a promoter of speculative investments, lists an address at Kingsbury as well. Teen Glow Makeup – now controlled by the CEO of heavily promoted Silver America (OTC: SILA.OB) – has used the same address, too.

Familiar Names

Before assuming his post as CEO of SILA, Johannes Peterson emerged as an insider at a penny-stock outfit known as Paloma Resources. So did Massimimiliano Pozzoni, who led a company that – like GeoXplor – sold lithium claims to AMEL.

On March 22, about a week after AMEL began trading under its current symbol, the company arranged to buy some Australian lithium claims held by Power Mining Ventures. As the CEO of Power Mining, regulatory filings show, Pozzoni officially signed off as the seller on that deal.

Before that, Pozzoni led several doomed microcap companies. He previously ran Falcon Natural Gas (OTC: FNGCE.OB), for example, which last traded on April 26 for 5 cents a share. He also served as a top executive at Otish Mountain Diamond and Cobra Oil & Gas, two microcap companies that no longer appear to trade at all. 

As Pozzoni’s latest venture, SILA continues to fare much better for now. Of course, an expensive publicity campaign – executed by the same parties promoting AMEL’s stock – has probably helped.

 

Eric Dany’s Stock Prospector, ranked among the worst-performing newsletters by Dow Jones in the past, claims that it specializes in “digging up the facts on little-known natural resource companies whose stocks are about to explode.” Recently, the Stock Prospector added both SILA and AMEL to that list. As a reward for its services, the newsletter pocketed fees from New Amsterdam Value Services – a mysterious firm based in Switzerland – which is financing six-figure promotions for SILA and AMEL alike.

When touting SILA, Dany predicted that SILA – a company with just $21 in the bank – would soon hit $7.50 a share and could fetch up to $50 a share as the target of a “takeover war.” 

SILA, a former golf company that transformed itself into a mining venture this March, peaked at $1.45 a share earlier this month. However, the stock has since fallen to $1.14 a share after losing some of its recent steam.

Although Dany portrayed SILA as “the best junior mining company you can buy,” he actually issued an even rosier outlook for AMEL shares. When touting AMEL, he predicted that the stock would likely hit $7.65 in six months and could command more than $125 a share under its own takeover scenario. He cited AMEL’s mining assets in Nevada and Australia – purchased from companies led by Ashworth and Pozzoni, respectively – when justifying his bullish claims.

“With the stroke of a pen,” Dany proclaimed, “AmeriLithium has positioned itself as a legitimate international player and a prime takeover target.”

Oddly enough, AMEL has indeed established connections that stretch around the globe. The company has acquired mining claims in Nevada, Canada and southwestern Australia. It has hired two CEOs who hail from Ireland. It has arranged financing from an obscure firm in Norway. And it has attracted publicity from parties based in Switzerland.

To critics, however, AMEL simply looks like a worldwide scam. To others, AMEL looks like a long-shot bet at best.

If nothing else, with its future hinging in large part on assets acquired from GeoXplor, AMEL appears to face some incredible odds. To prove itself, AMEL must address a formidable challenge: In short, the company must somehow find a way to succeed where so many others have failed. 

* To contact Melissa Davis, the author of this story, please send an email to editor@thestreetsweeper.org.

 

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