Today is deal day for Sennen Resources Ltd. (TSX:SN.V) shareholders to accept the Liberty Silver Corp. (LBSV)(TSX:LSL) tender offer made two months ago, or is it? Back on July 9th, Liberty made an offer to exchange each Sennen share for .28 shares of LBSV stock, roughly .29 for each as of Friday’s closing price. The drama between the two companies escalated into a “letter to shareholders” PR war as to why it makes good business sense. Yet, with just 21,600 shares of the target’s stock traded thus far in September, is the big candlestick from the last trading session headed in the opposite direction if the deal goes south?
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LBSV Stock Chart
Market Cap: 84.86M
Close: 1.06, up 0.20 (23.83%)
Dollar Volume: $2,538,737
Average Trade Size: 6,908
Issued and Outstanding: 80,060,834
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The tender offer made by Liberty Silver came prior to the Company’s acquisition of a 100 acre plot from Primus Resources, L.C. adjacent to the former Trinity Silver mine on the Company’s Trinity property in Nevada otherwise known as the Hi Ho Properties. What’s so big about that? The Trinity Project consists of a total of roughly 10,600 acres, including 5,700 acres of fee land and 240 unpatented mining claims. What’s another couple of football fields?
The deal cost Liberty $150,000 and 3 million shares which are not included in the above issued and outstanding number of LBSV stock.
The drama began on July 9th, two months ago, when Liberty Silver offered Sennen shareholders 0.28 shares of LBSV stock for each Sennen common share. At the time the exchange ratio was made, Sennen shares traded for just 0.11 and the deal implied a 0.20 price per Sennen share. That’s when the PR pissing contest began. Ian Rozier, President and CEO of Sennen, came out with his “Do Not Tender Your Shares” letter on August 24 (see here) to counter the Geoff Browne, Chairman and Chief Executive of Liberty Silver, open letter to Sennen shareholders dated August 9. (see here)
Accusations from Liberty of Sennen not owning enough of its stock and having not created any value from its Hope Bay Oro exploration property could just as easily be returned by Sennen since Liberty has yet, since its inception on February 20, 2007, booked one red cent in revenues and had an accumulated deficit of ($6,086,856) as of March 31, 2012.
Further to that, Liberty Silver raised $5,252,388 in stock sales for the nine months ended March 31, 2012. Most was from the November 10, 2011 Subscription Agreement with Look Back Investments, Inc. for $0.50 per Subscription Receipt; $3.25 million. Each Subscription Receipt entitled the investor to receive one unit, one share of common stock and one common stock purchase warrant exercisable at $0.65 per share.
An additional deal followed as soon as Liberty Silver began to trade on the Toronto Stock Exchange December 19, 2011. The Company raised $1,313,750 by selling 2,627,500 Units at $0.50 per Unit; one share of common stock and one common stock purchase warrant exercisable at $0.65 per share.
So, looking back at the dramatic series of mud slinging back and forth from the two Canadian mining companies, the way to play this was to take the offer on the date it was announced, sell those new LBSV stocks on Friday, the last trading session before the new extension deadline which is today, Monday September 10, and buy back into Sennen shares if you love their prospects of mining the Hope Bay Oro project.
If you did that, you took a stock worth 0.11 to you at the time, exchanged it for 0.28 shares of LBSV stock, sold those shares Friday above a buck, and just made yourself roughly an 18 cent profit on 11 cent or less cost basis shares. That’s trading smart.
About LBSV Stock
Liberty Silver Corp. is focused on exploring and developing mineral properties in North America. The company is committed to creating value for its shareholders by advancing its projects using its mitigated risk approach to production, developing new resources on its existing properties, and acquiring new properties with potential to expand their resource base. The Trinity Silver property in Pershing County, Nevada is the company’s flagship project of which Liberty Silver has the right to earn a joint venture interest in from Renaissance Gold Inc. pursuant to the terms of an Earn-In Agreement.
Click here to view the SEC filings for LBSV.
Bottom Line: LBSV has been a very hot penny stock of late with Friday’s volume the largest since March, 2011. The whole deal reminds me of the scene from “Proof of Life” when Meg Ryan and Pamela Reed are trying to count and bag money on the table – “Porque es una mierda.” When the PR deal proves it worked and the deal itself goes south with LBSV stock tanking back to its support level of around 0.60, you can think of one of the closing lines from that movie:
You and me, we open our own shop. I run New York, you run London. We meet in the Caymans once a month to visit our money!
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