Silver Stream Mining (OTCMKTS:AGSM) Hesitant Under Record-Breaking Volume

AGSM.gifSilver Stream Mining (OTCMKTS:AGSM) has been slowly inching its way up the list of the most heavily traded penny stocks, but although the volumes are growing, the performance fails to impress. On Friday, the ticker opened the session at $0.71 (a small gap up) an remained there for the better part of the day. At one point, it slipped and when the closing bell rang, it was standing at $0.69 which is a tenth of a percent under its previous value. Hardly the most eventful session, but AGSM managed to rack up a dollar volume of around $490 thousand which means that a lot of money is on the line. Naturally enough, we decided to check on the company and see what’s what.

A year and a half ago, AGSM was called W.S. Industries. It was a shell and its business plan involved offering wine storage and cellaring services. The plan didn’t quite work out and in May 2013, they completed the acquisition of a private mining company called Rio Plata Exploration Inc.

Back then, Rio Plata had a couple of option agreements (one of which is in default) for the acquisition of interest in various mining properties and if the press releases and 8-K’s are anything to go by, they are expanding their portfolio as we speak.

The problem is, if they are to close all the deals, they’ll need to make some payments and the latest 10-Q shows that at the end of last year, capital was in short supply. Here’s a summary of all the figures:

  • cash: $14 thousand
  • current assets: $25 thousand
  • current liabilities: $2.4 million
  • no revenue since inception
  • quarterly net loss: $1.7 million

As you can see, these are not really the financials associated with a solid mining company and they’re not good enough to justify the $25 million market cap. Still, we should note that back in March, AGSM managed to raise some cash.

A private placement was completed and the company received around $570 thousand which might not be much, but it is a start. Unfortunately, the terms of the deal are not that favorable for the regular investor. A total of 5,967,500 units were sold at $0.10 a piece. Each unit consists of one common share and half a warrant exercisable at $0.25. As you can see, the discounts are quite tasty and the people who took part in the placement might be tempted to sell their holdings and make a profit. While we’re on the subject of discounts, we should also note that a lot of debt has been converted into common stock over the last year or so.

AGSM_logo.pngThe 10-Q tells us that when they completed the acquisition of Rio Plata, AGSM converted $568 thousand worth of notes into 5 million shares of common stock (the conversion rate comes in at $0.11 per share). At the beginning of April, they turned some more debt into investment units such as the ones used in the private placement and once again the units were valued at $0.10 a piece.

On the one hand, the retirement of notes should strengthen the horrific balance sheet a little bit, but on the other, if the converted shares hit the open market, the ticker could be in for a crash.

And we can’t imagine that investors will be particularly happy with this. They also won’t be impressed by the company headquarters which appears to be located in a virtual office also used by Sierra Resource Group Inc (OTCMKTS:SIRG), Bakken Energy Corp (OTCMKTS:ORFG), and Xumanii Internation (OTCMKTS:XUII).

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