Saturday, January 16, 2010

SFEG - Fortune Favors the Brave / Santa Fe Gold Corp and the Day the Earth Stood Still

(SFEG)(GG)(NEM)(HL)(RODM)

"Audaces fortuna iuvat"
Fortune Favors the Brave -
Virgil


Shareholder's of Santa Fe Gold Corp. saw some serious market cap vanish right before their eyes today. There seems to be a lot of misinformation and speculation as to what really happened and why. Those who toe the "Party Line" assure you that the market simply "Over-Reacted". Now don't get me wrong, they mean well, but that's Crap. Without waxing eloquent I'm going to give it to you straight. 

Before we get rolling let's qualify my right to speak on the matter. 
  • I've been a shareholder since 1999. 
  • 90% of my long term portfolio is in this basket.
  • I've paid as much as $1.43 and as little as .10 to build my position.
Here's what happened - 

Here's what happened next -
Rodman & Renshaw did what their clients pay them to do, make them money while protecting their investments. We (SFEG) sold them shares worth $1.69 on the open market (stop laughing) for $1.30. What would you do if you were in their shoes? You would take that puppy right down to break even. Day one, out of the gate, their clients make money. "But aren't they afraid because now the stock is only worth $1.23 you ask?"  Nope....... They know full well what this stock is really worth. Do you think their few clients who participated in this PIPE deal are their only clients? Hardly! While Santa Fe shareholders were running in circles today shaking their puny little fists at God and cursing Pierce, did they ever stop to wonder who was on the buy side of those transactions? Keep in mind, the elite handful of R&R clients bought at $1.30, so everything below that was downdraft, and as sad, ugly and mean spirited as it may seem, some Ma & Pa investors got freaked out by the action and sold their shares. That's Wall Street baby. Let me say it again in quotes, "That's Wall Street Baby!"


So let me pretend for a moment I'm R&R. I find a company trading at $1.69 (stop laughing) and I swing a deal that buys me a boatload of shares for $1.30. Only a choice few of my clients can get in, after all, we're only talking $10m here. So what do I do with my "really special" clients who can't get in on the initial offering because the company will only sell 7.5m shares? Easy, as I make bank for the first group on the way down, I buy the second group in on the way up, which makes everybody whole including the original long term Santa Fe shareholders.


"Oh my God! Is that legal?"

Not only is it legal my friend, it's good business! Now keep in mind I'm sharing with you what I believe to be truth. Not Party Line, just Bottom Line. Am I still long Santa Fe? Am I still bullish Santa Fe? Would I accumulate more below $1 if we see it on Tuesday? 
Yes / Yes / (heck) Yes!


So why am I so convinced this is a good deal and just who the heck is R&R? Great questions, so glad you asked.


#1) It's a good deal because Pierce did it. If it were not a good deal, he would have passed.


#2) Rodman has been ranked the #1 Placement Agent in terms of the aggregate number of PIPE and RD financing transactions completed every year since 2005 thru 2009.

Now for this article to have any real impact, you have to understand we have a Win-Win situation on our hands.


Today was an obvious win for the R&R clients, but the bigger picture is beyond huge for the Santa Fe Shareholders with long term vision. R&R clients who did not get in on the "Sweet Deal" will be the very ones bidding it back up. Why? Because R&R recognizes how undervalued SFEG really is and they will be putting one group in as the first group peels out.


"Oh my God! Is that legal?"  
"That's Wall Street Baby!"

If you've been a shareholder for any length of time, you've heard - 
"We're under the radar"
"Just wait till Wall Street finds out"


Guess what, it may have cost us 30% in market cap but we are no longer a secret. 


Perhaps you never heard of R&R, many haven't. Well, the shareholders of the companies they've done deals with sure know who they are. Let me give you one example before I close.


Hecla Announces $21 Million Equity Transaction

December 11, 2008 Filed Under: Mining Investment, Mining Stocks  
Hecla Mining Company announced it has entered into a definitive agreement to sell securities to selected institutional investors for aggregate gross proceeds of $21 million. The offering will be made pursuant to Hecla’s existing Form S-3 shelf registration statement and base prospectus filed with the Securities and Exchange Commission (SEC). The offering is expected to close no later than December 15, 2008, subject to the satisfaction of customary closing conditions.
The securities in the sale include approximately 10.24 million shares of Hecla’s common stock, priced at $2.05 per share, along with Series 1 warrants to purchase up to approximately 7.68 million shares of Hecla common stock at an exercise price of $2.45 per share, expiring in five years; and Series 2 warrants to purchase up to 7.68 million shares of Hecla common stock at an exercise price of $2.35 per share, expiring on February 28, 2009.
Rodman & Renshaw, LLC, a wholly owned subsidiary of Rodman & Renshaw Capital Group, Inc., acted as the exclusive placement agent for the offering.

So what happened after that announcement? Hecla tanked! It fell from $2.38 to $1.71 on the "Good News". Where is it today? 













Could that happen to Santa Fe? All things are possible..............

Amen? 

(ps. If I didn't believe Pierce needed the money today for a very good reason, I'd be as pissed as a drunken sailor) 


Technical Perspective 













On a weekly chart we readily find 3 points of support and potential support. It is quite possible that support was found On Friday at $1.16. That price represented the 50 Period SMA and dual Fib confluence and is exhibited on the chart as A. If that support is to hold we should see price move higher Tuesday after any resting market orders to sell are filled on the open.

Should $1.16 be violated have a look at B. There we find the 200 Period SMA, the bottom of the price channel and another Fib confluence. Due to the time decay factor we are looking at a price somewhere between .92 and $1.00.

Finally we have C which is dual Fib confluence between .80 and .82 and would represent a 50% retracement from recent highs.

Because of the fundamental nature of what has, and is yet to transpire, it will be quite interesting to see how well technical analysis serves us in the short term. While these price levels are not predictions, should we see a break of $1.16, resting buy orders could be placed at or near the above mentioned prices for investors seeking entry.

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