Okaaaaay here we go....CMKM Diamonds mired in outstanding muddle
2004-10-01 21:13 ET - Street Wire
Also Street Wire (U-UCAD) US Canadian Minerals Inc
by Lee M. Webb
CMKM Diamonds Inc., a highly touted pink sheet diamond exploration play featuring a funny car dragster as a promotional vehicle, is mired in an apparent muddle over its share structure. Published ratios for two CMKM dividend-in-specie schemes peg the outstanding total at approximately 780 billion shares, but a third dividend-in-specie ratio seems to set the total at an even more staggering 1.56 trillion shares.
Many CMKM shareholders, particularly members of the cult-like following that congregates on an Internet chat site called PalTalk, dismiss any suggestion that the company has anywhere near 780 billion shares outstanding, let alone an outstanding total of more than 1.56 trillion shares.
The outstanding muddle
CMKM is headed by Prince Albert, Sask., native Urban Casavant, a former prison guard and then U-Haul entrepreneur who moved on to become a self-taught prospector and minor stock promoter. Mr. Casavant now makes his home in Las Vegas, Nev., from whence he launched his latest promotion, which once featured another 22 Casavants as shareholders.
The company stopped filing with the U.S. Securities and Exchange Commission (SEC) in July of 2003, so there is little in the way of current information regarding CMKM available from official sources. Among other things, speculation regarding CMKM's share structure has been rampant since the company bowed out of reporting.
A brouhaha erupted in late June when a newly hired transfer agent, Pacific Stock Transfer, publicly pegged the number of outstanding shares at a staggering 400 billion. CMKM immediately dismissed Pacific Stock Transfer, but did not bother provide its own disclosure regarding the number of outstanding shares.
In a series of transactions in July, CMKM acquired shares in three other companies and subsequently announced three dividend-in-specie distributions of those shares. The company acquired 7.5 million shares of OTC Bulletin Board-listed U.S. Canadian Minerals Inc., 40 billion shares of privately owned Casavant International Mining and approximately 95.5 million shares of Juina Mining Corp., which changes hands on the pink sheets.
On Aug. 18, after announcing the dividend-in-specie schemes, CMKM filed an amendment with the Nevada Secretary of State increasing its authorized share total to 800 billion.
U.S. securities regulations require that information regarding dividend distributions, including the dividend ratios, be provided to the National Association of Securities Dealers. That information is now in the public domain, courtesy of the OTC. However, the muddle over the number of outstanding shares remains.
According to revised information regarding the distribution of 7.5 million shares of U.S. Canadian Minerals now payable on Oct. 6, shareholders will receive 0.00000962 of a restricted share of U.S. Canadian for each share of CMKM. A simple calculation using that ratio sets the number of outstanding CMKM shares at a staggering 779.6 billion.
A calculation based on published information regarding the dividend distribution of 95.5 million shares of Juina Mining reportedly payable on Nov. 15 yields a similar figure. Shareholders will receive 0.00012267 of a restricted share of Juina Mining for each share of CMKM held, setting CMKM's outstanding total at a comparably lofty 778.5 billion.
However, a calculation involving the dividend-in-specie distribution of shares of Casavant International Mining reportedly payable on Oct. 18 and falling in between the two other dividend-in-specie distributions yields an outstanding figure that is approximately double the amount produced by the other two calculations.
According to the published information regarding the dividend distribution of Casavant International Mining shares, shareholders will receive 0.0256 of a restricted share of Casavant International Mining for each CMKM share held. Assuming the full 40 billion shares of Casavant International Mining are distributed, that calculation pegs CMKM's outstanding total at more than 1.56 trillion shares.
While the distribution of only half of the 40 billion shares held by CMKM or even a share consolidation of Casavant International Mining on the basis of one new share for each two old shares might account for the peculiar discrepancy in the calculations, public information regarding privately owned Casavant International Mining is even sketchier than the public information available for CMKM.
Stockwatch contacted the Nevada Secretary of State for what little information is available regarding Casavant International Mining, formally headed up by CMKM's chief executive officer Mr. Casavant and now at least nominally led by Ron Casavant.
No information was provided that might explain the discrepancy in the calculations. Adding to the general muddle surrounding CMKM, however, the Nevada Secretary of State reported that as of Sept. 28 Casavant International Mining was only authorized to issue a modest 25 million shares.
Evidently some paper work will have to be completed before the Oct. 18 dividend-in-specie distribution of shares of Casavant International Mining.
In the meantime, many Internet followers of CMKM simply do not believe the company has issued approximately 780 billion shares or more.
A favourite mantra among the CMKM PalTalk faithful is, "Don't believe anything unless you see it in a PR." Melvin O'Neil, the company's investor relations spokesman, has intoned the same mantra during his frequent participation in the PalTalk chats.
Since CMKM has not disclosed either the number of outstanding shares or even the dividend-in-specie ratios in press releases, the faithful profess not to believe the officially published ratios or the staggering number of outstanding shares revealed by those ratios.
Of course, that particular mantra is only selectively invoked. It does not seem to apply, for example, to fantasies about a massive short position responsible for depressing the company's share price, an "intrinsic valuation" of a trillion dollars or higher, unsupported claims about the largest diamond find in the world or many other wild speculations embraced by the CMKM faithful.
Whether by design or chance, CMKM has managed to attract a remarkably large number of naive, excitable, imaginative and intensely loyal shareholders, many of whom have brought relatives, friends, co-workers and other acquaintances into the stock. Indeed, CMKM seems to have tapped into a promoter's dream, a growing, proselytizing vanguard of believers zealously searching out potential converts for the promotion.
The promotion
CMKM's promotion turns on the company's various interests in a number of Saskatchewan mining claims, particularly some property in the vicinity of Fort a la Corne, where there are two advanced diamond exploration projects entirely unrelated to CMKM. The company's own modest drilling efforts in the Fort a la Corne area have not produced much in the way of toutable results.
Indeed, as disclosed on June 15 by CMKM's Canadian joint venture partners, Consolidated Pine Channel Gold Corp. and United Carina Resources Corp., only one of 12 samples from a five-hole drilling program on the previously drilled Smeaton property yielded any microdiamonds, two tiny stones with a combined weight of 0.000005 carat.
While the less than impressive drilling results had some negative impact on CMKM's subpenny stock price, they did not seem to have much of an impact at all on the enthusiasm of many of the company's devoted followers. Indeed, a remarkably large number of the CMKM acolytes believe that the company has made a massive diamond discovery, but is keeping the find secret until it is ready to reveal a so-called "master plan."
The touts
Promotion is an important part of any mining play, and paid touts are a rather common feature of mining promotions. CMKM has benefited from both compensated and reportedly uncompensated touts.
Earlier this year, an outfit based in Boca Raton, Fla., distributed a CMKM tout consisting of an article lifted from the Prince Albert Daily Herald, 11 factoids widely available on the Internet regarding diamond exploration in Saskatchewan and a two-paragraph closing blatantly plagiarized from an Oct. 21, 2003, Stockwatch article. The real investment pitch was none too subtly inserted into the material plagiarized from the Stockwatch article.
The Boca Raton tout outfit, which seems to have since vanished into cyberspace, received one billion free trading shares of CMKM for its efforts. According to the disclaimer that no longer appears in cached versions of the tout, PartTime Management Inc. anted up the one billion CMKM shares.
Interestingly, a search of Nevada-registered corporations reveals a company named Part Time Management Inc., with "Part" and "Time" not elided. The registered agent for Part Time Management is David Desormeau, who has a number of connections to Mr. Casavant. Part Time Management's officers are identified as James Kinney and Ginger Gutierrez. Mr. Kinney and Ms. Gutierrez previously served as investor relations representatives for CMKM.
Mr. Casavant's pink sheet promotion has more recently piggybacked on a paid tout for an associated company that trades on the OTC Bulletin Board, U.S. Canadian Minerals.
On July 18, OTCPro.com published a tout for U.S. Canadian Minerals that led off with two paragraphs primarily devoted to CMKM and followed up with several more mentions of the company and eight bulleted factoids about diamond mining in Saskatchewan.
"OTCP has been compensated 50,000 free trading shares of UCAD (U.S. Canadian Minerals) by IB2000, a non-affiliated third party," the disclaimer at the end of the tout notes. At the time the tout was published, U.S. Canadian Minerals was changing hands for $4.50 per share and within seven trading days jumped to $7.35 per share. (All amounts are in U.S. dollars.)
Interestingly, a search of Nevada-registered corporations reveals a company named IB 2000.com., with "IB" and "2000" not elided. The resident agent and only officer of IB 2000 is identified as John E. Dhonau, reportedly a key figure behind CMKM, U.S. Canadian Minerals and associated companies.
CMKM has perhaps received even more promotional mileage from reportedly uncompensated touts who have flocked to the play.
Harold (Hal) Engel, who does his compensated and uncompensated promoting under the banner of ***********.com, supplemented by thousands of Internet posts, was an early cheerleader and remains one of the most prolific CMKM touts.
Mr. Engel, who ran afoul of U.S. regulators in connection with some compensated touting three years ago, reportedly holds approximately 940 million shares of CMKM, but has not received compensation for his yeoman's work spinning out fantastic tales about the company's prospects.
The Green Baron, headed by Ed Miller, is a relative newcomer to the stable of CMKM touts and has provided free tout services for both CMKM and U.S. Canadian Minerals. He has also touted CMKM as a guest on a radio program called Prosperity for God's People.
Mr. Miller apparently holds a position in CMKM, as does his father upon his recommendation, but the extent of those holdings has not been disclosed. The Green Baron has been beating the drum for CMKM as "the stock play of a lifetime."
Pastor Dewayne Reeves, chief executive officer of Christian Traders and radio host of Prosperity for God's People, has also been spreading the good word about CMKM. Like *********** and the Green Baron, Christian Traders holds shares of CMKM, but the good pastor disclaims receiving any compensation for touting the stock.
In addition to some of the more established touts, a number of bullish CMKM gurus have staked out positions on several Internet message boards where fantastic tales are served up to like-minded CMKM supporters.
The most bullish, imaginative and faithful group of CMKM Internet followers congregate daily on PalTalk in a virtual room called Sterling's New Classroom, named after one of the most popular CMKM Internet touts, Sterling Collins.
The PalTalk room, hosted at a cost of approximately $600 per month, offers text, audio and even video capabilities. The room has a capacity of 500 participants and on some occasions when the room's namesake appears to address the followers an overflow room has been opened to accommodate a few more hundred people.
The PalTalk following
The hundreds of CMKM fans who congregate on PalTalk under the watchful eyes of a few bullish administrators charged with maintaining some order in the room bristle at any suggestion that they are members of a cult-like following. Indeed, many claim that they welcome differences of opinion and open discussion.
In fact, it should be acknowledged that there has been a great deal of open discussion regarding different opinions among the PalTalk CMKM followers. For example, different opinions regarding the relative significance to this nascent mining giant of diamonds, gold, silver, uranium, oil, potash, zinc and so on have been entertained and roundly discussed.
Opinions regarding the "intrinsic value" of CMKM, imagined by many to be upwards of a trillion dollars, have likewise been the subject of much discussion.
Different opinions regarding the size of the imagined massive short position have also been discussed at length, with estimates ranging from hundreds of billions of shares to a trillion or more.
While these and other matters are the subject of extensive discussion and at least modest differences of opinion, there are very clear and narrow limits with respect to the extent of acceptable differences.
While wild fantasies regarding a wide spectrum of mineral resources, a multitrillion-dollar valuation and a massive short position are accepted and embraced, anyone with the temerity to argue that CMKM is far from establishing any mineral reserves, or that its properties are little more than "moose pasture" at this point, or that the company is grossly overvalued with its current market capitalization of approximately $235-million, or that there is no evidence at all of a short position would quickly receive a drubbing and almost undoubtedly be bounced or even banned from the room.
Among PalTalk's CMKM following, where "believe" is one of the most frequently used words, very little criticism of the favoured fantasies is tolerated and open skepticism is simply not on.
The influence of the cult-like PalTalk following extends beyond the virtual gathering of the CMKM faithful. Indeed, many members of the group have been active with the real-world CMKM promotion involving the sponsorship of a funny car dragster.
The promotional vehicle
Prior to dropping its SEC filing obligations, CMKM reportedly intended to acquire a time-share interest in an "ancient Chinese jade collection" purportedly appraised at $50-million.
"The Company believes that the jade collection will provide it with both a $50,000,000 asset base for reporting purposes and it will also serve as the centerpiece for a traveling jade museum show in venues throughout North America, including Las Vegas, NV (where major hotels and casinos have offered world master artwork collections, treasuries of the Russian Czars, treasurers from the Titanic, and motorcycle collections as revenue generating tourist attractions)," CMKM reported on Feb. 3, 2003.
Apparently CMKM planned to use the ancient Chinese jade collection as a promotional tool, but that plan was scrapped.
Earlier this year, CMKM unveiled a new plan and a new promotional vehicle: a funny car dragster. At first, even some of the company's faithful followers arched an eyebrow over that news, but CMKM has garnered a remarkable amount of promotional mileage from the funny car.
While gaudily painted cars thundering down a quarter-mile track in less than five deafening seconds before deploying a parachute might not be as highbrow as, say, a travelling ancient Chinese jade collection, CMKM may have targeted an appropriate market.
In any event, members of the PalTalk following who have gone to the races around the U.S. to rub shoulders with the executives and key players in CMKM and associated companies, meet fellow shareholders and file the latest "race news," not to mention heavily embellished rumours, seemingly invariably return reaffirmed in their belief in the company and quite enthused with the racy promotion.
In addition to the beer and burgers, the pep talks and the general camaraderie, shareholders attending the races share in promoting the company. Promotional literature, CMKM poker chips and T-shirts emblazoned with "Got CMKX?" are stuffed into bags and reportedly given away by the thousands.
While some shareholders have openly described their promotional efforts as "working the crowd," others simply report that giving away T-shirts and other promotional items is just a great way to meet people and chat about the company.
Just how many of the funny car crowd regaled with tales of a subpenny pink sheet stock with an "intrinsic valuation" of a trillion dollars or more, a convoluted "master plan," a massive short position soon to be remedied by a price-spiking short squeeze or other PalTalk "beliefs" have been sufficiently wowed to plop down some money on "the stock play of a lifetime" is an open question.
In any event, the PalTalk consensus seems to be that the funny car is a great promotional vehicle and that every shareholder should make an effort to attend at least one of the races.
As it happens, many shareholders are at least tentatively planning to attend a funny car race and shareholder appreciation party hosted by CMKM and U.S. Canadian Minerals in Las Vegas at the end of October. For many, however, those plans are contingent upon being able to free up some cash by selling some shares of CMKM at a profit before the end of the month.
Perhaps not surprisingly, a widely held belief among the PalTalk faithful is that enough of the so-called master plan will be revealed well before the end of October to drive CMKM's share price up so that they will be able to attend the Las Vegas party.
In any case, the outstanding muddle should be resolved, at least for most people, by next week, following the distribution of the dividend of restricted shares of U.S. Canadian Minerals payable on Oct. 6.
Meanwhile, there has been some unusual trading activity in U.S. Canadian Minerals. On Oct. 1, a record 963,234 shares changed hands and the stock gained 65 cents to close at $5.40.
CMKM, however, has been losing traction and struggling to keep from falling further into the subpenny basement. Approximately 6.1 billion shares of CMKM traded during the final session of the week and the stock ended the day at three-100ths of a penny.
The saga will continue.
Comments regarding this article may be sent to lwebb@stockwatch.com.
(More information regarding CMKM Diamonds and associated companies can be found in Stockwatch articles dated Oct. 21, 2003; June 22; and Sept. 16 and 24, 2004.)
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