Loading ...Playing Mine Games, Tanzanian Royalty Exploration Is About To Fold
Nov. 30, 2014 4:15 PM ET | About: Tanzanian Royalty Exploration Corp. (TRX)
Disclosure: The author is short TRX. (More…)
Tanzanian Royalty Exploration Corporation has only C$1.8 million of cash remaining on the balance sheet.
The company missed the target date for commissioning the Buckreef Mine, triggering a penalty payment to the JV partner.
TRX did not make the required penalty payment, and may be in default of its obligations under the Joint Venture agreement governing the company’s primary asset.
Ernst & Young LLP highlights the existence of a material uncertainty that raises substantial doubt as to TRX’s ability to continue as a going concern.
In previous articles, I highlighted the pitfalls of investing in Tanzanian Royalty Exploration Corporation (NYSEMKT:TRX). Since I wrote my first article, the stock price has declined from $6.90 to $1.15. In July of 2011, the company raised US$27.9 million. As of August 31, 2014, it had just C$1.8 million left and very little to show for it. Three and a half years later, the company is on the verge of extinction.
Management has a history of failing to deliver results. Their efforts to develop a royalty model were unsuccessful. The latest failure is the Buckreef gold mine redevelopment project. On October 25, 2011, TRX concluded a joint venture agreement with Stamico, the State Mining Corporation of Tanzania, to redevelop the Buckreef gold mine. The agreement contemplated that TRX would arrange the financing and bring the mine into production within 30 months (the target date) of the effective date. The agreement allows TRX to extend the target date for commissioning the mine by paying Stamico $500,000. Over 30 months later, CEO Jim Sinclair and his management team haven’t commissioned the mine, nor have they made the payment to extend the target date. They are playing a dangerous game with the company’s primary asset.