Friday, May 4, 2012

MINERCO: Chiligatoro and Sayab Updates

MINERCO Resources, Inc. is one of those strange energy deals that we've written about previously.  It is a company lacking financial resources, which hired a new CEO in 2010 and switched corporate directions.  It went from being a company that acquires oil and gas leases, to one that pursues the development of renewable energy sources in Latin America.  It has "financed" the purchase of two hydro-electric projects and one wind farm project from Honduran energy companies by issuing stock, but none of these projects is anything more that a bunch of paper at this point.  Its stock trades on the OTC market for less than $0.01 a share today.

Its flagship potential project is the Chiligatoro Hydro-Electric project, a power generation project that will take water out of a river, let it drop several hundred feet in elevation running inside pipes to feed turbines, then reintroduce the water back into the river.  In addition to the income from the power, they expect to receive carbon offset credits for the facility, and further credits for reforestation.

There's a catch looming over them.  Their purchase agreement over the rights to the project from ROTA Inversiones, S.A. of Honduras calls for them to raise $12 million to invest in the project by May 27, 2012, or the rights to the project revert to ROTA.  They haven't raised $12 million; they haven't raised $1.  Instead they've spent money to issue a series of optimistic press releases as the deadline approaches.

On April 24 they issued a press release stating that they were simultaneously applying for the project power purchase agreement with ENEE, the Honduran National Electrical company, and soliciting bids for the final Design.  They still need approval from the Honduran Congress as well, before any construction can start, and of course, financing.

Only the bit about soliciting bids is actual new news.  The "applying for the Power Purchase Agreement" was already a statement in their March 31, 2012 10Q filing with the SEC, which says "Final approval and start of construction is anticipated by early 2012."  Oops.  That's not going to happen.

MINERCO uses PR Newswire to issue its press releases.  Anyone can use their service, if they can pay.  According to this column, MINERCO paid $2,500 for the April 24 promotional campaign.  The columnist speculated this release was to help support their falling stock price.

Then on May 1 MINERCO announced they are negotiating with an unnamed equity partner who might acquire 25-60% of the Chilligatoro project, with an investment of $3 million to $7.2 million. Scott Vanis, MINERCO CEO, said:
We are very excited about the potential of obtaining an equity partner in our Chiligatoro project. This would lower our capital expenditure outlay and expedite the construction of all 3 phases of Chiligatoro. This also opens up the possibility of partnering on future projects as well.

Here's the thing.  Real companies only announce done deals, not deals that might be, because they might not be. If it is far enough along to announce, its also far enough along to name the partner. Everything else is fiction.

Cui bono?

MINERCO had revealed in the March 10Q filing that they are in negotiations with ROTA Inversiones for a 12 month extension of the May 27 deadline to raise the capital.  Was the May 1 press release meant to help convince ROTA Inversiones to sign that extension? Without an extension, MINERCO will lose the Chiligatoro project.

But this is only part of MINERCO's headaches.  In theory, on  June 18, 2012, they need to have invested a further $10 million in the Sayab Wind Project which they purchased from Energia Renovable Hondureña, S.A.  However, because the project still lacks environmental approval from SERNA, the deal has not been consummated, and no shares of MINERCO stock have been conveyed to Energia Renovable Hondureña, SA according to the latest 10Q filing.  They state there that they expect this approval, and the transfer of stock and title to the project, to happen in the second quarter of this year.  At that point the clock will start ticking for them to raise the $10 million investment in that project.

The company lost $552,844 in the 3 months ending January 31, 2012 and had $115 in cash and claimed a further  $715,615 in assets. 


RNS said...

On May 10 MINERCO issued a press release claiming they were in negotiations to sell the Sayab and Iscan projects in Honduras to focus on Chiligatoro, and "in the traditional energy, such as oil and gas."

No real business makes this kind of content free announcement.

The "traditional energy market" is what MINERCO's focus was before V. Scott Vanis took over. This sounds like an acknowledgement that their Honduras strategy isn't working. The Sayab project is held up awaiting SERNA approval, and the Iscan project is not moving forward either.

The announcement does not seem to be containing their downward trending stock price, which currently trades for $0.0055 - $0.0065 (eg, 55/100 of a cent).

Unknown said...

And to think I invested in this company a couple months ago. Luckily it was only $100. It's all down the drain now. Your blogs are great, by the way.