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Stellar Resources - is all that glisters gold?

By Doc Holiday | Friday 30 January 2015


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


Stellar Resources (STG) has been yet another company connected to serial entrepreneur David Lenigas which has been a disaster for its long-term shareholders. Sure, insiders and the odd lucky trading punter have made cash on this stock, but for the overwhelming majority of Stellar’s small army of shareholders this has been a shockingly poor investment.

The company rebranded with an initial fund raise at 2.25p, yet now trades at 0.35p - a near 80% decline. Along the way, various executives and directors connected to Stellar have made wild and outlandish claims about the potential on offer, with apparently very little to back this up. I’ve been warning investors for a long time about Stellar Resources and today I present a series of documents, which shine light on the goings on. The evidence I have uncovered calls into question much about what has been said about the company’s so-called gold mining project at the Clogau and Gwynfynydd mines.

After months of painstaking research, I am now able to deliver a series of startling revelations, which will shock even the strongest supporters of Stellar Resources. This is a tale of aggressive stock promotion, officially sanctioned  exaggeration, broken promises and money that seems to have disappeared.

And to think it all started so brightly…

In the beginning, in December 2011, Stellar Resources acquired 49% of Gold Mines of Wales Ltd (GMOW), which was said to hold a license to explore 120 square kilometres of the famous Dolgellau Gold Belt in North Wales.. Stellar  Resources bought this stake from a company called Victoria Gold Ltd.

Remember that name as in my view this marks the start of the stock promotion.

As you’d expect with this sort of deal, Stellar Resources’ acquisition of its stake in Gold Mines of Wales was accompanied by a flurry of excited buzz words, designed to encourage a passionate response from British private investors.

What could be more romantic than to offer shareholders the chance to buy into a gold mining operation, which it was claimed had a direct connection to the Welsh gold used to create the jewellery of the Royal Family?!

Stellar’s website is extremely keen to point out that between 1862 and 1999, 200,000 ounces of gold were mined at the historical Clogau and Gwynfynydd mines. Of course, since then gold mining in Wales has become something of a  dying art, even if there is little doubt that gold still remains in the Dolgellau Gold Belt.

However, the mere presence of gold is not enough to guarantee shareholders a return. That gold has to exist in sufficient quantity and concentration to allow profitable extraction. This is the only way that a gold mining company can  deliver a tangible, fundamental return.

So, with this little insight fresh in our minds, let us return to those much touted prospects of Stellar Resources.

In the very same month that Stellar bought its stake in GMOW, a subsidiary of GMOW purchased the Clogau gold mine (or at least part of it), by way of a mortgage for £85,000.

 
 
 

Three years later and this mortgage charge (the £85,000 loan) still shows as live.


This is particularly odd as the ex-Managing Director of Stellar stated that this sum had been paid!

A simple search of Companies House filings shows that no MG02 has been filed.  An MG02 is the formal notification form to Companies House, which companies use to demonstrate a charge has been partially or fully paid off, as described in the official guidance;

“Whilst the company does not need to inform Companies House that it has fully or partly paid off a charge. However, it is in the company’s own interests that potential investors and lenders are aware that it has paid off all or part of the  debt. You should deliver Form MG02 to Companies House as notification that the company has partly or fully paid off a charge”

With such a glaring gap in the official record of the purchaser ‘s public files, perhaps the seller of Clogau’s paperwork is in better order. Not a bit of it!

The seller of Clogau was Mr Gethin Williams. He should have sent to the UK Land Registry a form DS1/2, to have the Mortgage Charge removed from the Title Deeds. Guess what…

…This hasn’t been done either!

 
 
 

This really leaves shareholders in Stellar with only one conclusion. GMOW’s mortgage on Clogau has not been paid.

At this point I hand over to none other than Mr Lenigas, who gave the following reply when I questioned him about this.

“Gethin Williams has been paid in full a total of £85,000, there is no reason why any such ‘unsatisfied mortgage’ payment should exist. I have just had it 100% confirmed that Gethin Williams has been paid £80,000 for the land at Llechfraith (Clogau lower Adit) and a further  £5,000 was paid for lifetime access to explore across any land that  Gethin still owns.

I am a director of GMOW Jersey. Surely that is very clear. I don't see what needs to be cleared up. GMOW operations is UK, but I am not on that board.”

 
 
 
 
 

Oh really David, so I guess that both GMOW and Mr Williams have simply forgotten to file the paperwork confirming your claim.

Then we come to the Gwynfynydd mine that Stellar still claims is part of its “scope of business”.

As it turns out the Gwynfynydd mine was purchased 18 months ago by the colour characters, “The Roberts” (see below). Bill Roberts and his son have a long-standing association with the gold business, as the custodians and owners of Clogau Gold of Wales Ltd. Clogau Gold of Wales is renowned for being the leading creator of gold jewellery, using Welsh gold.

This company is proud of its long tradition of creating unique and hand crafted jewellery. Needless to say it makes perfect sense that such a business would be a perfect fit with a Welsh gold mine, but this little fact becomes quite a thorn in the side of Stellar.

As of writing today, Stellar Resources still promotes the Gwynfynydd mine as a mine on its roster. Way back in 2012, Stellar generated a lot of excitement with its promise to reopen the Gwynfynydd and Clogau gold mines.

Fast forward to today and it seems the bare minimum work has been expended meeting this goal in establishing a functional mining operation or even classifying a resource/reserve report.

In short Stellar and GMOW have drawn a blank, despite all the hype on occasion stirred up.

Title deed for Gwynfynydd mine below: Purchase by Clogau Gold of Wales Ltd. (2013) Mr Roberts Gold Jewelry company.


 
 
 
 
 
 
 
 
 

Given that Gwynfynydd seems to be owned by Clogau Gold of Wales and not by GMOW nor Stellar Resources, should we infer from this that Stellar has changed the scope of its work programme? If it has, why has it not informed the market of this? At the very least, surely Stellar or GMOW must have reached a deal with Clogau Gold of Wales Ltd.?

Something isn’t right here and this negative impression was reinforced by my recent visit to both sites and enquiries I made locally. As I reported previously, Raymond Roberts is the site manager at the Gwynfynydd mine, but no longer at the Clogau mine, for the GMOW/Stellar partnership. This strongly suggests the division that exists between the operations at Gwynfynydd and those at Clogau, so why has none of this been reported to the market by Stellar?

Below are some images of the Gwynfynydd mine;

 
 
 
And below is a picture taken from 2011; 
 
 
 

Once again, I sought answers from Mr Lenigas about the apparent discrepancies between what has been reported and what can be proven via documentary evidence.

‘’There are many targets to prioritise and I have no idea when work at Gwynfrynydd is scheduled for this year.

If Ray or Bill Roberts do anything to the workings, I'm sure they will be in very big trouble with the authorities. It is cemented up for a reason.

On the gold front, the only people with any rights to any of the gold under the Crown Lease is GMOW. Any infringement of this will be dealt with by the authorities in a very serious manner, as it would be deemed as gold theft.

Our priorities this year are, as per the RNS and the SRK report. A lot of this work will focus on identifying new resource potential areas and trying to get some numbers around this with SRK.’’

At this point it is worth referring to the Crown Estates website:

‘’We may grant an exclusive option to take a lease of Mines Royal within a specified area. That will not however confer automatic rights to access the relevant mineral deposits. Rights of access will need to be separately negotiated with the surface owner of the land.’’

So, Mr Lenigas was extremely eager to point out the trouble that might face Mr Bill Roberts if he attempted to start gold extraction at Gwynfynydd, but by the same token just imagine the extent to which Mr Roberts has GMOW, and by extension Stellar Resources, by the balls (commercially speaking!). In the highly unlikely event that the GMOW/Stellar partnership ever gets to the point of attempting anything serious commercially at Gwynfynydd, it would need to negotiate “rights of access” with Mr Roberts, the landowner.

Therefore, I suggest that the opening up, or even likelihood of opening up any mining under the exclusive option GMOW claims to hold has to be unlikely.

The whole mechanics of the associated companies is grossly misleading to the investment community, but to clarify commercial mining relies massively on the infrastructure above ground including the mine entrance, roads, utility services (water, power, drains), buildings for processing etc.

From 2013, Stellar Resources quietly stopped referring to Gwynfynydd in its announcements. Promoters of the stock claim this is because its other projects offered more exciting opportunities, but the reality is this probably had far more to do with Mr Roberts’ and purchase, as shown in the title deed above.

But let us not forget the ramp of all ramps in 2011.

The joining in holy matrimony of the Duke and Duchess of Cambridge (Wills & Kate, to you and me) in April 2011 presented an opportunity for Stellar to ride on the coat tails of the Royal Wedding and its association with Welsh gold.

Take a look at this link and decide for yourself how defensible the extremely optimistic claims in the article were - http://www.bbc.co.uk/news/uk-wales-north-west-wales-17756325

The headline says it all;

“Goldmine in Dogellau, Gwynedd, could be worth £125m”

£125m….

By 2014 and the market was decidedly weary of Stellar’s miserable failure to develop its Welsh gold projects and realise this much hyped £125m valuation.

To try and stimulate interest in the flagging project, and by extension Stellar’s stock, the company reported the purchase of a gold processing plant on February 25th. Stellar claimed that this would be on British shores and delivered to the mine within 8 weeks.

16 weeks later and there was still no sign of this gold processing plant and Stellar made a highly irregular declaration on June 25th. It said “Stellar purchase the gold processing plant”. This begged an obvious question.

Why would the non-operator of a project directly purchase a gold processing plant, for a mine in which it is only invested in as a non-operator?

As ever, I dropped Mr Lenigas a line to hear his version of events;

‘’GMOW owns the plant, STG paid for it as part of its 49% contributions to the 2014 budget ‘’

 
 
 

So which is it then Stellar?

49% or the whole shebang?

But when has factual accuracy ever really been a concern of Stellar Resources’?

Since 2012, through the mainstream media and financial press, Stellar has given multiple interviews, heavily promoting fantastical valuations for the potential gold in the Dolgellau Gold Belt. Take this as an example;

GMOW managing director Ed McDermott says 500,000 ounces could be worth up to $200m (£125m).

"There could be another Clogau. If that was the case, we could be looking at
significant gold production," he added.

"This is an independent statement from a company trusted by the Stock Exchange
to give a true and fair account."

This wildly optimistic claim is very difficult to defend. After three years, Stellar has largely failed operationally. It has not delivered a reserve/resource report, which could be cited as a credible source to substantiate such exaggerated claims, and has instead preferred to cherry pick select bits of data in a series of ifs, buts and maybes.

An independent mining expert has confirmed to me “a resource report is paramount to ever truly developing or financing the gold mine”. This is consistent with the Dominey Report.

Rather than follow this industry accepted protocol, Stellar has instead resorted to the poor man’s testing of grab samples from known historical gold recovery locations. It collected grab samples from beneath the stopes. It has sent these grab samples (in 500g weight bags), which are nothing more than technical sweeping up of deads and tailings (essentially the geological terms for the dregs by-product from prior mining activity), sent off to Ireland for “interpretation”.

The image below illustrates where samples might be collected from ground
beneath the stopes;

 
 
 

Stellar’s own Snowdon Geologist clearly states that grab samples are ineffective from mines such as those in Stellar’s Welsh “portfolio”, for Grade Control. That is of course unless the plan is just to process mining waste!!!

Is that the plan Stellar?!

 
 
 
 

More recently, the GMOW/Stellar partnership employed an additional bulk sampling programme, which again took samples from below the stopes or just simply picked up off the ground. 25kg of samples were apparently taken, however these were then condensed again into 500g bags (who would have guessed it?!) and sent off to that merry old laboratory in Ireland for further analysis.

They say a picture is worth a thousand words, so take in the image below and consider the implications of Stellar’s approach (this image is for visual comparison purposes only);


 
 

Even to the untrained eye it is immediately obvious the difference in micro bulk and grab sampling, which I believe has led to the cataclysmic differences in sample results from the same area in the Clogau gold mine.

If you want to see the immense difference between the sampling practices and their results see link here.

The independent report Ref Clogau was categorical in its advice. It said that a strict diamond drilling programme was the only appropriate method for defining a resource at Clogau. Three years ago and Stellar itself suggested it was going to follow this. The more pertinent point of the report stated “no resource or reserve defined at Clogau. This lack of resource is related to the need for very close - spaced diamond drilling (5m by 5m)''.

Following this approach would have allowed anyone serious about commercialising a project like Clogau to better understand the nature of the mineralisation and its true structure. Critically, diamond drilling would have allowed for a 3D model of the structure (“3D” sounds familiar, doesn’t it, eh, David?!). This report was formally acknowledged by Stellar in 2012.

 
 
 
 

With all this in mind, why would the GMOW/Stellar partnership have decided not to pursue the established industry practices, needed to confirm the size and value of any resources in their gold mines? Why also, in 2013, did they let an apparent opportunity slip through their hands, when Bill Roberts procured Gwynfynydd? Is it possible that the early reports demonstrated the mines were not as lucrative as hoped? Was there a longer tail or yarn to spin here?

In November last year, I published a video of the mine site at Clogau showing no activity. Within hours of this, an anonymous video was posted using a new account on YouTube, which claimed to show the gold processing plant working. Amazingly this new YouTube account was created in Australia!

At the end of this new video the camera zooms in (and out of focus) on a small sluice. This sequence caused much excitement on bulletin boards, as the morons shouted “gold” and rushed over each other to load up on Stellar stock, in a crazy buying frenzy!

Although Stellar did not comment on the video (or lay claim to it), it was shot inside the mine buildings. If this video wasn’t shot with the permission of Stellar or GMOW that must have meant trespassers broke in and used the equipment.

In my opinion, this was total market abuse, designed to dispute my claim and mislead investors to believe copious amounts of gold were being recovered.

This was reflected in the share price rise, which followed.

The images below show some inconsistencies:

 

 
 

Concerning these images, I contacted an industry professional, who immediately explained that the sluice had “thick ribbed riffles” and that gold wouldn’t deposit on these. Then he pointed out that the same coloured “stains” on the side walls of the sluice. Next he zoomed in and identified the symmetrically spaced patterns and he laughed again! “Look at the pattern, it’s diamond”. He then explained the stains were made from diamond metal mesh that used to be in the sluice and said “if they had used galvanised mesh it wouldn’t have got rusty”.

You can see this as indicated by the few marker dots added and the colour saturation adjusted. This explains the opinion as to how the visual markings shown in the footage could have arrived.

 
 
 

Having consulted with industry experts and thoroughly read Stellar Resources’
own commissioned report, it is my belief that the chain of events since 2012,
towards so called commercialisation of its Welsh gold projects, is very peculiar.
It hasn’t been in keeping with the advice of the company’s independent
advisors. It hasn’t been what one would have reasonably expected from a
company trying to commercialise a gold mine.

This is not to say the Stellar hasn’t made any progress, but its moves have been slow and awkward. Advisers, employees, the directors and brokers have all been paid their fees, but the question for shareholders is “who is actually benefitting here?”

Stellar clearly states its aim on its website;

“the company aims to provide a superior return by investing in exploration, development and production assets in the minerals and / or hydrocarbons sector”

As mentioned, Stellar initially came to market at 2.25p, but today trades at 0.35p, a near 80% loss. This is hardly in keeping with Stellar’s promotional material in its website or its promotion elsewhere.

HorseHill – a much promoted UK onshore oil prospecting which Stellar has a 10% stake - sadly became another rainbow for shareholders, laced with the ill-judged comments of Mr “3D” Lenigas. To remind you, Mr Lenigas claimed repeatedly on Twitter that Horse Hill had had a 3D Seismic survey, which was highly misleading and totally untrue.

Eventually, when the drill at Horse Hill massively disappointed investors, Stellar’s share price tanked.

The company’s own website is out-dated, with ex-board members still being shown in positions they no longer employed, and Ed McDermott has had to make repeated corrections on Twitter.

When you take into account the questions, which remain over Stellar’s Indonesian project, it is hard to see how anyone could claim that the company is following a sensible path of development.

We all know that exploration is a tricky business. We accept losses, however when you have a game of boardroom musical chairs, on top of layered and convoluted behaviour, it makes it all the harder to truly understand what this company is actually doing, compared to what it says it is doing.

“Mark Twain once said a mine is a hole in the ground with a liar stood next to it”

Tom Winnifrith & ShareProphets note: This article was run past Stellar which declined to add further comment to those you see here. In conversations that I have had with the company it disputes a number of matters in this article. The article is the opinion of Doc not myself or ShareProphets.

For what it is worth I have never - speaking as a quasi Celt - been attracted to ANY Celtic gold plays be they in Scotland, Ireland or the land of the sheep shaggers. For such operations to have any value you need a sky high gold price and a ready supply of utter morons prepared to pay a mammoth premium for "home produced" Wedding rings. Judging by the utterly cretinous audience on BBC Question Time from North Wales last night I am prepared to exist that Wales has more than its fair share of utter morons.

But on balance I see little value in GMOW. But Stellar also has a stake in Horse Hill which could - I say could - be far more interesting. 


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Comments

4 comments


  1. turbograndad

    DOC,
    Great research, remembered at the time and was prompted to watch your video of said mine.
    That said it all to me, deserted not a sole, yet so much bullshit.
    I think Mr Lenigas is due a kick in the balls, like he has given share holders, just as well I hav’nt invested in anything associated with this prize bullshitter.


  2. DUCK AND DIVE

    Great digging, Doc. If it looks like a PoS and smells like a PoS, it usually is a PoS.

    I’m surely not alone in being grateful for your checks and balances on DL – especially as I fear the Sheriff has dropped his guard. If STG “disputes a number of matters in this article”, why don’t they go into print with attributed quotes?

  3. It’s actually ‘all that glisters….’

  4. Doc

    Stunning piece of work!

    As someone who bought into Clogau Gold back in the 1980’s and subsequently got burnt, I can happily confirm the Romans took all the gold out of Wales some 2000 years ago !


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