Bottom-Fish Comment - July 16, 2012: Bottom-Fish Strategy for Barisan Gold Corp
Barisan Gold Corp was recommended a low priority bottom-fish buy in the $0.10-$0.19 range on Juy 13, 2012 based on the possibility that management will abandon its focus on Indonesia where it has 75%-80% interests in three properties located in Indonesia's Aceh Province on Sumatra before it depletes its $8.5 million working capital as of February 29, 2012. Barisan was spun out from East Asia Minerals Corp on a 1 for 4 basis in July 2011, listed on the TSXV in August 2011, and promptly completed an $11 million rights offering at $0.55, half of which was taken down by Hong Kong based CEF Capital Markets pursuant to a standby guarantee. CEF now owns 9 million shares of Barisan. East Asia transferred to Barisan its 80% equity stakes in 2 Indonesian companies which hold the Barisan I and II licenses. Barisan has already defeated a lawsuit from the 12% stakeholder who wanted to be bought out as part of the transfer, but it is not a good sign that Barisan's Indonesian partners are troublemakers. Barisan I hosts the small Abong epithermal gold-silver deposit for which a resource was published in January 2012 based on work done by East Asia from 2007-2011, while Barisan II has several copper-gold prospects, one of which, Sekuelen was the focus of a 5 hole drill program started in March 2012. East Asia Minerals was heavily hyped in 2009-2011 based on a copper-gold prospect near an orangutan reserve which one knew could only end badly after management muzzled the Northern Miner with litigation when it mentioned supposedly undisclosed potential permitting problems which East Asia had in fact buried in a tiny footnote several years earlier. There is unlikely to be a permitting problem because the Miwah resource came in much lower than expected in May 2011, and East Asia's stock price collapsed, converting the goodwill embedded in the Barisan spinout into roadkill. Furthermore, Indonesia is now trying to force foreign resource owners to reduce their holdings below 50%, which makes it very difficult for an exploration junior like Barisan to justify funding 100% of the cost of establishing a valuable resource. Barisan is headed by Alex Granger, formerly of CIBC, parent company of Barisan's largest shareholder, who hopefully can redeploy Barisan's capital into a geopolitically more hospitable part of the world. Given the Southeast Asia focus an obvious new focus would be the relatively underexplored frontiers of Cambodia, Laos, and possibly even Myanmar now that a political thaw is underway.