Conclusions

For quite some time I maintained that company principals are short their own company. But this offended many, as it clearly flies in the face of the facts. Why, for instance, would Netolitzky be short his own company and buy so many shares? Remember, this is just an opinion, and a point of view without knowing all of the facts. Any time something totally illogical happens in the markets though, then you can attribute that to derivatives.

But there is little to no explanation of why, for instance a company would process only low grade stockpiles, or perhaps why key information is simply unavailable, when any other company would go out of their way to trumpet their results. What is occurring is they are deferring to the interest of the equity swap holders.(or perhaps why key information has no effect whatsoever on the share price.)

No mine has the potential to be viable under any circumstances @4g/t, and $600/oz., yet these were the atrocious numbers promoted in the PEA. No matter what they do, reported grades are higher than assumed, and no matter how little attention is paid to grade dilution or how desperately they go like a chicken with their heads off 'bulk sampling' Amisk in the Mallard Lake zone under pretense, they will not arrive at these stated sub-economic grades.

(you can bet if grades are low, then it will be reported. But note that no information is being offered as to where they got the may production numbers from. 'Quarry Zone' perhaps? But that would be well outside the proposed mine design.)

The high grade stockpile must be building up, while the low grade stockpile must be virtually cleaned up, and they are looking for more, bulk-sampling in the mill zone. (you can see the reasoning behind sending in a forensic mining analyst. )

The following is a screen shot of the quote from Bloomberg:

If you run your cursor over the chart on any given day, you get a volume quote. Now if you go to the venture exchange daily trading summary for Golden Band Resources stock, you will see there is a significant mismatch between the stated volumes on Bloomberg and the official quote from the stock exchange.

On the 6th Dec., 2010, Bloomberg quotes: 3,236,759 shares traded. But for the same day on the venture exchange, 'only' 2,812,353 shares were reported traded. That means there is a major discrepancy between the official quote (which is a legal requirement to report accurately) and the quoting system which is tied to ATS.

How an equity swap is set up in the instance of GBN.V, (or basically the entire venture exchange,) is that shares are sold into the market without first owning them, raising cash. This cash is then used to invest elsewhere and held as an asset. No shares are being held in escrow.

The trouble is that basically the only players in the stock are the sell-side brokers. There is an overwhelming volume of shares that need to be settled, should the share price move in favour of the longs, so any day the share price moves upwards, the volume 'off exchange' increases accordingly.

Depending on the maturity of the equity swap, they can continue to lay on naked shorts into the market over and above the daily volume until one party has to buy out the counterparty. But if the swap is synthetic, meaning no counterparty, its no more than just a naked short, designed to get around securities laws. And as an equity swap holder, they have the right to direct proceedings in their favour. An equity swap comes with voting rights, so if you say, hold the obligation to settle for 51% of the float, then you can literally tell the company what to do.

Without a PHD in geology or Mine engineering, you would seriously compromise your bet by making the wrong decision and painting yourself in the corner. It doesn't take a PHD to see you need to be on the long side.

If you bought an i.o.u. from one of these sell-side brokers, they have an obligation to settle any share sold into the market without first owning it within 55 days. The ultimate length of time a simple naked short can stay active is 180 days, or 6 months. But with equity swaps, you can lay on naked shorts over very long periods of time.

So the sell-side brokers (really computer programmes) taking on an synthetic equity swap (really selling shares without owning them) can build up an enormous amount of risk over time. The risk here is that GBN.V will actually be viable and buyers will begin to accumulate stock at market. The extent to which Sell-Side brokers are under obligation to settle shares in one small company extends over the whole gold mining sector and can be as much as the entire float of each company. As a penny stock on the venture exchange, GBN.V is at great disadvantage.

So you can see the amount of interest in expecting that the mine will fail, since no broker, no matter how huge they are in their own minds, can settle that kind of obligation, since people actually have taken on shares and are prepared to ride out the share price fluctuations as the gold price just keeps on going higher.

-F6