Conclusions

In financing future growth, preferreds can be used to keep the company independant of so-called 'resource lenders' who really intend to cannibalize small producers.

But a company can also reverse share holdings into preferreds, similar to an estate freeze. (the company has died, or is dying) You would reverse split, convert to preferred's, fix at par value, then adjust par value based on the net present value of the business. Of course, this would require a shareholder vote. Preferred's in the initial conversion would retain their voting rights until dividends are declared.

Certainly the sell-side is very anxious to see small companies collapse of their own accord, but many are subject to the vagaries of derivatives markets. The sell-side position as I understand it, wants to promote the most disastrous course of action for any small equity gold producer.

Mostly this would be through mergers or taking a company private, where capital cannot be raised. The company would collapse as a foregone conclusion despite the fact they might be sitting on viable gold properties. The resulting loss would be to the banking sector, as this would likely bankrupt many people. Converting to preferred's gives some breathing room for everyone concerned with interest on the sell-side and the long side.

In the case of GBN.V, you would organize shareholder interest in the company using preferred's according to the 'strategic vision.' (or really the failure of the managing director holding the minority shareholder interest in the company to succeed.)

-F6