Capella Resources

The Vancouver Sun reports on Brian Gracey’s cash cow. This is not agriculture; this is Capella Resources. I could not believe the Sun that he is living in a $2.2 million British Properties home on a salary of about $150,000 a year, so I decided to poke around the internet and access the InfoMine Companies & Properties database. Here is what I found and what I think.

First some more background from the Vancouver Sun which reports:

One of Gracey’s companies is Rose Marie Resources Ltd. (formerly Previa Resources Ltd.). Gracey has been a director for more than 11 years. During this period, Rose Marie has raised nearly $12 million, but has virtually nothing to show for it. As of Jan. 31 (the date of its last audited statements), it had only $10,834 in total assets, including a resource property valued at just $1. As president, Gracey collects only $2,000 per year in salary. But his management company, Chara Acquisitions Ltd., gets $3,023 per month for management services and $9,860 per month for providing office space and equipment, regulatory compliance and accounting services. That adds up to more than $150,000 per year. By comparison, the company has not spent a cent on mineral exploration during the past two years.

Of course these days, $150,000 a year income really cannot support living in a $2.2 million dollar house, even in British Columbia with free medical and cheap bus services. Do not worry, he does have another source of income according to the Sun:

There is Probe Resources Ltd. Gracey has been president and a director — along with trusty sidekicks Pepper and Diston — since 1996. As of Aug. 31, 2006, the company had raised just over $2 million, but its assets totalled only $280,973. Gracey has the same management deal with this company as it does with Rose Marie and Alcor: He gets paid $12,883 per month, or more than $150,000 per year. By comparison, the company spent only $7,500 on exploration activities during its last reporting year. None of these companies has generated a cent of revenue for shareholders. Alcor is trading at 11 cents, Rose Marie at 12 cents, Lyra at eight cents, and Probe at 50 cents.

In its January 2007 Report and Consolidated Statements, Capella Resources describes itself thus:

The Company is a development stage public company whose shares trade on the TSX Venture Exchange. The Company is in the process of exploring its resource properties in the USA, Chile, and Canada and has not yet determined whether these properties contain ore reserves that are economically recoverable. The recoverability of amounts shown for resource properties is dependent upon the discovery of economically recoverable reserves and confirmation of the Company’s interest in the underlying properties, the ability of the Company to obtain necessary financing to satisfy the expenditure requirements under resource property agreements and to complete the development of the properties and upon future profitable production or the sale there.

All I could find in the InfoMine files about Previa Resources is the following from 2002:

The Company is a party to a Management Contract with Antaries Aquisitions Ltd.. (”Antaries”), a company which is 100% owned by Brian Gracey, a Director of the Company. Pursuant to said contract and a prior contract with Antaries’ predecessor, $72,840 has been paid or is payable since the commencement of the Company’s last financial year for management, office space, office equipment, and office and accounting services. Antaries is currently receiving $2,500 per month for management. In addition, Antaries is a party to an agreement with the Company whereby it supplies office space, office equipment, and office and accounting services for $3,570 per month. Antaries has not been indebted to the Company since the commencement of the Company’s last financial year.

From the InfoMine files, here is the Probe Resources Performance Summary for Quarter 3 of 2006:

Cash Less Debt in [,000s]	76
Working Capital in [,000s]	141
Net Profit in [,000s]	(307)
Approx Market Capitalization in [,000s]	3,352
Quarterly Exploration Expense in [,000s]	N/A
Annual Exploration Expense in [,000s]	N/A
Net Profit Ratio	N/A
Market to Book Value	13.76
Current Ratio	4.79
Note	Financials are for the twelve month period ended August 31, 2006. Mineral properties were taken as non-book value items.

In March 16, 2007 Capella Resources signed an agreement to acquire Tripple Uranium Resources, a privately held mineral exploration company primarily engaged in the exploration of uranium prospects with assets in Eastern Canada. This from their website which is kind of nice. It does not list Mr. Gracey anywhere. Rather they note the following luminary amongst their management:

Dr. Michael P. Terry. Dr. Terry is currently a Professor in the Department of Geology and Geological Engineering at South Dakota School of Mines & Technology. Dr. Terry received a Doctor of Philosophy in Geosciences (2000) University of Massachusetts, a Master of Science in Geology (1991) University of Akron, and a bachelor of Science in Geology (1987) University of Wisconsin, River Falls. Dr. Terry was employed by Homestake Mining Company in the early 1990’s where his research was instrumental in defining a new geological model at the historic Homestake Gold Mine. More recently, Dr. Terry conducted post-doctoral research at Bayerisches Geoinstitut, Universität Bayreuth, Bayreuth, Germany.

I did find one report that Mr. Gracey has resigned as a directors, but will continue as a consultant: “Capella Resources Ltd. Canada announced the resignation of Brian Gracey as a Director of the Company effective April 18, 2007. Mr. Gracey will continue with the Company in the capacity of consultant.” I wonder if he will continue to get his office management fees.

In reality he maybe does not need all that office management fee business if this investment analyst is right (I edit for brevity):

The meteoric rise of Capella Resources is based on the agreement in principle with International Minerals Resources Ltd (IMR) to acquire all issued and outstanding shares and capital of Compania Minera Cerro El Diablo Inc. (CMCD). Capella is primarily owned and operated by the Gracey’s and their associates. Capella Resources Ltd. is basically a shell. A very large portion of this issue in controlled by a very small group of investors. You might call them Gracey and associates. They know how the game is played and have done very well playing it. When they want to get out a lot of stock will get dumped on the market. I suggest that if you want to play this game, look for shell companies that are dormant and cost pennies per share. Time will tell, but you are better off buying a shell company before the action starts rather than after it has risen a dollar.

This investment advisor seems to be telling you to buy. Confirms my impression that investment advisors are addicted to telling you to buy, regardless of the merits of the ore body, the company, or its management. Well, maybe you will come to trust Dr. M. Terry and get rich on his advice and knowledge. At least Dr Terry is getting rich research funding from Capella, as announced at this link:

Dr. Michael Terry, assistant professor, geology and geological engineering, received $42,144 from the Capella Resources Ltd. Nevada Exploration Office for the project, “Structural Analysis of the Tinton Project Area and the Age of Gold Mobilization in the Homestake Deposit, Northern Black Hills of South Dakota.”

I have not looked into Aurora’s plans to mine uranium in Labrador, but I can begin to understand concerns by the Inuit of the area to let Capella Resources promise to close the waste disposal facilities properly. But then again considering their track record of developing mines, it seems there is not much chance they will proceed to actually mine the ground when there are still all those investors to mine and office management fees to be paid. Maybe the Inuit can stop worrying for a while.