Sunergy Inc (OCTMKTS:SNEY) shares came back to the limelight after it clarified the doubts raised by National Minerals Agency. The company has confirmed that it did not maintain any mining licenses in the areas of Sierra Leone.
The company’s stock witnessed over 9% gain on Friday after its clarification to National Minerals Agency or NMA’s recent comments. The agency found that Sunergy did not maintain any licenses. The company was clear-cut in saying that it had already pointed out that it had a new area of license with considerable gold deposits, which they were planning to start operations. However, NMA failed to find any evidence confirming it.
Sunergy clarified further it never operated in Sierra Leone or any part of Africa directly. It said that it conducted its operations mainly through fully-owned local subsidiaries that were properly incorporated in their respective nations. Therefore, it said that it was true that the company did not have any license in Sierra Leone.
In 2010, Sunergy commenced its operations in Sierra Leone in October through 100% acquisition of Allied Mining and Supply Limited, which was owned by the Pampana Mining concession. It further clarified that it was a license for exploration allowing no minerals to be sold without buying more mining licenses that became quite costly. The company stated that it was a license of exploration that failed to allow any minerals to be divested without resorting to purchasing of mining licenses that became quite costly.
Cash-Flow Driven Operations
Sunergy said that the management has changed its operating plan to cash-flow driven operations from an exploration driven model. The company believed that there was a lack of funding for exploration throughout the industry with investors’ preferring cash flow since operations under the exploration licenses needed money to be spent. It would mean that there was no chance to sell products recovered from the exploration phase.
Therefore, Sunergy preferred to strike deals in Sierra Leone, as well as, nearby Liberia to integrate its equipment, as well as, operating knowledge with local miners to help in the rapid development. While the local miners benefit from the recovery of discovered gold or diamonds, Sunergy gains as it could immediately operate in proved lands and rivers. The company further clarified that it enabled to strike sustainable and immediate cash flow that was accretive to the prosperity of its shareholders.
Sunergy Inc (OTCMKTS:SNEY) had a nice rally in the early part of this year but the after making a top in April, it has almost lost all the gains made in this calendar year. The 50 day Moving Average crossed below the 200 day Moving Average in September, which is popularly called a Death Cross implying a lot of weakness. The Friday gain of 9% has not repaired the technically weak structure of the stock and any rally runs the risk of a sharp selloff coming from the higher levels.