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XMFSinchiruna (27.47)

A Little Patience Required for Holders of GGCRF

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March 14, 2012 – Comments (3)

With gratitude to CAPS member jimg282000 for bringing the matter to my attention, I would like to provide some information on a recent development regarding the U.S.-listed OTC proxy security for Toronto-listed silver miner Silvermex.

Please note, if you own shares of Silvermex listed on the TSX under the symbol SLX, you are 100% unaffected by this development.

If you own Silvermex through the OTC ticker symbol GGCRF, as I do, then you will find the ticker has been rendered untradeable for the time being.

There is nothing to worry about with respect to the sanctity of your stake in the company.

I repeat: 

There is nothing to worry about with respect to the sanctity of your stake in the company.

I just got off the phone with the company's investor relations manager, who kindly reassured me that indeed a new OTC listing will emerge in due course; and to which your shares of GGCRF will transfer. The catch here is that it could take up to 60 days from the filing of a new registration statement for that new security to begin trading. In the meantime, those GGCRF shares can not be sold, nor new shares purchased (the latter being the one that bums me out more).

This all ties back to Genco Resources, the prior operator of the La Guitarra mine, which apparently did not keep up with its filings to the SEC in the period BEFORE Silvermex's purchase of the company. As I understand it, some of the information that would have been required to bring those old filings into compliance is not even available to Silvermex, and so it was decided that consenting to a revokation of the registration of the GGCRF security, in conjunction with a prompt filing of a new registration statement to list the replacement security, represented the best course of action.

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Here is Silvermex's press release on the matter:

http://www.silvermexresources.com/s/newsreleases.asp?ReportID=512250

Vancouver, BC, Canada - March 13, 2012 - Silvermex Resources Inc. ("Silvermex") (TSX: SLX) reports that, on March 13, 2012, with the consent of Silvermex, the Securities and Exchange Commission ("SEC") issued an order revoking the registration of Silvermex's common shares (traded on the over-the-counter market in the United States under the symbol "GGCRF") under section 12(g) of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act").

Silvermex consented to this administrative procedure as an amenable solution to address the filing delinquencies of its predecessor company, Genco Resources Ltd. ("Genco"), under the Exchange Act. As a result, broker-dealers in the United States are currently unable to effect transactions in the United States markets under the trading symbol GGCRF. Silvermex's common shares continue to trade publicly on the TSX under the symbol SLX.

Silvermex, which had previously filed an annual report on Form 40-F with the SEC in December 2011, is currently preparing a registration statement on Form 40-F and is expecting to file the new registration statement within 14 days. The registration statement is anticipated to become effective 60 days after its filing. For more information, the SEC order can be accessed via the following link: http://www.sec.gov/litigation/admin/2012/34-66578.pdf.

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Since the OTC market is no place for short-term traders -- as relative illiquidity renders it an unforgiving space for such endeavors -- I don't imagine that this development will cause Fools any concern. In other words, if your intented investment time horizon on Silvermex was shorter than 60 days, then you purchased on the wrong exchange. Because I have been accumulating shares in Silvermex this year with a very long-term view of the shareholder value creation that I anticipate from CEO Duane Nelson, my stance is completely unaffected by this development.

I enjoyed a terrific and lengthy conversation with Duane in Vancouver at the Cambridge House conference in January that really reignited my interest in the stock, and at the PDAC conference in Toronto last week I enjoyed his company yet again. I find it incredible that the market has offered almost no re-rating as yet for the significant improvements that Duane has swiftly brought to this once struggling operation, and like so many of the deep value plays I've invested in I am content to sit back and wait for the market to reflect the true value of the shares.

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And for those who may thirst for a reminder of why they hold the shares, we received a nice little reminder today:

http://www.silvermexresources.com/s/newsreleases.asp?ReportID=512240

Recent drilling continues to extend the limits of gold and silver mineralization in existing stopes and ore chutes, which will be mined in the immediate future. "As was reported in a news release on November 3, 2011, our underground program has been very successful in identifying the largest ore chute to date in the La Guitarra mine," commented Michael Callahan, Silvermex's President "Our most recent drilling continues to extend this zone both laterally and vertically. This program has been very successful in extending the life of the La Guitarra mine and we will continue with an aggressive drill campaign into 2012."

The La Guitarra mine is divided into three sectors: the Northwest Zone, the Central Zone and the Southeast Zone. Drilling in the Northwest Zone is focused on delineation of mineralized shoots for future production, in up to four distinct ore shoots within the broad La Guitarra vein. Delineation drilling in the Northwest zone has identified mineralized structures within the broader La Guitarra vein structure, which will aid in guiding future mine development. The presence of high grade gold and silver mineralization in parallel structures to the La Guitarra Vein is highly encouraging as such zones have been very productive in the past. Follow-up drilling will investigate the full potential of these structures.

In the Southeast Zone, a total of 57 holes have been completed. Drilling has focused on extending the Southeast Zone down dip and defining the strike length and plunge of the ore shoot. Highlights of the results include hole LGS-10, which intercepted 2.0 m of 509.1 g/t Ag and 1.71 g/t Au, hole LGS-13, which intercepted 0.9 m of 586.3 g/t Ag and 0.14 g/t Au, hole LGS-16, which intercepted 1.1 m of 476.1 g/t Ag and 2.32 g/t Au, LGS-17 which intercepted 2.1 m of 406.2 g/t Ag and 1.09 g/t Au , and hole LGS-44, which intercepted 0.15 m of 1,154 g/t Ag and 8.9 g/t Au. All widths are true widths. As shown in the table below, widths and grades for the LGS series of holes in the Southeast zone are consistent.

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Even (perhaps especially) on days like today, when it is so easy to become discouraged as a resource investor by the sudden and painful declines one is forced to grow accustomed to, I am deeply comforted by the deep value I have identified in virtually all of my equity holdings in the space. Because I know that most of my current holdings would represent great bargains even at $1,200 gold, I will never suffer a moment's concern at this volatile market's periodic fits. My long-term price outlook for gold and silver remains similarly undaunted by all the chatter regarding escape velocity for the U.S. economy and the inane notion that we've seen the last of the central bank interventions. $2,000 gold is just as certain an interim target for me today as it was in 2011, 2010, 2009, 2008, 2007 ... you get the picture.

I didn't intend for this post to turn in to a pep rally for pm investors. But at the end of the day, it's the strength of my conviction that has led me successfully this far through a tumultuous and often very challenging environment for such a huge bull market trend for the metals. When this pm market grows hungry for weak hands to fold, it is only the strength of one's conviction in the longer-term trend (and the inevitability that value must ultimately be priced efficiently) that can keep one's own hand strong.

Long and strong,

Sinchi

3 Comments – Post Your Own

#1) On March 14, 2012 at 3:36 PM, jimg282000 (< 20) wrote:

Thanks for the update.  Looks like I will have to wait a little longer to purchase some shares.

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#2) On March 14, 2012 at 3:40 PM, kdakota630 (29.56) wrote:

Very timely, as I messaged TMF about this matter last night.

After a couple of exchanges, the reply I got was this:

After looking through our data feeds, it doesn’t look like they’re trading anymore, since I can’t find them anywhere. My guess is that the company isn’t in a rush to update the FAQ, especially to tell people they failed to meet listing requirements. ;-)

I think we’re going to enter this as a delist at 0.01, and picks should close as of yesterday.

Fool on,

Chris

Hopefully you can have this remedied before that goes through, if you haven't already. 

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#3) On March 14, 2012 at 6:16 PM, XMFSinchiruna (27.47) wrote:

Kdak... Glad you mentioned it. I would suspect that our best route will be to have it fixed retroactively once the OTC security is relisted. But I'll alert the CAPS desk to the issue.

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