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Buddy Up! - CMKM Diamonds, Inc.; U.S. Canadian Minerals, Inc.; Juina Mining Corp.; St. George Metals, Inc.; and United Carina Resources Corp.

Investigative Reports

October 29 2004

Consider it just one more puzzle, wrapped in a mystery, shrouded in an enigma.  The buzz keeps building for a group of little known mining companies – and billions of shares keep changing hands – although the companies in question have yet to produce meaningful revenues, or demonstrate that they are running viable businesses.

This quintet of companies - CMKM Diamonds, Inc. (Pink Sheets: CMKX); U.S. Canadian Minerals, Inc. (OTCBB: USCA); Juina Mining Corp. (Pink Sheets: GEMM); St. George Metals, Inc. (Pink Sheets: SGGM) and United Carina Resources Corp. (CDNX: UCA.V) – may someday yield tangible results which so far have proved elusive, but for now investors are relying on encouraging press releases, chatter on Internet Message Boards, predictions and projections from promoters, and little else.  Indeed, with the exception of U.S. Canadian Minerals, none of the companies presently files financial reports with the Securities & Exchange Commission.  The financial reports filed by U.S. Canadian are hardly encouraging.

So what has been motivating investors to propel these companies toward the top of active trading lists?  As we have noted in the past, CMKM Mining frequently trades billions of shares a day – though with minimal price movement.  See CMKM Diamonds, Inc. - A Familiar Drill; Update: CMKM Diamonds, Inc. - Swapping Stuff; Update: CMKM Diamonds, Inc. - Sharing Shares; Update: CMKM Diamonds, Inc. – Concentric Circles; and Update: CMKM DIAMONDS, INC. - Less and More. 

This week regulators in Canada and the U.S. stood up and took notice of the unusual trading patterns that had been fueled by relentless hype.  On October 26, 2004, the Saskatchewan Financial Services Commission issued a Temporary Order halting trading of CMKM stock until November 9th.  The Temporary Order also suspended trading in shares of CMKM's affiliate, Casavant Mining Kimberlite International, and put a halt to securities trades by Urban Casavant (CMKM's President), David Desormeau (a one time, and perhaps present, director of CMKM) and Melvin A. O'Neil (CMKM's press contact).

The Temporary Order charges that Casavant, Desormeau and O'Neill made statements that contained misrepresentations in connection with their trades of CMKM stock that were neither properly registered nor exempted from registration.  The Temporary Order may be extended beyond November 9th if the Commission does not receive satisfactory answers to its questions.

Meanwhile, south of the border, the U.S. Securities and Exchange Commission was setting its sights on CMKM's partner, U.S. Canadian Minerals.  On October 28, 2004 the SEC suspended trading of U.S. Canadian shares until November 10, 2004, putting an end to months of irrational trading and speculation fueled by rumors, press releases and promotional hype.  In announcing the suspension, the SEC cited questions about the accuracy of publicly disseminated information concerning U.S. Canadian's financing and mining activities and claims about the value of the Company's assets.

As we have discovered, those claims, and related representations by some of U.S. Canadian's "partners," including CMKM, have created a frenzy for shares of a group of obscure mining companies that have in common, among other things, a notable failure to produce tangible results and significant revenues.


Mining The Markets

It all started with a relentless campaign to promote CMKM.

The surge of interest in CMKM shares has coincided with a barrage of press releases issued by the Company offering an optimistic, although cryptic, view of the Company's prospects.  CMKM's CEO and President is Urban Casavant, who has been down this high-flying road before.  Mr. Casavant was at the helm of a company called Petro Plus beginning in late 1995.  At the time shares of Petro Plus were trading at about 15 cents on what was then the Vancouver Stock Exchange (now subsumed in the TSX Venture Exchange).  Soon, in the wake of press releases reporting "visible gold" taken from ore samples, shares rose to more than $1.  Share prices soon plummeted once again and Mr. Casavant took his leave from Petro Plus.

While the other members of this group have not achieved similar ten digit volume, the demand for their shares has been steadily increasing.  Juina Minerals, which traded 42,900 shares on September 30, 2004, soared to more than 4 million shares on October 5th.  Volume has exceeded over one million shares each trading day since, and unlike CMKM, share prices have risen dramatically, from 3 cents on September 29, 2004 to 18 cents on October 18th. 

Shares of St. George Metals have followed a similar pattern.  On September 1, 2004, 500 shares of St. George Metals stock changed hands at a price of 1 cent a share.  Less than two weeks later, on September 9th, almost 2.5 million shares were traded, as stock prices reached a high of 35 cents a share. 

And then there is U.S. Canadian Minerals.  On September 6, 2004, U.S. Canadian stock closed at a price of $4.15 a share.  No trades were reported that day.  On October 18, 2004, U.S. Canadian shares were selling for $15.30 (having hit $18.75 a share four days earlier).  Approximately 61,000 shares traded on October 18th.  Since the beginning of October, U.S. Canadian volume has exceeded 100,000 shares on nine occasions, topping 1 million shares on October 5th.  On October 27th, U.S. Canadian shares underwent a 3 for 1 forward split.  A day later the SEC halted trading.

Yet, despite this frenzy of trading activity, U.S. Canadian and these other companies have not produced any results that translate into revenues. 


Conjoining Forces

From all appearances, CMKM and U.S. Canadian Minerals have developed a close working relationship, joining together to explore mining properties, swap shares, and exchange interests in one another's mining claims.  Recently, the CEOs of CMKM and U.S. Canadian appeared together on a web cast hosted by an Internet promoter known as the Green Baron, who has been calling CMKM "The Stock Play of a Lifetime." 

Earlier this year, CMKM and U.S. Canadian joined forces with United Carina Resources Corp. (CDNX: UCA.V), Consolidated Pine Channel Gold Corp. (CDNX: KPG) to hunt for diamonds in Smeaton, Saskatchewan, Canada.  On June 10, 2004, CMKM issued a press release declaring that ore samples recovered from the area had been confirmed as "diamondiferous" by an independent laboratory. 

Unfortunately, that press release failed to mention that the diamonds were microscopic – two particles having a combined weight of .000005 carats.  Eleven other samples contained no diamonds at all.  Investors learned those details when United Carina Resources, under pressure from Canada's TSX Venture Exchange, issued its own press release clarifying the dimensions of the diamond "find."

Unlike CMKM, United Carina Minerals and Consolidated Pine Channel Gold do file public reports, in their cases through Canada's SEDAR system, which is somewhat akin to the SEC's EDGAR filing system.  Those reports indicate that United Carina and Consolidated Pine share more than their association with CMKM.  The companies both maintain offices at 105-111 Research Drive, Saskatoon, Saskatchewan, Canada; share a telephone number; have the same President, Richard Walker, and the same directors and; have failed to produce meaningful revenues.  United Carina's revenues for the first six months of 20034 totaled less than $3,000, while Consolidated Pine Channel had no revenues for the first six months of 2004.  It would appear that the diamond dust discovered in Saskatchewan added nothing appreciable to those companies' coffers.

Despite the lack of meaningful results from their Smeaton project, CMKM and U.S. Canadian have continued to develop a close working relationship.  On July 18, 2004, CMKM issued a press release to announce that U.S. Canadian had agreed to purchase 5% of CMKM's mineral claims in exchange for 7.5 million shares of U.S. Canadian stock.   The agreement also gave U.S. Canadian a one year option to acquire an additional 10% of CMKM's mineral claims for $15 million in cash.

It seemed unlikely at the time that U.S. Canadian would exercise its option on the CMKM claims.  As of June 30, 2004, U.S. Canadian had $1,321 in cash, no revenues, and cumulative losses of $17.7 million.  Where would U.S. Canadian get the money to invest in CMKM, and if it were able to raise capital, wouldn't it be more likely to use them to fund ongoing operations than to invest in CMKM's unproven mining claims? 

Apparently not.  On July 27, 2004, CMKM announced that it had received $3 million from U.S. Canadian, representing a partial exercise of the option.  Why had U.S. Canadian decided to use those valuable funds to take a stake in CMKM's operation?  According to its Form 10-Q financial report for the quarter ended June 30, 2004, U.S. Canadian had agreed to sell 600,000 shares of its stock to an unnamed party related to CMKM at $5 a share.  The $3,000,000 received by U.S. Canadian from that transaction was then paid to CMKM.

And that, as they say, was the start of a beautiful friendship.  On September 28, 2004, U.S. Canadian announced that it had exercised an additional portion of the CMKM option, purchasing an another 1.66% of CMKM's mineral claims for $2.5 million. 

How did the Company finance that purchase?  The September 28th press release did not say, but on September 8th U.S. Canadian had issued a press release revealing the receipt of "$3,000,000 of funding via a private placement."  The Company, which did not indicate how many shares it had issued in exchange for the investment, explained that the funds would "allow the company to move forward on several fronts in the execution of its current plans and future development of the company's financial growth as dictated by the board of directors."  It did not say whether that included the additional investment in CMKM.

The CMKM/U.S. Canadian relationship continued to evolve on other fronts as well.  An August 6th press release from U.S. Canadian stated that the two companies (teaming up with United Carina Resources and Consolidated Pine Channel Gold, their joint venture partners on the Smeaton project that yielded negligible particles of diamondiferous ore, and a new player, Shane Resources (SEIH.V)) had received permits to drill in the Fort α La Corne, Saskatchewan area. 

U.S. Canadian, which files regular public reports as an OTCBB listed company, offered no further details of the venture, or predictions for its success.  CMKM, which files no such reports, was considerably less restrained.  In an August 5th press release, CMKM's CEO and President Urban Casavant stated that "the Company feels that this target in the Fort α La Corne area has great potential," citing, in support of his optimism, a "Time-Domain Electro Magnetic Survey" of the property.  He then alluded to diamond discoveries by other companies in other parts of Canada that had utilized the same type of survey – possibly leading some investors to conclude that the survey itself was indicative of positive results. 

A September 13th press release from CMKM stated that drilling had been commenced and samples collected, but no results were reported at the time – or since.


More CMKM-ty Promises?

All too often, press releases create the possibility of unfulfilled expectations, opening the possibility of important developments, but failing to provide essential supporting details.  The "news" from CMKM and U.S. Canadian suggested potential discoveries but offered no meaningful insight into the likelihood of meaningful revenues.  A more recent announcement, suggesting the prospect of a substantial gold discovery, suffers from a similar deficiency.

On October 19, 2004, CMKM issued a press release headlined "THE SUCCESS OF ITS INTEGRATED BUSINESS PLAN GOES INTO EFFECT IN ECUADOR."  The prospects sounded promising.  Unfortunately, the details that followed were somewhat muddled.  CMKM said that it had concluded "the major ownership acquisition of the established American Mine…in Portevelo [Ecuador]."  The press release went on to explain that CKMM, together with its operating partner, Minera Nevada SA, a subsidiary of Nevada Minerals, will manage a major corridor of gold production in the region.  A spokesman for Minera Nevada claimed that the American Mine is currently yielding an average of 40 tons of gold a day, and that the production was expected to rise to 80 tons a day within six weeks.

According to the press release, the "American Mine," sits within a district which has "recorded historic production of more than 4.5 million ounces of gold and 19 million ounces of silver, as well as significant tonnages of copper, zinc and lead concentrates."  It does not indicate how that production, reflected in millions of ounces, relates to the purported "tonnage" produced at the American Mine, or the value of that "tonnage" to each of the participants.

An October 27th press release from CMKM only added to the fog.  This time, CMKM claimed that the "first week of gold ore has been mined at the American Mine" and had been shipped to "the Yellow River processing facility for immediate ore extraction."  CMKM's President, Urban Casavant, called it an "exciting day for CMKM shareholders," but is that excitement a tad premature?  The Company offered no indication that the "gold ore" possessed any significant value.

We have noted the relationship between CMKM and Nevada Minerals in earlier articles.  See Update: CMKM Diamonds, Inc. – Concentric Circles.  On July 26, 2004, CMKM announced that it had agreed to acquire a 60% interest in 500,000 acres of "potential Kimberlite mineral property in Saskatchewan, Canada" from Nevada Minerals Inc., a private Nevada corporation, in exchange for 75 billion restricted shares of CMKM stock.

And how does U.S. Canadian fit into this picture?  On January 20, 2004, U.S. Canadian and Nevada Minerals entered into a joint venture agreement to develop what would appear to be the very same property in Saskatchewan, Canada.  As part of that transaction, Nevada Minerals received 5 million shares of U.S. Canadian stock which, together with 4,850 shares of Preferred Stock (which was convertible into 485,000 U.S. Canadian common shares) made it U.S. Canadian's largest shareholder – at least until CMKM came along.  In exchange for those shares, U.S. Canadian received rights to a percentage of revenues from the project – but only for a limited time, which expires on January 20, 2005.  That could prove to be a bad bet for U.S. Canadian.  So far there is no indication that any revenues have been generated from the Saskatchewan claims.

And what is bad for U.S. Canadian also could prove unfortunate for CMKM as well.  On July 18, 2004, CMKM revealed that U.S. Canadian had agreed to purchase 5% of CMKM's mineral claims in exchange for 7.5 million shares of U.S. Canadian stock.  As a result, CMKM owned approximately 46% of the outstanding U.S. Canadian shares (8.56 million U.S. Canadian common shares had been issued as of June 30, 2004).

All of this would seem to make CMKM, U.S. Canadian and Nevada Minerals more than mere business partners – but how much more?

Which leads us back to CMKM's latest announcement and the prospect of Ecuadorian gold.  After reciting the prospective tonnage expected from the operation, the spokesman for Minerva Nevada, stated that "[a]ll will be done to ramp the mining production to complete our obligations to Yellow River and US Canadian Minerals, Inc. for their addition of two additional mills to Yellow River and the new production facility of the Buza coming on line over the next 90 days to build up to 300 tons of gold ore processing per day to satisfy the volume increase of the American Mine build up of production."

If the word "huh" comes to mind take comfort, you are not alone.  Despite this string of details it is not clear whether CMKM or US Canadian owns or controls the American Mine, what interest each holds in the American Mine, or what revenues can be expected from "management" of a gold corridor.  What does seem clear is this: 

• Minera Nevada is a subsidiary of Nevada Minerals.
• Nevada Minerals owns a substantial interest in U.S. Canadian.
• CMKM owns approximately 46% of the issued U.S. Canadian shares.
• CMKM is a joint venture partner with Nevada Minerals. 
• Nevada Minerals owns 75 billion shares of CMKM common stock.  What percentage of CMKM shares does that represent?  Since CMKM does not file public reports, and has not otherwise disclosed its outstanding shares, it is impossible to determine that percentage from the public record.  Since CMKM reportedly is authorized to issue up to 800 billion shares of common stock, Nevada Minerals may own as little as roughly 10% of the CMKM shares – or a greater percentage if CMKM has not yet issued all of its authorized stock.

And that is not all. 


Juina Dance

The relationship between CMKM and U.S. Canadian is even more complex than these transactions suggest.  There is plenty of fodder for more bullet points.  Enter Juina Mining Corp. (Pink Sheets: GEMM).  Like CMKM, U.S. Canadian, and Nevada Minerals, Juina has declared itself to be in the mining business – and like those other companies it has yet to uncover marketable ore that seems likely to lead to significant revenues. 

How has the relationship between these companies evolved?  In April 2004, U.S. Canadian acquired control of Juina.  Later that month Juina acquired Yellow River Mining S.A., which operates the Yellow River Gold Mine in Ecuador.  At the time of the acquisition, U.S. Canadian said that the Yellow River Gold Mine was "currently a revenue producing concession."  Exactly what does that mean?  U.S. Canadian's Form 10-Q financial report for the quarter ended June 30, 2004 stated that "to date, a small quantity of gold" has been recovered from black sand removed from the Yellow River Mine. 

U.S. Canadian did not generate any revenues in the first six months of 2004 – either from the Yellow River Mine or any other project.  Still, efforts to exploit the Yellow River Mine apparently continue – to reiterate the comments from a Minera Nevada spokesman in CMKM's October 18th press release:

[a]ll will be done to ramp the mining production to complete our obligations to Yellow River and US Canadian Minerals, Inc. for their addition of two additional mills to Yellow River.

How does this relate to CMKM?  In July 2004, CMKM announced that it would acquire 95,502,027 shares of Juina Mining Corp. representing 25% of Juina's outstanding shares, for $500,000.  CMKM had the option to buy another 24% of the Juina shares for an additional $500,000.  On October 16, 2004, CMKM revealed that it had exercised its option to purchase the additional Juina Shares (127,336,036 shares) for $500,000. 

Will CMKM enjoy potential revenues from the Yellow River Mine by virtue of its ownership interest in Juina?  Apparently not.  One day before CMKM acquired the first tranche of Juina shares, Juina sold its interest in the Yellow River Mine to U.S. Canadian in exchange for 50,000 shares of U.S. Canadian stock.  Where does that leave Juina?  According to a spokesperson for the Company, Juina plans to proceed with mining operations in Brazil once it gains necessary governmental approvals.

On the other hand, CMKM could now benefit from the Yellow River Mine as a significant shareholder of U.S. Canadian – assuming of course that the mine yields something of value.  The value of that mine remains at issue.  U.S. Canadian reported in May 2004 that two of its representatives – neither of them a qualified geologist – visited the mine and returned home with samples of gold that had not yet been tested independently.  U.S. Canadian conceded at the time that it lacked the financial wherewithal to support the project and that, even if funds could be raised, the Ecuadorian government and other third parties may object to the venture for reasons that include international environmental considerations.  The Company now says that Yellow River Gold received a concession for mining gold from the government of Ecuador on August 24, 2004, although the terms of that concession have yet to be released.

Where does Juina presently fall in the CMKM/U.S. Canadian equation?

• U.S. Canadian acquired control of Juina in early 2004.
• CMKM has now acquired 49% of the outstanding Juina shares.  It is not clear whether those shares came directly from Juina, from U.S. Canadian, or elsewhere.
• U.S. Canadian has obtained Juina's interest in the Yellow River Mine.
• Minera Nevada (in partnership with CMKM) is completing "obligations" to U.S. Canadian and Yellow River Mine.
• Juina is planning to mine for gold and/or other minerals in Brazil if and when it gains permission.

And investors are still awaiting a discovery that will generate substantial revenues for any of these companies.


Could They Be Laying a Pysanka?

Add St. George Metals, Inc. to the roster of obscure companies entwined in the CMKM/U.S. Canadian mix.  St. George, which trades on the Pink Sheets (Pink Sheets: SGGM) announced in October 2002 that it had "no continuing ongoing business operations."  The Company's Form 10-Q report for the period ended October 31, 2002 confessed that it's "financial resources have been substantially exhausted."  As of January 31, 2002, the date of the last audited financial statement filed by the Company, St. George had no money.

When it was last heard from – or at least at the time of its last public filing in November 2002 – St. George, a Nevada corporation, maintained its offices in Alexandria, Virginia.  The Company, which had abandoned its mining operations and appointed a new set of directors (Joseph Meuse, Gary Meuse and Barry Martelli) who it hoped would "be able to propose a combination of the Company with another business entity that could possibly result in a return of some shareholder value to the shareholders of the Company."  Joseph Meuse, an investment consultant and licensed stock broker, was identified as the Company's new Chairman. 

St. George now has resurfaced, with a different home – and apparently a different set of characters.  The Company is now located in the town of Vegreville, in Alberta, Canada. Vegreville, with a population of 5,376, is best known as the home of the world's largest Pysanka, a Ukrainian Easter Egg. 

The Company also has new management.  The National Quotation Bureau identifies Mark Giebelhaus as the President of St. George.  We have not discovered any public information detailing the transition from the Meuse group to Mr. Giebelhaus, describing Mr. Giebelhaus's professional background, or indicating the identities of any other members of the St. George management team.

St. George ceased filing public reports in November 2002, joining CMKM and Juina as non-reporting public companies whose financial status remains hidden from the public.  Somehow, that has not dissuaded investors from purchasing St. George shares – or CMKM from tagging St. George as another business partner. 

On September 2, 2004, CMKM announced that St. George had agreed to acquire 5% of CMKM's mineral claims in exchange for $10 million and 200 billion restricted shares of St. George stock.  CMKM said that St. George had already paid the first $2.5 million installment and that a second $2.5 million payment was anticipated by October 2nd.  Indeed, CMKM announced receipt of the second $2.5 million payment on September 13th, the third $2.5 million payment on September 22nd, and the final $2.5 million payment on September 28th.

CMKM offered no insight into St. George's sudden ability to dole out millions of dollars.  As we noted earlier, when last heard from, St. George was in dire financial straits, and there has been no public information that would indicate a dramatic turnaround.  Indeed, on October 15, 2004 St. George issued a press release suggesting that it still is struggling to ramp up operations.  The announcement certainly would not encourage investors to conclude that St. George is on the brink of success.  Instead, it revealed that St. George:

• Had retained a mining consultant, but had yet to assign him any work, and could not be certain that any fruitful mining claims would be forthcoming;
• Is considering exploration in Northern Arizona, but has not entered into any contracts;
• Is seeking a new Board of Directors and Board of Advisors but had not yet identified any candidates; and
• Was continuing negotiations with CMKM – but gave no indication of how those talks might position the Company.

So where did St. George get $10 million to invest since the Company does not reveal the existence of any operations that would generate those funds?  Does that mean St. George raised the money by selling shares, and, if so, to whom?  The Company has not issued any information detailing the source of those funds – or explaining why it valued 5% of CMKM's unproven mining claims at $10 million.

Then there is this – which should not be lost in the glow of St. George's $10 million investment.  St. George would now appear to be a subsidiary of CMKM.  According to the National Quotation Bureau, as of September 6, 2004, 16.9 million shares of St. George common stock had been issued.  That same month, CMKM said it would receive 200 billion St. George shares as part of the $10 million deal.  That would leave CMKM holding 99.99% of the outstanding St. George shares.

There are other elements that suggest the underpinnings of a close working relationship between the two companies.  St. George identifies its investor relations representative as Vickie Curran.  As recently reported by Stockwatch, an Internet publication headquartered in Vancouver, Canada, Ms. Curran's father is Victor Casavant, Urban Casavant's brother.  According to Stockwatch, Ms. Curran says that Victor Casavant has no role at St. George.  As for Urban Casavant – with CMKM holding a controlling interest in St. George, his involvement would appear to be considerable.

St. George may barely exist as an operating entity, but that has not deterred investors in the wake of the CMKM announcements.  On September 1, 2004, St. George stock closed at a price of one cent a share, on volume of 500 shares.  On September 8th, shares prices hit 75 cents and over 653,000 shares were traded.  Volume continued to increase, to 2.4 million shares on September 9th and over 1 million on September 10th.  Shares have continued to trade at prices ranging from 23 cents to 50 cents, although by October 21st they had dipped to 28 cents a share.  Of course, even that seems high for a Company which seems to be starting over – at best.


Shaking the Money Tree

For the past several months U.S. Canadian has been bubbling with enthusiasm about the imminent appearance of a white knight which would alleviate the Company's financial woes.  On August 19, 2004 the Company announced that it had agreed to swap $9,005,355 of U.S. Canadian common stock for shares of a newly-formed London, England-based investment company that had been formed to invest in United States micro cap companies. 

According to U.S. Canadian, the investment company planned to apply for its shares to be traded on the London Stock Exchange.  The deal provided that the U.S. Canadian shares issued to that investment company would be "locked up," and therefore could not be traded for two years.  On the other hand, fifty percent of the investment company shares issued to U.S. Canadian could be forfeited, in whole or in part, if the price of U.S. Canadian shares dropped during the lockup period. 

U.S. Canadian was so enthusiastic about the prospects of this transaction that it issued virtually the same press release before the stock market opened for trading the next day.  It did not, however, file a Form 8-K with the SEC describing the transaction and making public the underlying documents.  U.S. Canadian certainly is familiar with Form 8-K, having filed nine of those forms since May 2004 to report such sundry developments as transactions involving CMKM and the Yellow River Mine and the replacement of the Company's accountants.

On October 5th, U.S. Canadian announced that it would release a timetable for its new funding within a few days.  The following day U.S. Canadian identified the financier as Langley Park Investment Trust Plc and said that Langley shares would begin trading on the London Stock Exchange on October 7th.  Then, on October 8th, the Company declared that Langley shares had begun to trade, thereby triggering the time schedule for funding U.S. Canadian. 

What was that time schedule?  The Company did not say, and still has not filed a Form 8-K reflecting its terms. 

U.S. Canadian is not the only U.S.-based company to have announced a stock swap arrangement with Langley Park.  At least four other U.S. over-the-counter companies have disclosed similar transactions: Direct View, Inc. (OTCBB: DRVW); Consolidated Energy & Technology Group, Inc. (Pink Sheets: CGGE); Galaxy Minerals, Inc. (OTCBB: GAXY); iMedia International, Inc. (Pink Sheets: IMNL); IVI Communications, Inc. (Pink Sheets: IVCM); and Material Technologies, Inc. (OTCBB:MTNA).

Galaxy Minerals has filed a Form 8-K with the SEC, including a copy of its agreement with Langley.  While there can be no certainty that the terms of that agreement are identical to those between U.S. Canadian and Langley, the Galaxy transaction does offer some food for thought.  The Galaxy shares were sold to Langley pursuant to Regulation S, which permits the sale of unregistered shares to non-U.S. citizens.  Regulation S shares may not be sold back into the U.S. market for one year, but, under ordinary circumstances they can be sold immediately outside of the U.S.  In this case Galaxy, like U.S. Canadian, has entered into a two year lockup agreement with Langley.  Galaxy may, however, consent to release its shares from that lockup at any time. 

If the U.S. Canadian shares were issued to Langley under Regulation S – as seems likely – and if U.S. Canadian has the right to release the lockup before the end of two years, those shares also could find their way into the marketplace in far less than two years.

Meanwhile, Langley is predicating its net asset value on the current market prices of its "portfolio" companies – which could prove dicey considering the untested nature, and uncertain financial future, of many over-the-counter companies.

Meanwhile, Langley's U.S. Canadian holdings now have multiplied threefold.  On October 27th, U.S. Canadian completed a three for one forward split of its common shares.

U.S. Canadian stock prices have been soaring in recent weeks even though the Company has not reported any revenues in 2004 and had merely $1,321 in the bank as of June 30, 2004.  Have investors bought into the promise of the as yet unproven U.S. Canadian/CMKM alliance?  Or is the prospect of Langley stock driving U.S. Canadian's share price?  The reason for the surge may be elusive, but U.S. Canadian shares, which were selling for $4.70 on September 30, 2004 (on volume of less than 9,000 shares) reached a price of $18.75 a share on October 12th, as over 660,000 shares changed hands. 

U.S. Canadian's rising stock price created a market capitalization for the Company that is out of proportion to its financial condition and hardly justified by its uncertain prospects.  On October 12, 2004, when the share price hit $18.75, at least 16 million shares of U.S. Canadian stock were outstanding – the 8.5 million shares issued as of June 30th and the $7.5 million shares given to CMKM in July.  That does not include the shares issued to Langley, which may or may not have been distributed at the time.  Based solely on those 16 million shares, with the stock priced at $18.75, U.S. Canadian had a market value of approximately $300 million.

And $1,321 in cash – at least according to the most recent public filing.


Uranium or Mine?

CMKM recently extended one of its partnerships, this time with United Carina Resources, one of its joint venture partners in the quest for diamonds in Saskatchewan which, thus far, appears to have uncovered two diamond particles weighing an aggregate of .000005 carats. 

On October 8, 2004, CMKM announced that it had entered into an agreement with United Carina under which it could earn a 50% interest in "recently acquired uranium properties" in Saskatchewan in exchange for payments totaling $1.45 million.

The October 8th press release maintains that "a substantial amount of exploration has been carried out on these properties in the past" and notes that the targeted area is within 30 kilometers of known uranium deposits – but 30 kilometers, otherwise known as 18.6 miles, sounds like a considerable distance.  CMKM goes on to describe the nature of mineral deposits in the area, a reference that offers no indication that valuable, revenue producing uranium has been discovered on the property under exploration by United Carina. 

The uranium announcement, like many of the other press releases issued by this group of companies, is long on promise and short on substance.  And while investors have had access to financial details about several of these entities – namely U.S. Canadian, United Carina, and Consolidated Pine Channel Gold – information about CMKM, Juina and St. George ranges from scarce to non-existent. 

That may change if, as promised, CMKM resumes filing public reports.  That, at least, is the buzz from the Company and its proponents on Internet Message Boards.  CMKM's press releases have repeatedly referred to the Company's retention of an experienced securities attorney, Roger Glenn, and fans of the Company have convinced themselves, and one another, of the significance of Mr. Glenn's role as a prelude to becoming a reporting company.  Indeed, a CMKM  press release issued on September 24, 2004, quoted Mr. Glenn as saying that "[t]he company's accountants are working to complete the audit of the company's financial statements. When that has been accomplished, the company will be well on its way to becoming a reporting company again."

Neither Mr. Glenn nor CMKM has identified those accountants, but they could face a daunting task when you consider the number of other public companies in which CMKM now seems to hold a controlling interest - U.S. Canadian; Juina; St George.  Does CMKM intend to consolidate its financial statements with one or more of those companies.  That could pose a problem since Juina and St. George are public companies that do not file audited reports.

On the other hand, if CMKM's revenues rival those of its joint venture partners, the calculations could be simple.


X Factors

The television program "X Files" developed a following of devoted fans who tuned in each week (and paid their way into the movies) hoping, sometimes expecting, to find answers to the lingering questions that formed the show's fabric.  Followers of CMKM – which trades on the Pink Sheets as CMKX – have set out on a similar journey – occasionally positing their own answers to questions, despite the paucity of information emanating directly from the Company.

The CMKM bandwagon has been ably assisted by a group of promoters and proponents who spread the word through e-mails, reports, and a litany of mind-numbing messages posted on Internet Message Boards like Raging Bull.  An Internet tout named Harold (Hal) Engel, who calls himself Willie Wizard, has been one of the Company's most prolific supporters, sending out dozens of e-mails regurgitating CMKM press releases and recommending the stock.  Engel recently invited his readers to attend a "Shareholders' Appreciation Party" in Las Vegas later this month honoring CMKM and U.S. Canadian.

Earlier this year the SEC charged Engel with violating federal securities laws by selling unregistered shares of Energy & Engine Technology Corp. that he had received for his promotional services.  At the time, the SEC found that

Engel fails to provide any assurances against future violations.  Further, Engel is in the practice of entering into arrangements with issuers that are similar to the one he entered into with Energy & Engine.  Engel states that from 'time to time [he] is approached and asked to assist in building a corporate image by allowing the company to advertise on his website.'…Engel's submissions also indicate that it is not atypical for him to receive payment in securities from these companies.

Since Engel seemed determined to continue his promotional activities, and would therefore have ample opportunity to violate the securities laws again in the future, in May 2004 an Administrative Law Judge ordered him to cease and desist from future violations.

By June 2004 Engel was hyping CMKM - and admitting that he had purchased 725 million shares of the Company's common stock.

He was not alone.  That same month a promoter operating a website and newsletter service called Explosive Stock Picks. Com, or ESP, began beating the drum for CMKM.  Explosive Stock Picks said it owned 5.7 million shares of CMKM common stock, which had been purchased in the open market. [Note:  On January 23, 2005, StockPatrol.com received an email from Equity Bridges Financial Relations, the publisher of Explosive Stock Picks, stating that the publisher continued to hold all of his shares of CMKM, that he has continued to buy more shares, and that "there is nothing hyped in my profile. Pink sheet stocks are speculation."]

The CMKM boosters soon were joined by The Green Baron Report, published by Evergreen Marketing, which repeatedly has called CMKM "The Stock Play of a Lifetime."  The Green Baron is a vocal proponent of CMKM, but its website does not indicate whether this particular fan of the Company holds any CMKM shares.

These CMKM proponents have been ably assisted by a flock of true-believers who spend hours pumping the Company's prospects in online forums available on Raging Bull, PalTalk, Investor Hub, and elsewhere on the Internet.  But the biggest X Factor driving the CMKM promotion may be one provided by the Company itself – the "CMKXtreme" "funny car," which travels the drag car circuit.  CMKM fans apparently gather at these events, soaking up the CMKM vibes and hoping to sniff out tangible information about the Company's mining activities. 

So far, however, they seem to be inhaling the same exhaust fumes as the rest of the public.

No doubt, some of the CMKM/U.S. Canadian boosters will dismiss the recent trading halts as a regulatory conspiracy, plot by short sellers, or mere blip on the upward trajectory of the two companies and their venture partners.

On the other hand, some things are even funnier than a funny car.

 



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