NEW THOUGHTS from the Zen man...

[james55703]

SOME NEW THOUGHTS.

After thinking through many, many things regarding CMKX, I've reached some new directions on thinking. I base these thoughts on three key assumptions. Anyone who disagrees with these assumptions will obviously disagree with everything I say. Which is fine. I'm not here to convince anyone of anything. I'm here to share my thoughts and you can either agree or disagree but a) I don't care, and b) your agreement or disagreement won't affect the ultimate outcome of this stock anyway. So here are my three assumptions and the basis for each, then I will get into where I'm going with this.

Assumption 1:

There is a very large short position. My estimate is 100 billion. You either agree or disagree. Based on trading volume in the past year, that is my opinion.

Assumption 2:

The O/S share count is around 10 billion. Urban retired billions of shares last year. It is documented in press releases. 36.5 billion were retired between September and December in '03. I believe he was doing this for a reason. Obviously, you cannot be a successful public company with 100 billion shares. He was making a legitimate effort to take this number down to something palatable. Something investors could actually live with. We have not seen any updates on the retiring of shares, but we have seen Roger Glenn hired. I believe when Urban had everything in order with a palatable number of outstanding shares, he then approached Roger. I am choosing 10 billion and erring on the side of what I believe is conservative. It's entirely possible that Urban retired enough to take this down to under 1 billion. Who knows. I will choose conservatively and assume 10 billion.

Assumption 3:

I am guessing that when all the geology is completed and we perhaps have some further drilling results back, that we will be looking at mining potential in the range of $20-30 billion. I believe that is a very conservative estimate. I think many people are underestimating the true reach of this latest PR. This number could be as high as $100 billion+ in my opinion but I will conservatively say $20-30 billion.

Now, if at this point you are rolling your eyes and in complete disagreement with anything I've said above, then please stop reading. I really don't care if you disagree with nice personumptions. These are MY thoughts and I'm allowed to have them. Much of what follows has some basis in Sterling's thoughts over on Raging Bull, which at first I thought were pretty wild, but then I began thinking them through more and more.

So my new thinking over the weekend is that I've become much fonder of the notion of a tender offer by Urban to go private. One thing that has always baffled me in this whole mix is that if they let the short covering just play itself out straight out, the results are wildly unpredictable. It is entirely possible that enough people will sell to allow the short off the hook by maybe 5 cents or 10 cents. But then again it's possible that there will be such a massive buying frenzy, that the shorts won't even be close at that point. When the sharks circle, it gets VICIOUS. It's possible that this could indeed become the mother of all squeezes reaching several dollars, maybe even in the double digits. Depending on the size of the short position, when you start getting into numbers like that, you have what I would term "chaos". Market regulators don't like chaos. And nobody likes market regulators.

So I began thinking about what the options would be to prevent complete chaos and still deliver what everyone wants. I keep coming back to the same conclusion that a tender offer to go private would be the quickest, safest, easiest method to lock in a price that burns the shorts but not the entire market, makes all the shareholders happy and does not leave anything up to chances as to how this will all resolve itself. It basically names a price and that's that. SEC can't do anything about it. DTC can't do anything about it. Shorts can't do anything about it. If Urban has the financial backing, he has every right to make a tender offer.

So now we get to tender offers. What is fair value for a tender offer. Well, in my opinion first off Urban needs financial backing to extend a tender offer. He's going to have come up with the money to make the offer. Of course, if he owns 9 billion out of the 10 billion shares left, he doesn't have to come up with the money to fund those 9 billion shares since he would, in effect, be paying himself. But unless he owns the ENTIRE float (possible given the short situation), he may still need some money. Roger just happens to be a top attorney at a law firm with perhaps the finest collection of private equity financing clients in the country. Moreover, if a true value can be attached to this property, Urban may qualify for some significant debt financing with a major bank/institution in order to perform the buyout and go private. I think Roger is here for more than just paperwork filing.

The thing that I like about the tender offer approach is that it makes everyone happy. We get a presumably nice buyout price. The shorts get torched but not in a way that the market crumbles. Urban gets his company back and can now turn around and do an IPO as a new entity to achieve proper market valuation.

[james55703]

Continued...

So the question arises then about valuation. I believe that this process will require several things. First and foremost will be the share count. I expect that within 30 days. I am not one of the people claiming it is coming this week. I believe there will be several issues involved with verifying the number, mostly due to some rather questionable behavior by First Global in transferring their records to Pacific. And because I believe that a tender offer would have to actually have a basis for its value (otherwise the SEC could crack down on it as being market manipulation), I believe that in the next 30-60 days Roger and Urban will reveal more meaningful numbers that will allow a fairer valuation to be placed on the property. If we can demonstrate realistically that we are sitting on a property with $30 billion in potential and we have 10 billion shares outstanding and if you assume an appropriate discount based on potential, cost of mining, etc., I arrive somewhere between 50 cents and a dollar for a tender offer. Naturally this number moves up or down based on these variables. If there's 100 billion shares and the property can only be rationally assigned a value of $5 billion in potential, the tender offer could be as low as a penny. If the share count is 1 billion and the property potential is as massive as some speculate (let's say in the neighborhood of $100 billion), a tender offer could rationally be assigned of $20 per share. Who knows. These variables will indeed be key. Based on MY guesswork and assumptions above, I net out around .50-1.00 as a reasonable tender offer. I think higher than that also runs the risk of breaking the backs of too many high-powered players, thus creating the "chaos" that we want to avoid.

I found this article cited on Raging Bull to be very helpful with respect to going-private transactions. Notice that it frequently references the Sarbanes-Oxley Act of which Roger is based one of his publications on.

articles.corporate.findlaw.com/articles/file/00144/008504

Notice too that under Rogers bio in his Corporate Responsibilities publication, that "going-private transactions" is listed as an area of his expertise. Also, in his Edwards Angell bio, he lists "hostile and friendly tender offers" as an area of expertise.

As for a time frame, I believe all of the above will take longer than many want to hear. I'm giving it 30-60 days to develop. First off, I don't think Pacific, our TA, will be ready with its documentation for awhile. Then I think their plan of action will take some time to coordinate with respect to the valuation. If they go forward with a tender offer, in my opinion it must have SOME basis in real, actual valuation. This may take some time still to justify and develop. Clearer readings on our property, drilling results, and perhaps even geologists' consultations may be being formulated as we speak. In the mean time, there may be other news releases to give us hints that things are progressing in the right direction and to be patient regardless of how the market makers manipulate the stock.

Ultimately, if we want to go public and get a proper market valuation so the company can be looked at with a fair eye by analysts and the investment community, we must affirmatively knock the short position out. In my opinion, the tender offer does that. It then gives Urban the opportunity to go private and for Roger to then plan an IPO onto Nasdaq with FAIR valuation. The IPO could also raise significant money for the company to fund the drilling through either Roger's private equity financing contacts or possibly even large institutions. Yes, we would have to buy back into the new company, but if the tender offer was fair, we would have LOTS of money to do that. I personally do not believe that we would be issued stock or warrants for any new, future company with a tender offer since that would continue to put the shorts on the hook with the new shares and the whole point of this exercise would be to rid the company permanently of them. I could be wrong here. Roger may still see that as ok. But my guess is that this would be a clean sweep in going private with a brand spanking new entity untainted by any past securities issues that IPOs. And yes by the way, IPOs and going public are Rogers PRIMARY specialty.

The more I look at Roger's background and skill sets, the more I see why he may ultimately have been chosen for this company. Many will disagree with me that we are not going private because Urban wants to be on the big boards or Urban wants to take care of small investors or for whatever reason. And my response is that a tender offer may actually be the BEST way to properly go public and become a fully reporting company again. It resolves the nasty short issue conclusively and then sets the stage for a more viable option of a full blown IPO with media coverage and everything else. One of the disadvantages of a reverse merger or the mere transition of an otc company to the big boards is the lack of fanfare. Whereas an IPO is a big deal, putting you squarely on the map of every analyst and in front of the investment community front and center. If CMKX has the goods, this would be a very wise move.

Again, there are many variables here. And this is all just one theory. Roger probably has many creative options available to him in this situation. I truly believe that a person in Roger's position would not have taken Urban or CMKX on as a client unless he was shown that either there is massive valuation residing within CMKX or that there is conclusively a massive short position that needs to be broken, or possibly both. If all this is true, how this is resolved will be landmark lawyering on Roger's part.

Also, as for the Joint Venture theory, my opinion is that those other companies would be merged into the new entity that would ultimately go public. They'd get "bought out" for shares in the new company that equate to a fair value.

This is all speculation. Massive, rampant speculation. I am not a securities attorney. I do not know what Roger has planned. I am simply guessing at this based on logic, known facts as we have them, and the application of creative thinking. If you disagree, fine. Many will. If you want to bash this theory, bash away. I really just don't care nor will it make ANY difference on the outcome of this stock.

Speaking of which, I have become far too involved on this stock. When my personal life suffers, I know that it is time for me to step back. So, I will be limiting my involvement here. I'll spend about 1/2 hour at night reading through anything new and posting any new thoughts I might have. That's it. I think this process will take 30-60 days before it truly unfolds. I really don't care what the price does in the interim. I am very comfortable with what I've invested in. I believe as details are continually revealed, that comfort level will continue to go up. Bashers may claim "Where's zen going? Looks like he's running away." Whatever. By now, you know their mode of operation. Look for more articles to be published by stockpatrol, look for more fervent bashing. All that stuff is par for the course. In the mean time, give Roger and Urban the proper space to deliver on their words. I would much rather spend the next 30-60 days engaging in my normal life again than trying to be here to monitor every incremental piece of information. Because whether I do or don't, the end result will be the same, whatever it is.

I am still 110% behind this investment and still believe that it has the greatest potential of any penny stock I have invested in in the last 10 years. I still believe that the key securities partner at the ny office of a top tier law firm does NOT get involved with a stock trading on the pinks at .0001 for most of 2004 without some VERY BIG reasons for doing so.

Anything can happen here. Roger and Urban can run into snags nobody anticipated. On the flip side, Roger may execute this flawlessly and sooner than I expect. Who knows. I am currently in with 33M shares and I truly believe in my heart that we will be a piece of history with the outcome. I truly believe there will be a massive redistribution of wealth from the gutter slime that has savaged and brutalized companies over the last decade by naked shorting into the hands of good, upstanding investors like us that will actually do good things in the world with this money rather than simply use it to leverage more naked shorting to crush more American entrepreneurship. Time will tell. I will be a part of this ride whichever way the current takes us.


Z

As always, these are my personal opinions.

Hopefully nobody in here is investing anything but "fun" money that they can afford to gamble with.

[CashinIn]

Very good post.

[TopHat]

Dude, Excellent! I will also be surfing w/ you all the way.

Top Hat

[bluediamonds]

Nice post.

[millie]

Good Morning Everyone!

In straight forward english, what does all of this mean???

Millie

[millie]

Hello Again:

This just popped up on my 'Google' News email. Can anyone explain this as well.



<http://www.investors.com/breakingnews.asp?journalid=21846220&brk=1>

[CashinIn]

good fine milie, ok i see now, that's a bit old news, it just steculation/bashing. Take my advice and hold your CMKX stocks.

[millie]

Thanks - I intend to.