Geopulse Explorations (OTCBB: GPLS) has been banking on potential for some time now and while there is certainly value in what could be that potential only pays off when a company actually has the ability to follow through with a plan. That being said GPLS seems to be making a habit of selling investors on possibilities rather than realities and the question remains, can they ever develop a plan of operation that they follow through to the end?
Based on their history the chances are slim, having been incorporated since August 2004 the gold, copper and potash exploration company has yet to realize any revenue from operations, remaining dependent upon obtaining financing to pursue exploration activities. Not only has GPLS failed to generate dollar one from operations they actually allowed their only mineral claim to expire in 2008.
Yes GPLS has since made some acquisitions, finalizing a mineral release purchase in the La Sal Mountains region of San Juan County, Utah back in May as well as secured a potash lease on a 234 acre parcel of land in Utah yet according to their most recent quarterly report the company’s balance sheet reflects total assets of $19,435, all in the form of cash. GPLS has already said that “we believe these funds will be needed to pay basic operating costs and costs associated with preparation and filing of required periodic reports.” Meaning they will need to raise the money necessary to actually do anything with their acquisitions.
GPLS gave shareholders a glimmer of hope last month when they announced the finalization of its negotiations with Haycliffe Corp. to procure up to $25 million in financing. Unfortunately that doesn’t mean that GPLS is getting $25 million, it means that Haycliffe “has agreed to use its best efforts to seek to arrange a financing for Geopulse.” Given the history of GPLS it would stand to reason that Haycliffe will run into some problems trying to secure that kind of financing.
Given the popularity of copper and gold mining along with the growing demand for potash GPLS has attracted investors with the word “potential.” This has been the same avenue that several other small exploration companies have taken, grabbing up claims and saying there’s a possibility of gold and copper deposits. In most cases, after what the company considers due diligence, they determine that the cost associated with furthering exploration or production on the claim is not economically feasible.
Investors should be skeptical when it comes to the announcements made by these small exploration companies, especially the mineral lease rights that they possess. Looking at GPLS, the company managed to secure the potash lease on a 234 acre parcel of land located in San Juan County, Utah for $2,380 along with rental fees per acre during a 10-year lease term.
As part of their announcement detailing this acquisition in Utah’s Paradox Basin the company stressed the success found in the nearby Cane Creek Potash Mine which it said had “an estimated life of over 124 years, produces over 180,000 tons per/year of potash; a value of nearly $100 million at current prices.” GPLS then went on to highlight the tremendous benefits of the growing potash industry, pointing to the “rising demands for food, feed and fertilizer.” According to the release “The United States produces only about 1,200,000 tons of potash a year, but consumes 5,200,000 tons; making it one of the largest net importers of potash in the world.”
The natural question to ask is if the mineral lease rights that GPLS managed to acquire holds so much potential then how were they able to secure it for such a minimal price? GPLS has less than $20,000 in total assets yet they managed to grab acreage that could be the equivalent of a gold mine?
Of course their financial situation doesn’t mean GPLS can’t devise a plan of operations and this was outlined in their quarterly report: “For the fiscal year ending January 31, 2012, our plan of operation is to seek to commence phase one of an exploration program on one or both of our mineral leases. Phase one of the exploration program is expected to consist of mapping, prospecting and geochemical sampling of the properties. Following completion of the phase one exploration program we will review the results and any recommendations provided by the consulting geologist and make a determination as to whether to proceed with a second phase of exploration. If it is determined that the results from the first phase of exploration justify a second phase, it will also be necessary to make a decision regarding the nature and extent of phase two of the exploration program and to establish a budget for the second phase.”
First they will need to secure that financing, the $25 million mentioned earlier, and even with that financing they will only begin phase one of their exploration program. Their proposed exploration program could take some time, meaning there will be little value coming to shareholders in the meantime. To solve that problem GPLS has also said they plan on acquiring additional gold, copper and potash property with management’s corporate strategy being to act as “a project explorer, generator, and operator with an objective to option and/or joint-venture projects with major and junior mining companies through to production.”
The bottom line is GPLS is lacking anything concrete, it’s all about potential. That potential has been pushed out to investors through a series of press releases that have done little to convince investors that the company is even close to realizing production. Shares of GLAS are currently trading around the 0.234 – 0.250 range with heavy trading volume, something that can be attributed to the recent coverage by stock promoters.