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Willow Creek Enterprises: A Classic Stock Promotion?

Quick Stats
 

Share Price  $0.695 
Market Cap $186 million
$ traded/day $1.25 million 
Borrow Cost -6.5% 
Short Interest (Est.) 350,000 
Days to Cover  0.15


Willow Creek Enterprises (WLOCD:OTCBB) is a $186 million market cap exploration stage mining company with no discernible asset value and a promotional management. I believe the stock is worth zero. 

What exactly does WLOCD own?

In August 2007 the company paid $6,000 (six thousand) for a mineral claim in British Columbia. In October 2010, the company purchased 20-year rights to explore the Dolly Varden Property in Nevada. It paid $10k up front and owes an additional $10k annually. On November 17, 2010, the Company acquired 7-year exploration rights for the Hercules Property in Nevada. WLOCD owes $290k over the term of the lease and must provide $3.5 million in work commitments. The payment schedule is $20k up front, $10k monthly for four months, and then annual payments.

As of the most recent financials on Aug. 31, 2010, the company had $0 (zero) in cash and current liabilities of $66k. 

The most recent press releases from the company are:

  • 1/13/11 – The company announces a 4:1 stock split effective on 1/14. 
  • 1/4/11 – “Willow Creek Samples Positive Quantities of Copper, Silver and Gold on Dolly Varden”. Literally, the company found 16 rocks, some with “anomalous quantities” of metal. This vague press release does not mention the name of a third party engineering firm, probably because is no such firm, or if there is one it is not of high quality. 
  • 12/29/10 – “Willow Creek Outlines Preliminary Exploration Programs for Early 2011” I saw only one sentence that actually discusses the company’s plans: “Early 2011 exploration program to include: trenching, sampling, ground geophysics, mapping and further targeting; then, advancing the exploration program in the early spring.” 
  • 12/15/10 – The company raises $250k in equity by selling shares and warrants to an entity incorporated in Belize. There was no press release, though the company did file an 8-K (though they don’t always seem to file 8-Ks for the press releases…) 

How much does the company intend to spend on the exploration program? According to the 10-K filed Dec 2010, they plan to spend $35,000 for exploration over the next 12 months. That’s right: the company tells us that it will spend $35k exploring claims that the stock market values at $186mn.

In the extremely unlikely possibility that there is a material amount of precious metal on these claims (about as likely as the CEO going to the 7-11 and buying a winning lottery ticket), the cost of building an actual mine is significant. Since the company has only ~$200k cash (from the Belizeans), shareholders would face significant dilution. 

WLOCD has invested a total of $46,000 in its various rights and claims—less than the amount it currently owes to creditors. Most of this money was invested in the past 3 months. If these assets are really worth $186 million today, these investments rank amongst the greatest in history.

Management

So who exactly is responsible for this magical 4000-bagger in 3 months? The CEO, President, CFO, Secretary, and Treasurer positions at WLOCD are all held by a “Mr. Terry Fields, LL.B., BSc.”

A quick search also revealed that Mr. Fields is also CEO or president of the following public companies:

  • Uniontown Energy (UTOGD-OTCBB, $1.65) 
  • Formcap Corp (FRMC-Pink, $0.02)
  • Daulton Capital Corp (DUCP-OTCBB, $0.19) 
  • Spirit Exploration (SPXP-Pink, $0.01) 
  • First Pursuit Ventures Ltd (FPV-Venture, C$0.16) 
  • Malwin Ventures (MLWN-Pink, $0.23)

And associated or formerly associated with the following companies:

  • Yankee Hat Minerals (KHT-Venture, C$0.07) 
  • GoEnergy (GOEE-Pink, $0.55) 
  • Liberty Silver (LBSV-OTCBB, $0.43) 
  • Meadow Bay Capital (MAY-Venture, C$0.18)

(source: investing.businessweek.com/research/stoc...)

So in addition to being one of the world’s greatest investors, Mr. Fields is also able to run 6 companies at once. That’s quite an impressive feat. How much does such a talented executive cost?

According to the 10-K, Mr. Fields received 2 million unrestricted, pre-split shares when he became CEO in August, and another 5 million pre-split shares from a Mr. Sidney Swick on October 21, 2010. That’s a cool $18.7mn total at market today.

Who is Sidney Swick? According to the 10-K, Mr. Swick was the majority shareholder of WLOCD at August 31, 2010 with a holding of 105 million shares, and “On October 22, 2010, the Company and Mr. Swick agreed to retire a total of 100,000,000 restricted common shares owned by Mr. Swick.” There is no stated reason why Mr. Swick would agree to cancel $80 million worth of shares (The stock was trading at $0.80 at the time).

Here is a profile of Swick (source: investing.businessweek.com/research/stoc...)

“Age: 36

... 

Sidney Swick served as the Chief Executive Officer of Willow Creek Enterprises Inc. until August 9, 2010 and served as its President, Chief Financial Officer, Secretary, Treasurer and Principal Accounting Officer from January 16, 2007 to August 9, 2010. Mr. Swick has been employed as an insurance broker since 2004 specializing in group benefits for small and medium sized businesses in Edmonton Alberta and surrounding area. He served in the telecom industry at Bell Canada until 2004. Mr. Swick served as a Director of Willow Creek Enterprises Inc. from January 16, 2007 to August 9, 2010.”

So who else is associated with this company? There are only two directors on the board at WLOCD. One is Terry Fields, and the other is a Mr. Larry Eastland.

From the 10-K:

“Since 1980, Mr. Eastland has been Chairman of the Board of Directors of LEA Capital Advisors, Inc., an international business and investment advisory group specializing in taking private companies public with various offices worldwide”.

And this is what the State of California thinks of Mr. Eastland and company:

“the California Corporations Commissioner is of the opinion that Larry Eastland, Justin Eastland, and LEA Capital Advisors, Inc. have effected transactions in securities as a broker-dealer without having first applied for and secured from the Commissioner a certificate authorizing them to act in that capacity, in violation of Corporations Code section 25210. Pursuant to section 25532 of the Corporate Securities Law of 1968, Larry Eastland, Justin Eastland, and LEA Capital Advisors, Inc. are hereby ordered to desist and refrain from effecting any transaction in, or inducing or attempting to induce the purchase or sale of, any security in this state, unless and until they have applied for and secured from the Commissioner a certificate, then in effect, authorizing them to act in that capacity, unless exempted under the provisions of Chapter 1 (commencing with Section 25200) of this part.”

(source: www.corp.ca.gov/ENF/pdf/2010/LEACapital_...)

Conclusion

I believe that the buyers of this stock are retail victims of a classic stock promotion. Even for a penny stock, this is such a blatant promote that I suspect that many of the buyers are knowing participants in a greater fool game. When the downside comes it will be violent. 

Disclaimer: The information and opinions presented in this article are provided for informational purposes only, and do not constitute investment advice. Investing in equities and other securities involves a high degree of risk. Potential investors should seek the advice of a professional before engaging in any investing activity. The author of this article and/or his affiliates have a position in the securities mentioned in this article at the time of publication. The author and/or his affiliates may change their position at any time without disclosure.

 


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: The author of this article and/or his affiliates have a short position in the securities mentioned in this article at the time of publication. The author and/or his affiliates may change their position at any time without disclosure.