OilPrice.com gets regulatory face slap over Klondike Gold (KG.V), but stock keeps soaring

We’re not usually the types to put crap on competitors, but the guys over at OilPrice.com have a set-up that appears to help direct a lot of folks toward buying certain stocks that they’ve been paid to promote.

Unlike us, OilPrice doesn’t talk about much it hasn’t been paid for, and when it talks about a stock, it comes in the form of extended sales letters rather than deep analysis, and which get put out on the news wires, which is a whole other barrel of scorpions.

Hey it works. Maybe it works a little too well, in fact. That, in itself, brings more people to their site who don’t care about whether a stock is any good, but know they’ll ride a short term rise if they invest in what OP is selling.

And that’s got the eye of regulators, who tend to show up when you get a stock doubling on no news, for several days straight.

To each their own; but what went down this week with Klondike Gold (KG.V) was a whole new level of weirdness.

Klondike Gold Corp. (TSX.V:KG; FRA: LBDP) announces that, as a result of a review by the IIROC, the Company is issuing the following news release to clarify and retract disclosure pertaining to an article featuring Klondike Gold entitled “How Technology Is Fueling The Next Gold Rush” which appeared on the website OilPrice.com.  The article is the product of a corporate communicator attempting to encapsulate the news and direction of the Company’s exploration efforts specifically over the past three years as part of an awareness initiative.  For greater clarity this article and its contents is not in any way intended as, nor should be confused with, technical disclosure, nor was this article reviewed by a Qualified Person.

It goes on:

In particular, the Company wishes to clarify the several references of “20 million ounces of gold” throughout the article.  The 20 million ounces of gold refers to the total estimated alluvial gold production as calculated by the Yukon Geological Survey from the Klondike area creeks and gravels extracted from 1896 to the present day from the area located within Klondike Gold’s current bedrock mineral claims.  A Yukon Geological Survey technical reference is HERE.  Alluvial gold in the Klondike area creeks within the Company’s claims has been considered to be locally derived since its discovery in 1896, and scholarly research has supported this over the past century.  The first scholarly publication from 1899 is HEREHowever, there is no certainty that ongoing bedrock exploration will yield positive or substantive results from the Company’s properties.  As stated above, these references to “20 million ounces” should not be construed to imply the existence of any bedrock mineral resource or reserve on the property. [emphasis mine]

And:

The Company wishes to retract the quote of “The verdict: Not only was Klondike’s property ‘good’, it was exceptional: It’s sitting on channel gravels that have given up 20 million ounces of placer gold (worth $25 billion USD today)”.  This statement is unsupported and misleading, and disclosure of gross values of metal is a violation of NI 43-101, 2.3 – Restricted Disclosure.

And:

The Company wishes to clarify the statement in the article that “The Klondike is full of gold – it is known for its gold. It is all sitting at the surface”.

The OilPrice piece was stupid. It’s way over the top and promotional. I mean, it includes the words, “#1 The Gold Discovery of the Century” and ticker-targeted five other gold companies in their news release, which is a stanky practice.

But anyone reading it knows the piece is stupid. If you read it and thought the words rang true, please stop sending your banking information to Nigerian princes, NOW.

The reason that site is effective in driving share price isn’t that anyone reading that sales letter would think the KG property is suddenly the best opportunity in the world, or that the journalism of one James Burgess is anything close to journalism, it’s that they know, right now, OP advertorials are seen by a large number of daytraders, who’ll jump on the stock just because others are doing likewise.

“Oh, OP is doing a Klondike campaign? Sure, buy $10K worth.”

“Oh, the stock price went up 40%? Cool. Sell.”

This brings big spikes, but they’re spikes, not trends, which over the long haul can really hurt a stock. When people see those massive upswings followed by a massive downswing that usually follows, they see that as a pump and dump going forward and steer clear. It’s a short term gain, but a long term hurdle because you can never hit ‘reset’ on your stock chart.

Regardless, while KG did take an initial drop on the retraction, it has since gone for another ride, and a ride that’s all the more impressive – or scary, depending on how you look at it – because the company is running a $0.29 private placement right now, with a $0.40 half warrant.

The stock price this morning was $0.43 when trading opened. It’s $0.51 now.

It was $0.35 when the piece in question dropped.

I’ve talked to folks involved with the deal and they’re believers in the project. Many are, despite the OP fracas. but when folks are buying the stock at two thirds the price of what the PP is selling for, even after that retraction, the market has gone higgledy piggledy. We’re not buying on assets any more, we’re simply buying and selling sentiment. We’re gambling on whether the crowd will walk east or west.

To me, that’s when I start preparing for a correction.

On Klondike, I’ve got a call in to the CEO and will hopefully talk soon about the project proper, so we can get a sense of what’s really there. On OilPrice, who I’ve never talked to and had no dealings with, I continue to watch from afar and wonder how long they can keep that train going, because the real problem with having an audience that isn’t listening to your words, but is rather watching the rest of your audience and reacting to them, is that they can shift to another venue at any time and leave you suddenly irrelevant.

What’s up, Stephan Bogner.

Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.

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