Entourage bows out of one bowser CMKM Diamonds deal
by Lee M. Webb
Canada Stock Watch
December 6, 2005
Entourage Mining Ltd., a Vancouver-based company trading on the OTC Bulletin Board, has scrapped one of three recently announced Saskatchewan property deals involving CMKM Diamonds Inc., Urban Casavant's revoked pink sheet woofer.
On Dec. 5, Entourage disclosed that it had terminated an agreement to acquire CMKM's purported fully paid 36-per-cent stake in a group of Saskatchewan mining claims rather optimistically known as the Forte Diamond property in exchange for five million shares.
The five million Entourage shares that were to be issued to CMKM under the now cancelled Forte deal were part of 50 million Entourage shares Mr. Casavant's revoked pink sheet promotion claimed would be parcelled out to shareholders under a peculiar liquidating distribution of assets as the penniless company wound up its affairs.
CMKM's Entourage bounty, representing the company's only assets, is now down to 45 million shares that have not even been issued yet.
In part, according to Entourage's Howe Street savvy chairman Paul Shatzko, the company pulled the plug on the Forte agreement after "due diligence" performed subsequent to actually inking the deal indicated that the other parties to the agreement could not meet their obligations.
Mr. Shatzko does not specify which obligations under the five-page Forte agreement the "other parties," CMKM and John E. Dhonau's privately owned Nevada Minerals Inc., could not meet.
Inasmuch as Mr. Dhonau's company simply acknowledged, accepted and consented to the assignment of CMKM's purported 36-per-cent stake in the property to Entourage, however, it appears that any significant problem rests with CMKM's obligations.
Basically, CMKM's significant obligation under the Forte agreement was simply to transfer its purported interest in the property to Entourage.
As previously reported by Stockwatch, information regarding CMKM's purported interest in the Forte property is sketchy, at best.
In July of 2004, CMKM issued a news release claiming that it acquired an undivided 60-per-cent stake in Mr. Dhonau's property in exchange for a whopping 75 billion shares, 40 billion of which were reportedly personally anted up by Mr. Casavant.
After the U.S. Securities and Exchange Commission (SEC) launched an investigation into another CMKM affiliate, U.S. Canadian Minerals Inc., in October of 2004, Mr. Dhonau, coincidentally U.S. Canadian Minerals's largest shareholder, reportedly wanted to distance himself from Mr. Casavant's pink sheet promotion.
In December of 2004, CMKM obliged, announcing that it had repurchased the 75 billion shares from Mr. Dhonau's company for $2.2-million, reportedly consisting of a cash payment of $200,000 and a promissory note for the remaining $2-million. (All amounts are in U.S. dollars unless otherwise noted.)
As of May 10, 2005, CMKM's $2-million promissory note to Nevada Minerals was still outstanding.
Just how penniless CMKM managed to pay off that $2-million, if it actually did, remains as much of a mystery as the shrinkage from the 60-per-cent stake in the Forte property reported last year to the 36-per-cent stake represented in the now cancelled agreement with Entourage.
Muddying the already murky information regarding the Saskatchewan property even further is the fact that SEC target U.S. Canadian Minerals, headed by former purveyor of powdered milk Rendal Williams, lays claim to a 40-per-cent stake in Mr. Dhonau's Forte property, according to regulatory filings.
Setting aside whatever obligations the other parties to the Forte agreement could not meet, Mr. Shatzko also claims that, in part, the deal was cancelled because of the financial burden of as much as $400,000 (Canadian) that Entourage would have to ante up to maintain the claims.
Interestingly, the now cancelled Forte agreement contains no provision requiring Entourage to spend anything on the property. In fact, the agreement specifically stipulates that the deal does not require Entourage "to continue work or payments on the property."
In any event, given that financially challenged Entourage only had working capital of approximately $527,000 (Canadian) as of Nov. 30, any prospect of having to come up with some cash to maintain the claims might well give the company some pause.
Entourage was reportedly also concerned over the likelihood that other interest holders in the Forte property, presumably Nevada Minerals and U.S. Canadian Minerals, did not have the financial resources to make similar potential cash commitments.
Inasmuch as Mr. Dhonau's Nevada Minerals is a private company, there is no information available regarding its financial condition.
While U.S. Canadian Minerals is a public company trading on the lowly pink sheets after being booted off the OTC-BB in the wake of an SEC suspension last year, it has not filed any required financial statements since November of 2004.
Moreover, subsequent to that filing for the third quarter ending Sept. 30, 2004, U.S. Canadian Minerals disclosed that all of is quarterly filings for the year were inaccurate and should not be relied upon.
While Entourage has scrapped the Forte agreement, two other Saskatchewan property deals inked at the same time are still intact.
As previously reported by Stockwatch, Entourage is peeling off 15 million shares in exchange for CMKM's peculiar right under a defaulted agreement with Rick Walker's TSX Venture company United Carina Resources Corp. to acquire a 50-per-cent stake in four prospective uranium claims known as the Hatchet Lake property.
Mr. Walker's United Carina has reported some exploration on the Hatchet Lake property, but very little is known about the property covered in Entourage's third Saskatchewan deal.
Potential prairie dog
In a larger and even more peculiar deal executed with a numbered Saskatchewan company controlled by Mr. Casavant's associate Emerson Koch, Entourage will issue 30 million shares to CMKM and 3.89 million shares to Mr. Koch's company for an 80-per-cent stake in a purported 1,087 claims known as the Smeaton property.
After Stockwatch raised a number of questions regarding that deal, Entourage disclosed in an SEC filing that it was relying upon the representations of Mr. Koch concerning CMKM's purported entitlement to the 30 million shares under yet another agreement upon which Mr. Casavant's pink sheet woofer had defaulted.
In the same Nov. 30 SEC filing, Entourage acknowledged that it did not know the status of the 1,087 Smeaton claims covering approximately 411,275 hectares.
As previously reported by Stockwatch, hundreds of those claims may have lapsed.
Under Saskatchewan mining regulations, beginning in the second claim year, claimholders are required to file technical work reports to meet assessment fees of $12 (Canadian) per hectare or provide a cash deficiency bond in order to maintain mineral dispositions.
According to Pam Schwann, Director of Mines, disposition holders have 90 days from the end of the second claim year to file the technical work reports.
Earlier, Stockwatch paid for search abstracts from Saskatchewan Industry and Resources on a random sample of 10 of 318 claims included in the Smeaton agreement with a second claim year ending July 31.
Technical work reports, due by the end of October, had not been filed for any of the 10 claims, but a cash deficiency deposit of $3,072 (Canadian) had been submitted for each of two claims, protecting those two dispositons until Aug. 1, 2006.
Following Entourage's Nov. 30 disclosure in U.S. and Canadian regulatory filings that it did not know the actual status of the 1,087 claims for which it was peeling off approximately 33.89 million shares, Stockwatch paid for search abstracts on another random sample of 10 claims.
The second random Stockwatch sample was taken from a group of 117 claims, with 105 claims having a second claim year ending on Aug. 26 and 12 claims having a claim year ending on Sept. 1.
Under Saskatchewan mining regulations, technical work reports or cash deficiency bonds should have been filed for all those claims by this time.
According to Saskatchewan Industry and Resources, however, as of Dec. 6 no technical work reports have been filed for any of the 10 Smeaton claims in Stockwatch's second random sample, nor have any cash deficiency payments been made for any of those claims.
Entourage claimed in its Nov. 30 SEC filing that it "believes that most, if not all, of the claims have sufficient assessment work performed on them to keep the claims in good standing with the Government of Saskatchewan until January of 2007," but some observers may find that belief hard to square with the fact that 18 out of 20 claims in a random sample are not in good standing.
Indeed, given those results, investors, perhaps including some of Entourage's existing shareholders who will be impacted by the massive dilution entailed by the transaction, may well wonder whether the Smeaton agreement is another dog of a deal.
Perhaps after scrapping one sign-first-look-later Saskatchewan deal Entourage will eventually get around to obtaining verification of the actual status of the Smeaton claims from Saskatchewan Industry and Resources, something that could have been done for $10,870 (Canadian) as part of the due diligence before announcing and signing the deal.
Failing that, of course, Entourage and its shareholders and others, perhaps including U.S. and Canadian regulators, can simply wait to see exactly how many of the 435 Smeaton claims that should already have had assessment work reports or cash bonds filed end up on Saskatchewan Industry and Resources lapse lists for restaking.
In the meantime, many of CMKM's cult-like followers, who might represent something of a bonanza for any stock promotion if they have any cash left to invest, are taking the five million share reduction in the revoked pink sheet company's expected liquidating distribution of Entourage bounty in stride.
Incredibly, some of those gullible CMKM shareholders seem to think that this latest development is just another part of a convoluted master plan engineered by Mr. Casavant and the revoked pink sheet promotion's brain trust, whoever they may be, that will eventually deliver fantastic riches to the true believers.
Meanwhile, Entourage's share price has taken a nosedive from the 52-week high of 70 cents notched in the wake of the Oct. 20 announcement of the Saskatchewan deals, one of which has now been relegated to the dustbin.
With 138,600 shares changing hands, Entourage closed at 22 cents on December 6.
The saga continues.
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