THE DOG ATE MY HOMEWORK

Last night on Mad Money, Jimmy made the selection of KRY for his viewers and loyal followers. My thanks to Adam at the Daily Option Report for reminding me of this selection. Jimmy's reasons stated for likeing the stock was demand for precious metals from the BRIC countries was strong and political issues in Venezuela may be changing for the better. So as an investor/trader, I decided to do some homework on this one because it sounded odd for someone like our Jimmy to recommend a risky gold stock whose operations are largely mineral concessions that are owned or controlled in Venezuela.

I did not want to spend hours and hours on this project, so I went to the company website and found the latest reports. The major information obtained from the filings are as follows:

The company as of March 27, 2006 had 220,837,259 shs outstanding including options and warrants to purchase about another 20,000,000 -yielding a market value (market cap) of over $1,000,000,000.

In 2005, the companies Revenues totaled $25,000,000 which was up 23% from the $20,000,000 in the prior year. The company attributed the revenue increase to a 12% increase in production and 11% to the increase in the price of gold. That gives the company a multiple of 40x - yes, correct the company is now selling at 40 times sales- not 40 times earnings but 40 times sales. There are no earnings as the companies net loss for the year was about $45,000,000.

At December 31, 2005, the Company had a book value of approximately $130,000,000 and is therefore trading at 8 times book value with huge shareholder deficits.

The company had capital expenditures in 2005 of $94.4 million or about 4 times sales.

The company has a section in its financial report called Liquidity and Capital Resources- The information provided was as follows "the companies principal sources of liquidity have been equity and debt financing. The company does not expect to generate positive cash flow until the Las Cristinas project is operating at full capacity. The company forecasts cash requirements of approximately $275,000,000 through the first quarter of 2008. The company intends to fund this overall requirement with existing cash and from a combination of limited resource project debt financing, and other forms of public market debt and equity financing. "

The company identifies the following as a country risk- The companies principal properties are located in Venezuela and as such the Company may be affected by political or economic instabilities. The risks associated with carrying on business in Venezuela include, but are not limited to civil unrest, terrorism, military repression, extreme fluctuations in currency exchange rates and high rates of inflation.

The bottom line is that this company has spent much of its trading life as a penny stock under 2 bucks. It is obvious that they will continually issue stock and debt to fund losses, probably never be profitable and eventually trade at zero unless it becomes delisted due to political issues or lack of funding. Why someone goes on national television and recommends something like this to viewers is beyond comprehension.