Silver Falcon Mining (SFMI) Has to Be the Worst Stock Investment of All Time? Why? Its the Lease!

Why is the Silver Falcon Mining company one of the worst stock
investments of all time? Its simple, the Lease.

Now Goldcorp Holdings, the company that owns the War Eagle Mountain in
Idaho, values that property on their audited balance sheet at $360,000
which to us sounds like a fair value .

Both Goldcorp Holdings and Silver Falcon are managed by the same person.

Now what does the lease require from Silver Falcon? and why does the lease make SFMI The Worst Mining Investment of All Time?

Once Silver Falcon is in production, SFMI has to pay Goldcorp 15% of
the minerals produced BEFORE any expenses for production are paid out.
Now SFMI has only 85% of their production to pay expenses. In addition
now to their production expenses, they have to pay Goldcorp a monthly
lease payment of $83,333.33 (this on a $360,000 property!) and they
have to pay them $10,000 a month so Goldcorp can audit the production.
Why does SFMI have to pay Goldcorp a monthly fee for auditing, they are
managed by the same people! Here is part of the lease:

4. Rent. The annual rent for the premises is $1,000,000, which will be
payable in twelve equal monthly installments of $83,333.33 commencing
on April 1, 2008 and continuing on the first day of each calendar month
thereafter during the term of this Lease; provided that Lessee shall
have the right to extend the commencement date of the payment of annual
rent until July 1, 2009, and if the Lessee exercises that option, the
term of this Lease shall extended for an equal number of months. Rent
shall be paid to the Lessor at such address as Lessor may designate in
writing.

5. Royalty. In addition to the annual rent, Lessee shall the Lessor a
royalty equal to 15% of all minerals produced from the premises during
the term of this Lease. The royalty shall be calculated on the amount
of marketable minerals derived from ore produced from the premises, as
determined after the ore is smelted and after the smelter’s fee is
deducted, regardless whether the smelter is paid by taking a share of
the smelted minerals or by some other fee arrangement. The Lessee
agrees to pay the Lessor a nonaccountable fee of $10,000 during any
month that mineral ore is produced from the premises to reimburse
Lessor for the cost of auditing the production of mineral ore and
refined minerals from the premises.

Here is a beautiful provision. When SFMI wants to extend the lease,
they have to tell Goldcorp and send them an additional one million
dollars, unreal!, this on a $360,000 property:

2 Term. This Lease shall expire on April 1, 2023. Lessee shall have the
option to extend this Lease for an additional five year term, provided
however that Lessee is not then in default under the terms of this
Lease and Lessee pays Lessor a lease extension fee of $1,000,000. In
order to extend the term of this Lease, Lessee must notify Lessor of
Lessee’s intention to extend the term of this Lease in writing at least
ninety (90) days prior to the expiration date of the Lease, accompanied
by payment of the lease extension fee.



Check out the signature page from the the Lease. The CEO of both companies are the same person, Pierre Quilliam. Click on the company names below on the signature page to verify this. I bet those were some tough negotiations. Who represented the Silver Falcon Mining shareholders?

Signature page from the the Lease:

LESSOR:

GOLDCORP HOLDINGS CO.


______________________________

By: ________________________

Its: Chief Executive Officer

LESSEE:

SILVER FALCON MINING, INC.


______________________________

By: ________________________

Its: Chief Executive Officer




From the 12/31/2007 Goldcorp Holdings audited financial statements:

"On October 11, 2007, we entered into a lease agreement with Silver Falcon Mining, Inc., under which we leased our owned and leased acreage on War Eagle Mountain, Idaho to Silver Falcon. Silver Falcon is responsible for all mining activities on our land, and we are entitled to lease payments of $1,000,000 per year, payable monthly, a nonaccountable expense reimbursement in the amount of $10,000 for any month in which ore is mined from the property, and a royalty of 15% from any proceeds payable to Silver Falcon by the smelter of ore produced from land. Pierre Quilliam, our chairman and chief executive officer, is also the chairman and chief executive officer of Silver Falcon."

The reason this is the worst mining investment of all time, is that I
know of NO small mine that could be profitable with this lease
arrangement. NOT ONE!

But eliminate the $1,000,000 annual lease payment and the $10,000 monthly expense fee and just charge the 15% royalty then this mine has a chance. The creditors need to be paid off and the Silver Falcon shareholders deserve to be looked out for by the Silver Falcon management.