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Take physic, pomp

Kaizen Discovery (KZD.v) and the power of magical accountancy

On October 26th 2015, Kaizen Discovery (KZD.v) closed its deal with AM Gold and Rokmaster Resources on the Pinaya property in Peru. Here’s the relevant blurb from the latest company MD&A, the hack comes underneath
On October 26, 2015, the Company closed its definitive acquisition agreement with AM Gold Inc. (“AM Gold”) that gives the Company 100% ownership of the Pinaya Copper-Gold Project (the “Pinaya Project”) in Peru’s provinces of Caylloma and Lampa. Under the acquisition agreement, the Company has acquired Canper Exploraciones S.A.C. (“Canper”), a Peruvian subsidiary of AM Gold. The Pinaya Project is Canper’s principal asset. AM Gold received 15,384,615 common shares of the Company, a cash payment of $500,000 and a US$198,617 reimbursement for certain property-maintenance payments made by AM Gold (note 4). 
The Company also closed a concurrent agreement with Rokmaster Resources Corp. (“Rokmaster”), which previously had entered into an option and joint-venture agreement with AM Gold to earn up to a 75% interest in the Pinaya Project by spending approximately $26 million. Rokmaster and AM Gold have been engaged in arbitration proceedings, which were suspended pending closing of the transaction with the Company. Under the terms of the agreement with Rokmaster, (i) Rokmaster transferred to the Company certain of Rokmaster’s drill equipment located in Peru and (ii) Rokmaster agreed to, among other things, terminate the arbitration proceedings with AM Gold and Canper. As consideration, the Company issued 2,000,000 common shares of the Company and paid $300,000 to Rokmaster.
Summing the deal up, KZD got Pinaya for $1m in cash and 17.4m shares issued. At that time, KZD shares were trading at 17c each, which makes them worth $3m (rounded) and let’s go with that number, rather than the 10c and $1.75m value on them this weekend.
Bottom line: KZD paid a book value of $4m for Pinaya.
Last night in a late night Friday NR (and how we love those) KZD announced it had vended out an eventual maximum of 20% of Pinaya to its Japanese business partner for $2.5m, which would value the property at $12.5m. The deal includes an initial no strings payment of $0.625m for 5% of the property. Also KZD lost the services of both its CEO and VP Corp Dev last night which is probably a coincidence innit guv.
Can’t accuse the Canadian mining industry of not being able to create wealth, right? Right?

By the way, we could also add that the Pinaya property is a dog of monumental proportions, has been picked over by mining companies large and small from time immemorial and has one of the worst community relations profiles in all Peru (including an ongoing war between the two main villages on the property), but why complicate a good book-keeping story with facts? And don’t tell the Japanese either, please?

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