At the end of trading today, Valley High Mining (OTC: VHMC) reached a new high of $2.00. This was a staggering gain of 33%. However, what made the gain so impressive was its suddenness. It came out of nowhere. Analysts have been asked frequently over the last few months whether or not Valley High Mining would have the opportunity to become a profitable penny stock company, and nine times out ten the answer was always, “Maybe, but not yet.” To put it another way, a sudden rise of 33% is the closest thing to a miracle one can get within the penny stock universe.
It is hard to pick penny stocks that hide under veils of mystery. In the penny stock world, being able to read press releases and announcements is extremely important. Wall Street hedge funds have the golden rule of believing that the system is flawed and therefore should be bet against, and the penny stock world has the rule of believing in the news. It is a belief that stems from the fact that penny stocks are generally smaller companies and therefore generate smaller revenues. In the mind of the penny investor, the system is not as flawed as the billion-dollar giants. At least that is the hope.
Valley High Mining has been dead quiet. It has been quieter than a mouse on Christmas Eve, and for a while it was thought that this was for good reason. Considering the fact that as of December 31, 2009, the company had generated no revenues, it was thought that the silence was an indication of truth: There actually was nothing to tell the world. To see a jump of 33% seemed improbable and impossible.
Valley High Mining is what is known as a shell company. It is a company that focuses on seeking acquisition candidates through acquisition, merger, reverse merger or any other business combination method. A shell company is a company that is used as a mediator of financial transactions. In other words, a shell company is generally a company that is inactive and that is used for various financial maneuvers. This is also a good explanation of why there has been so much quiet surrounding Valley High Mining – it is not really a “real” company to begin with.
However, Valley High Mining made two different announcements over the last six months. Both of these announcements are very different in their nature. Consider them below:
- April 13, 2012: Valley High Mining announced that it had entered a Letter of Intent with a private third party lender to acquire a direct interest in an 800-hectare gold project located in southwestern Peru. The agreement saw Valley High provide $500,000 in direct investment to certain tailings on the property.
- May 3, 2012: Valley High Mining reported that John Thomas Hickey, who held all positions in the company, resigned. The company appointed Michel Van Herreweghe as his replacement.
These press releases were covered by Reuters and do not convey very much. Whether the seal of silence is just an indication of a shell company, or whether Valley High Mining actually has more to it than what is being said still remains unknown. It should also be noted that there has been a history of shell companies committing fraud. Indeed, Valley High Mining could just be another one of those companies experiencing artificial gains.
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