West High Yield's Asset Sale Draws Inquiry After 1,000% Gain

(Bloomberg) -- A Canadian regulator is seeking more information from West High Yield (W.H.Y.) Resources Ltd. after the miner said it sold a magnesium deposit for 46 times the company’s market value, pushing the stock up as much as 1,000 percent.

“Given the magnitude of this transaction, we are in contact with the company to get additional information,” Hilary McMeekin, a spokeswoman for the Alberta Securities Commission, said in an emailed statement Friday.

Shares of Calgary-based West High Yield, which has no revenue, surged as high as C$3.80 Thursday after it said it sold a Canadian mining deposit to a U.S. buyer for $750 million. The stock was halted Friday in Toronto. The shares closed Thursday at C$2, up from 36 cents Wednesday, when it had a market value of C$20.6 million ($16.4 million).

According to the West High Yield statement, the purchaser was Gryphon Enterprises LLC. Stephen Cummins, chief executive officer of Gryphon Enterprises, said via a LinkedIn message Thursday that the sale is “absolutely a legitimate transaction.” He said the company will provide more information on the purchase “at the appropriate time.”

He didn’t return requests for comment Friday.

In 2010, while Cummins was CEO of Green Processing Technologies Inc., a Salt Lake City-based company, he was accused of soliciting and selling securities to investors without a license by the Colorado Securities Commissioner. The Commissioner issued a cease-and-desist order and Cummins agreed to pay investors back in cash. He neither admitted nor denied the allegations.

According to a West High Yield filing to regulators, the Toronto office of law firm Baker McKenzie represents Gryphon Enterprises, based in Swanton, Maryland. Greg McNab, global head of mining at Baker, said Thursday he was unaware of any connection.

“I’m not aware that we act for them,” McNab, a partner at the firm, said by phone. “We’re not aware of any role in it.”

McNab declined to comment when contacted Friday.

West High Yield’s CEO Frank Marasco said in an interview Thursday that the financial backer of the deal wanted to stay anonymous. He said he got the price he deserved for the asset on 7,891 acres near Trail, British Columbia, just north of the Washington state border. He didn’t return a call seeking comment Friday.

--With assistance from Aoyon Ashraf Kristine Owram and Joe Deaux

To contact the reporters on this story: Danielle Bochove in Toronto at dbochove1@bloomberg.net, Doug Alexander in Toronto at dalexander3@bloomberg.net.

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, David Scanlan, Steven Frank