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A silver ingot.

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The main market regulator in the United States suspended trading in shares of Canadian junior miner Liberty Silver Corp. on Friday before markets opened, but a half-hour delay in Canada opened the door to a selloff on the Toronto Stock Exchange.

At 9:30 a.m., the U.S. Securities and Exchange Commission placed a temporary suspension on Liberty Silver, which trades on the over-the-counter market in the U.S. But in Canada, the shares opened for trading on the TSX, and nosedived once investors heard the news.

It wasn't until 10:01 a.m. that Liberty Silver was halted on the TSX, after the Investment Industry Regulatory Organization of Canada, or IIROC, issued a temporary halt. By that time the shares had already lost 39 per cent, or $49-million of its $128-million market value.

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This isn't the first instance in which there has been a lack of communication between Canadian and U.S. regulatory agencies, but it demonstrates that time is of the essence in such a fast-paced trading environment. Liberty Silver did not issue a press release, and IIROC did not halt the stock until after 10 a.m.; the only people who saw the news were those watching U.S. wires.

IIROC believes it acted as quickly as it could. "It's not common for the SEC to issue a temporary suspension on a Canadian-listed security and in this case IIROC staff were not notified of the action ahead of time," Mike Prior, vice-president of surveillance at IIROC, wrote in an e-mail. "In issuing our trading halt, we have requested Liberty Silver release a statement."

For now, Liberty Silver is simply halted on the TSX (typically a short-term action), but the SEC has issued a trading suspension until Oct. 18. The two-week period will give the regulator time to look into what it described as "a lack of current and accurate information about the company concerning, among other things, the control of its stock, its market price, and trading in the stock."

For much of this year, Liberty's shares traded at $1 or less. But a flurry of activity in late August gave the stock some momentum. From January to August, the stock's trading volumes averaged about 42,000 shares per day, but shot higher heading into the Labour Day weekend. Volumes remained high in September and early October, averaging roughly 236,000 shares per day.

From Aug. 31 to Oct. 4, the day before trading was suspended, Liberty's share price jumped from 75 cents to $1.58. During this period, the company's market value climbed to $126-million from $61-million, almost doubling in just over a month.

During the same period, silver prices climbed higher, but rose only 9 per cent.

Liberty Silver's flagship asset is the Trinity Silver exploration project in Nevada, which is still in early stages. The company currently holds up to a 70-per-cent interest in the project. So far, Trinity's drill program is in what the company calls "Phase 1" as the firm begins to confirm the resource base.

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Although Liberty is currently in the exploration phase, the project was in operation during the 1980s. From 1987 to 1989, Sante Fe Pacific Gold and U.S. Borax produced about 5 million ounces, but abandoned the project after silver prices plummeted from $9 (U.S.) per ounce to $3 per ounce in just 18 months. By contrast, silver closed on Friday at $34.48 per ounce.

Liberty Silver is run Geoffrey Browne, the former head of private equity at Merrill Lynch Canada, who was appointed chief executive officer in 2010.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More


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