The Mining Play

Auryn/Medinah - 2020 - 1st Half General Discussion

In my opinion, DILUTION is not a dirty word. In this industry, a junior explorer wants to be that proverbial 1-in-1,000 junior that makes a discovery which is going to need funding to put into production. Of course, it’s going to involve DILUTION. Post-financing, an investor is typically going to own a smaller percentage of a MUCH MORE VALUABLE entity. Similarly, in a JV situation, the shareholders are going to have their ownership percentage in the overall property (not share structure) be DILUTED in exchange for money spent by the major and the gaining of the expertise of the major.

There is no corporate event in the genesis of a mining company which PREDICTABLY increases VALUE more than putting a mineral discovery into production and joining that 1-in-1,000 club. In essence, the GOAL of a junior explorer is to sacrifice the DILUTION associated with going into production in exchange for a much larger percentage increase in VALUE. The flip side of that coin is that the DILUTION associated with raising money to go explore for a deposit and take on those incredibly distant odds is often NOT good DILUTION.

My investment thesis in this sector, which has been evolving through the years, is WAIT for a junior to irrefutably PROVE the bona fides of any perceived DISCOVERY. How do you do that? You wait for the junior to put it into production. Any financier that agrees to do the funding is going to be a lot smarter than you or I. Let the financier do your due diligence. The SWEET SPOT in any investment is getting in right before any jump in VALUE occurs. In this particular sector, the biggest jump in VALUE occurs right as the lucky explorers go into production.

Maurizio is the largest shareholder in Medinah, Cerro, Masglas, AUMC and Auryn Holding Corp. This is the ideal when the financial goals of management align tightly with that of the small shareholders. He would be the biggest victim of any untoward DILUTION.

IS MAURIZIO REALLY ABOUT TO SCREW THE MEDINAH SHAREHOLDERS AS HAS BEEN SUGGESTED ON THIS FORUM?

Maurizio has had all of the opportunity in the world to screw the Medinah shareholders but he chose not to. Why would he start now when his percentage ownership in AUMC is somewhere around 73% when he chose not to screw Medinah when his ownership percentage was only 10 to 20%? Don’t confuse the DILUTION associated with raising funds to go into production with the DILUTION associated with raising funds to go explore.

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CASE IN POINT: I got into ELYGF at about 28 cents, and then [Uncle Eric] Sprott did a private financing for us, complete with warrants at a very cheap price, and diluting the living you-know-what out of us - now the stock is selling for 1.30’ish and has some $20 Million in the bank for more royalty deals, with the CEO saying he’s gunning for Royal Gold/Franco-Nevada status. So no, dilution is not always bad.

Personally I believe MDMN is way down but only for artificial reasons - the company has had NO NEWS for two years, radio silence, so that’s what we would expect. I still believe MDMN will come back, and in a big way. Having averaged down to about 1.2 cents per share, I’m confident that Maurizio, et al, will generate a nice profit for me. Do we really think Maurizio is in this to lose?

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Yes. This would be a good example of healthy dilution. I know ELY pretty well and they have been around almost as long as RGLD/FNV but clearly not quite as successful. They seem to make good investments which buy them time to add to the royalty portfolio (as they are sold). Sprott has been a bit “loose” as of late but his endorsement of ELY has clearly helped the optics.

In the case of AUMC dilution will be a bit more tricky given that the current market cap most likely exceeds what it will cost to get into production (even bulk testing 5,000 tpd which has a lighter permitting load). This will be Mauriziio’s big challenge. I’m not in a position to speculate what is in his best interest but his current ownership really isn’t relevant. Yes, he has a lot of skin in the game (~70%) but, depending on his level of “greed” he can easily own 100%, 90%, pick a number with the next capital raise. Let’s not forget that he took a larger percentage with the last capital call. Maybe he’s feeling philanthropic in his older age and investors here can elect to bet on this altruism. However, this is a necessary consideration when buying shares. Claiming that he and family and friends already own shares in broken public vehicles has no relevancy on the path forward. When you have control of a company that needs money you have complete discretion on the recapitalization. This is not an opinion but rather a truism to how the capital markets operate.

Thank you for your input and opinion. Believe it or not, I do value what you have to say - as I do the opinions of others. Really.

On the skin in the game not being relevant, I guess one would have to believe that Maurizio won’t mind seeing his family and friends (some of whom have reputedly invested here) go down the tubes. You probably know things that I do not (I think you sold out a year or so ago), but I’m not there … yet. I was not one of those early investors in Aurelian’s Fruta Del Norte who got out too early, but I can appreciate the wisdom of those who got “schooled” by making the mistake of not seeing the writing that was clearly on the wall. No, I have been bent over the chair before by other junior exploration companies, such as Plexmar Resources, Logan Resources, et al, and so have a … different … experience. Thank you sir, may I have another. Frankly, at one point I swore I’d never invest in another junior explorer. But, I see things different with MDMN. Hochschild decided to get involved, and I think they know more than me, you, and brecciaboy put together, times 10,000. Other mining professionals have put their seal of approval on the ADL as well. The claims have all been put together. Potential immediate production. Many, many hectares of potential mineralization. Hyperspectral imaging and the interpretation thereof by Sepulveda-Perez, a known expert. To each his own. Hope you get back on board in time to make some coin.

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Nice to see Gold hit $1800 8.5 year high

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Auryn/Medinah - 2020 - 2nd Half General Discussion