You sai “AMC just expanded this 900 meters of alteration N to S to 3,600 meters of nice surface grades. This is pretty much the entire southern downslope of the mountain. I’m not sure if people realize how large of an area this is. Of the 7 Km of alteration found E to W they only had time to test 1.2 Km but it remained “open” to the east. This is probably where they’ll start in the next round of geochem surface sampling.”
Could you map 1. The original 900 Meters 2. The current 3600 meters 3. The area that is still open to the east, the 7 km.
Could you also comment as to whether the copper deposit about 1.5 miles to the north northwest of Fortuna and was first visible on the 8-28-2015 Google Earth image might be related? Do you know the nature of the deposit that someone owns?
A very rough guess as to how we proceed given the news / mining investment climate . . .
AMC puts all their money into going into production as quickly as possible. By end of 2Q, 2017 demonstrate positive cashflow and a 43-101 outlining the resource size on the high grade gold. Use that to become bankable and borrow the money so they can exercise the option using opm.
I thought this was worth passing along…The article below is really worth a read. I think the “Mining Clock” is quite educational… I get the sense the PM miners are at the 3-4pm on the clock which is the first buy signal.
Are mining shares the steal of the century?
Shares in miners are at their cheapest for almost 12 years having collapsed by 76pc since early 2011, but there are important reasons to stay cautious.
Mining sector
Questor Editor John Ficenec says AVOID
Shares in mining companies are at their lowest levels for almost 12-years. Bargain hunters are right to be attracted to what looks like the opportunity of a lifetime, but industry experts are issuing a stark warning to those thinking of diving back in.
Rock bottom
The amount of value destruction has been staggering. The FTSE 350 Mining Index peaked at more than 28,000 following the 2008 financial crisis, and it has fallen more than 76pc to end last week hovering around 6,800.
In terms of individual companies, the shares in Rio Tinto were changing hands for about £43 in early 2011, and they were trading at about £17 per share at the end of last week.
The shares are also offering a mouth-watering prospective dividend yield of 7.1pc. On the face of it, this is exactly what Warren Buffet was talking about when he said: “Be fearful when others are greedy and greedy when others are fearful”.
Buying up the shares in the sector could still be a dangerous approach right now. The miners are suffering from a unique set of circumstances which make holding the equity very risky. Demand is falling as the world’s largest consumer of commodities, China, is slowing down. Huge expansion plans at the miners are seeing output of base metals rise into this worsening market. The debt that was used to fund all this expansion has also piled up on the balance sheets.
In such a scenario where earnings are falling sharply, and the cost of interest payments on the debt is rising, then a number of things have to change before the shares can be accurately valued. The market expectations for profitability at the miners are still based on commodity prices that are far too optimistic when compared to the current market price.
As these lower commodity prices feed through into results, the value attributed to acquisitions completed during the past five years will need slashing.
What time Mr Wolf?
Investec have developed a handy “Mining Clock” which clearly illustrates how we are still in the wee small hours of the commodity downturn. Until there is a clear idea of the value in the underlying assets on the balance sheet, investors could be walking into a value trap.
“Until we know how deep the axe will cut, we keep our Investec Mining Clock at three o’clock, i.e. watch and wait. We wait for a significant “value event” (such as a major restructuring) to shock the market into value territory.
The industry as a whole needs to clear out the augean stables from more than five years of debt fuelled expansion based on a world where oil was about $100 per barrel and iron ore was more than $100 per ton.
Credit crisis
Fears about how the miners will repay much of that debt are sending shockwaves through the mining industry.
The cost of insuring the bonds in miners Glencore and Anglo American against default – as measured by the five year credit default swap (CDS) – has soared to 905bps and 1,144bps respectively.
An old rule of thumb is that when CDS spread goes above 400bps, the company is in big trouble, with a one-in-four chance of default within five years.
BHP Billiton and Rio Tinto have much stronger balance sheets by comparison, but the contagion of credit risk is spreading. The five year CDS in BHP and Rio has risen sharply to 241bps and 260bps respectively.
The miners all have to refinance some of their debts within the next 11 months, and bondholders always carry a much bigger stick than equity when it comes to the negotiations.
The concern for bondholders is that as the asset base shrinks they have less security against the money they have loaned. When that happens they either ask for higher debt repayments, or they demand the balance sheet is shored up. Dividend cuts, discounted equity raises, or debt for equity swaps will all come at the shareholders expense in the year ahead.
Swinging the axe
The process has already begun with Glencore cutting its dividend and pushing through a $2.5bn share placing to shore up the balance sheet last year. Anglo American has also taken the axe to dividends. The process of writing down assets its steadily feeding through, and it looks like death by a thousand cuts for an industry on its knees.
Investing is hard enough in today’s market when there is fair idea of the net asset value underpinning the shares, the future earnings, and the dividend income. The process becomes next to impossible when all three of those measures are up in the air.
Signposts to look for
Like all investment cycles there will be a time when mining shares are worth tucking away for the long-term.
What the industry needs is for a large chunk of the higher cost producers to go out of business. As this excess production is removed then the price of commodities can find a floor when it meets the current level of demand in the world. So, far there have been hardly any miners collapsing.
The next marker will be to look for how debt holders and shareholders are treated during the restructuring process of the first failures. This will give a guide to the underlying value in the miners and what proportion is available to the equity.
There is no definitive timeline for this process. In fact the ability of higher cost companies to struggle along has surpised everyone in the industry. Commodity cycles move on a glacial timeline, so there is no rush to make an investment decision. The opporunity will not be missed through taking a patient and prudent approach. We advised against buying a brief rally in miners in October last year and that advice remains. Avoid.
The Perez report just cited that the width of the 7 Km E to W swath was 900 meters along the southern downslope off of the plateau. AMC’s PR dated Feb 3 shows the “moly anomalous area” as a yellow oval with a long axis of 3.6 Km and a width of 1.2 Km. It starts at the plateau which is 2,000 meters above sea level. Remember that there is a slant to the hillside. The oval ends to the south at about sea level which is nice for year round production. The “South Road” is aready right there as well as 3 past producing mines-the Cobriza, the Andacollo (not Dayton’s Andacollo) and the Carrizo.
The highway to Curacavi and Valparaiso is south of this. I believe they’re negotiating with an orchard owner in the area to cut across his property in order to reduce the commute to the mill by 6 or 7 Km. As far as the 7 Km length from E to W it might include land both to the west and east of the yellow oval but definitely to the east. It doesn’t make sense to me as to why the zone of alteration is 900 meters wide yet the high moly grades are 3.6 Km wide. The zones of alteration almost always exceed the zone of mineralization. Except for the 3 past-producing mines located within this “moly anomalous area”, I don’t think a lot of this southern downslope area has been evaluated much except for the satellite imagery. You don’t see many road systems like you do in the area served by the “south road”. Incidentally, the road cuts at the South Road revealed massive amounts of veinlets over several Kms in length. Most of the metals within the porphyry proper are housed withing these stockworks of veinlets.
What’s striking is how the high grade moly trends NNW and if you extrapolate it upwards in elevation it smacks not only into the Gordon breccia but also the Merlin 1 Vein that extends at least to the northern downslope at the Caren Mine. The super linear nature of this fault/fault zone is like somebody took a giant meat cleaver and cut a swath from the valley south of the southern downslope to the valley north of the northern downslope. You can see how the surface moly grades get lesser as you go east or west of that NNW oriented swath through the mountain. One could probably spend a couple of decades mining that “swath”.
As far as the mines peripheral to our area, I’m not sure which mine you are referring to just north of the Fortuna. Perhaps the “Fortuna Norte”? On a more regional scale these “Early Cretaceous Porphyry Deposits” like Andacollo, Llahuin, Dos Amigos, Colliguay, etc. seem to feature the porphyry/porphyries located in a central location. Radiating out of the porphyry for even as much as 5 Kms you get high grade gold epithermals, lots of mantos (stratabound deposits), a few skarns, lots of breccias, stockworks with small veinlets, etc.
Cretaceous-aged rocks are famous for being high in limestone/dolostone (“Creta”=chalk). This is great because hydrothermal fluids chase away the limestone and use these areas to cool and deposit out their contained metals. The “plumbing systems” of these deposits is very favorable to allow the fluid bearing metals to get close to surface where they can cool and get easily found and easily mined.
[quote=“cornhuskergold, post:225, topic:836”]
The first charts are from all 422 porphyry deposits included in the Singer Report. They also sub-divide those deposits into different sub-categories, one of those being Copper / Moly porphyries. Here are the grades against that sub population:
[/quote]These are remarkable graphic charts! Thanks for posting. The few sample assays to date are showing why AURYN is so interested in the claim concessions acquired and under contract to date (and proceeding so methodically).
Doing some back of the napkin estimates, if AMC gets permission to expand the production level to 500 tpd, it’s possible to pay the $100 million out of production proceeds.
That would also mean a penny or two a share earnings for MDMN in addition to the cash from the execution of the option!!!
It will be interesting to see how AMC executes over the next few months. It should tell us a lot more than we know now.
Kevin,
Buying at these levels and below like I have been seems to be a great area. Got my best buys at .0122 and picked up .015 yesterday. Seems that when I was buying at .10 and .14 that this level seems to be a great opportunity. At least I am averaged down around .03 area so we shall see. Thanks for all you and Doc and others do for the board.
L&G: Many of us have pointed out to you that MDMN has a major credibility problem, and share price won’t adjust until that credibility problem is eradicated; i.e., we have new ownership, and the stock symbol MDMN fades away.
NoDoubt – I think AMC exercising the option and going into early production would do it as well. If those bonanza grades are legit and they have tonnage the market will eventually take notice.
Kevin, you know I want to believe that scenario. However, I still believe with the stock symbol “MDMN” forever banished to the dustbin of history will only accentuate your scenario.
If you look at the 2nd and 3rd figures in this presentation you might be able to gain some insight into what 3.6 Km of high grade moly represents in reality. In the second picture you can see the scale of 4 Km and appreciate that these are very, very large deposits. The 3rd picture shows the classic “Lowell-Guilbert” model for where the various metals hang out in relationship to the centralized “porphyry stock”.
The moly is pretty much only found near the core of a Cu/Mo porphyry in the white “low grade core” or in the nearby red “ore shell”. In our situation, this “ore shell” with high grade moly is protruding through the southern downslope of the mountain. Having 3.6 Km (lineally) of pretty high grade moly is significant. It’s very confirmatory of the presence of a Cu/Mo porphyry as moly is almost only found in porphyries. The presence of the various breccias in this area and the size of the moly showings is highly suggestive of porphyry. The age of the mineralization (95 million years old) plus the location of the mountain in the southernmost aspect of a well known “early cretaceous porphyry belt” in Chile’s Coastal Range makes it a slam dunk.
Geoscientists love to be able to label deposits with a classification. This is a Cu-Mo porphyry which suggests a long list of characteristics i.e. huge size and tonnage, moly near the core, possible presence of rhenium, etc. It is also an “early cretaceous porphyry” which brings out another long list of characteristics like likes of mantos from stratabound limestone layers.
Just a little update on Medinah/Auryn and the PDAC conference which starts March 6.
It appears that the Auryn people will be there in association with Cathy Hume…CEO of CHF Investor Relations.
She use to be a director of the PDAC. It appears that several of her client companies will be there and so she will be there in support of them. It is not clear to me physically where Auryn will be(in their own booth or somebody else’s?) or how to contact them.
