Let’s gain some altitude already!!
[quote=“MikeGold, post:129, topic:836”]
Both parties will need to agree to the total buyout price basis($100 million plus bonus amount) and what part of that will be cash, what part in percent of Auryn and what percent production or a net smelter royalty.
[/quote]Can someone comment on the intricacies of how a percent production differs from a net smelter royalty. Which is better, or are both needed? If a processing plant is put in, who pays? Do both an NPI and NSR continue for a set number of years, or continue on to end of mine life? Assumably, the larger the percentage, the smaller the cash outlay, as with any increase in percent equity interest in AURYN, less cash upfront. Can shareholders expect to see a summary of these contracts in the very near term for the properties that AURYN apparently has 100% title to, at least as it pertains to NUOCO/ADL and CDCH?
As everybody has commented, these amalgamations are material events and therefore the details of same have a deadline in which to be disclosed. So please get on with it already.
NSR (Net Smelting Revenue) is a percent of net gold smelted (realized). It is a percentage (usually small 2%) taken off the top line or gross sales.
Net Production Interest is more of a vague term that needs definition. It is a percentage of either gross profit (sales less cost of sales) or bottom line profit after mining costs, salaries, general and administrative expense, inteterest expense and taxes.
Most people prefer taking the NSR as it is off the top line. Companies can manipulate cost of goods sold and expenses, by taking high salaries, padding expense accounts, having plush office space, etc. These would all reduce net income.
Threre is no room for manipulation with NSR, you get a monthly statement from the refinery saying how much gold was produced and sold.
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L and G,
Actually I think holding off on closing the ADL UNTIL AMC had procured the concession groups to our west (Nuoco), north (Caren and Nuoco) and east (Cerro) was the correct way for Medinah to do it. AMC has made their intent very clear. Those groups of concessions are going to be worth a whole lot more when the ADL concessions and all of the surface rights, water rights and permitting progress achieved to date and held within Medinah are incorporated into the package. As Mike said, the lion’s share of the high grade near surface early production opportunities are held by Medinah. They include the Merlin Veins, the Fortuna Oeste and the new discovery at hole #24 and west of hole #24.
A couple of years ago, AMC and Medinah sat at a negotiating table. AMC said we want a 3 year EXCLUSIVITY clause during which Medinah is not allowed to talk to any other mining firms. In exchange for that Medinah was guaranteed a minimum of $100 million in cash plus a potential “bonus” as dictated by a mutually agreed upon formula or perhaps set of parameters or perhaps further negotiations plus 15% of AMC if AMC were to exercise the option.
My read is that if any early production opportunities were uncovered then there would be negotiations to determine the size of any “bonus” associated with these rare opportunities. I believe this is what Mike is referring to as to what is going on now which might explain why Medinah couldn’t close at the recent meetings. It sounds like if an agreement can’t be reached then restructuring the entire deal as to cash and percentage amounts might be on the table. It’s fuzzy for now but it appears that the bonus could be paid with a greater amount of percentage points or perhaps a lot more percentage points and less cash or a moderate increase in percentage points and the same amount of cash.
I don’t sense that anybody is too concerned about NOT coming to an agreement otherwise AMC probably wouldn’t have closed on the other 3 groups of mining concessions. This would have allowed the leverage pendulum to swing too far in favor of Medinah. We read how the engineers are due to land in February to design the production plan. Recall too that AMC/Medinah just got their blessing from the SEIA in regards to the baseline environmental studies needing to be done prior to production. These studies are not cheap.
I think we need to zoom out periodically and study the amount of money being spent, the share purchases of Medinah, the results of the trenching program, the permitting progress, the surface rights portfolio, the new production roads hooking up to the Pan Americana Norte highway, the grades being uncovered at the early production opportunities, the expansion of the known veins making it to surface being expanded from 400 meters to over 5,000 meters, etc. THE GAME IS ON. ALTHOUGH THE SPECIFIC DETAILS ARE A BIT FUZZY WE ALREADY KNOW THE PARAMETERS FOR THE SPECIFIC DETAILS.
$100 million (plus?) is an awful lot of money. A perhaps 15% (plus?) stake in this entire mining district is a huge asset. I realize that we would all like to see a PR in 5 minutes from AMC stating “WE’RE GOING TO EXERCISE THE ADL OPTION”. But you can understand that until the “bonus” negotiations are done that would be incredibly stupid of AMC. Medinah could theoretically say we want a gazillion dollar bonus now that you’ve told the world of your intent.
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Market is showing us what they think about the update. What’s next step wait till March for the next rumored meetings?
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Right now the market is a group of about 500 shareholders watching this and a few other boards.
There may be a dozen people who could care less about news but rather playing off emotions from the board while flipping for small profits.
If you want to eliminate this behavior, lobby for capital gains tax within Roth IRAs on trades within short periods of time
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Totally fine if this is the case. Where I’m not okay is if we entertain or negotiate a reduction of the $100 million base amount for an increased Auryn percentage.
While I can understand that with AMC acquiring other surrounding claims, the current acquisition of Caren, Fortuna…, the ADL does become an important piece to consolidate/control the mining region.
Conversely, allowing AMC to do the above, makes the ADL much less desirable to a 3rd party in the event AMC walks or tries to negotiate the payment downward.
This is a two edge sword that swing either way. JMO, I would have demanded an all or nothing.
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Surely you are not asserting a dozen people are totally responsible for the way this stock trades! ROTH IRAs are not designed as flipping accounts, but rather as a long term investment vehicles upon which taxes have been paid upfront. In the case of MDMN, unless the account was recently opened, the account is down greatly from when it was created. Your assertion is of no consequence to this stock, IMO.
Very few people I know would consider putting a penny stock into a ROTH account.
How many of the estimated 500 investors here have ROTH accounts, and of those, how many are flipping? You say a dozen? How was this number arrived at?
Just a random no re those flipping but yes there are shareholders flipping this stock within Roth IRAs. While post tax dollars go into the Roth, no capital gains tax for trades are realized within the Roth.
Not saying this is the sole reason we’re down but contributes to the mm manipulation IMO
Yes that may be true, but it makes Auryn substantial more desirable to a third party.
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Hi Shocker,
The way I see it is that at the end of the day this mining district will be developed by perhaps 3 or so mining mid tiers or majors. So I picture that as the finish line. The path to that finish line could go all over the place. If I were AMC and I owned perhaps 300 million Medinah shares currently and I was way under water on my investment the first thing I’d do is buy a truckload more of their shares. I wouldn’t be allowed to do this until all material nonpublic information was out in the public domain. AMC might also be hamstrung by Medinah itself stating that you (AMC) are not allowed to buy greater than an “X” percentage stake of Medinah until all “across the table” potentially adversarial negotiations are done. There could be a “staged” noncircumvention agreement in place.
For instance, if Medinah is currently sitting across the table from AMC hammering out the amount of the “bonus” and the final breakdown of cash versus shares and AMC was sitting on 60% of our shares then AMC could conceivably say “I don’t think so”. You don’t want to give over CONTROL until every bit of consideration can be squeezed out of every incremental step in gaining control. So I wouldn’t let AMC go nuts in the market quite yet until the negotiations are done which I sense is rapidly approaching.
You just have to figure that they would love to be going nuts in our market now but they can’t. If you’re about to hand somebody $100 million plus 15% of the action and that somebody has a market cap of $19 million then you’d have to be salivating. If you know that you’re going to exercise the option then that is FREE MONEY to you via a riskless arbitrage. So in my opinion, something is clearly blocking their market participation currently.
Once I owned a gazillion Medinah shares, if I were AMC and I knew that there was a party in the background wanting to buy perhaps 25% of the action on the entire property complex and Medinah was still trading way below FMV, I’d be tempted to get 25% of the action into Medinah via whatever mechanism i.e. perhaps a little less cash and 10 more percentage points of the action. AMC would then be highly financially incentivised to broker a deal between Medinah and the suitor to sell Medinah’s stake at as high of a price as possible. AMC could then cash in on a huge investment windfall to help fund the CAPEX. If Medinah were to sell part of their percentage points to a suitor then this would create a BENCHMARK for the market to value Medinah’s remaining percentage points.
With the DISCONNECT in place, I think the explosivity sits within the Medinah “shares”. If and when AMC goes public, they’re going to trade at whatever level the market tells them to trade at. There’s no built in disparity between a market cap of $19 million and the fact that you’re about to receive a check for $100 million plus a bonus plus 15% of the action. You need to route a strategic transaction through the holder of this disparity in order to lever it.
I keep picturing the AMC management team and their lawyers sitting at a table with a check for perhaps $120 million made out to Medinah sitting in front of them. They’re sitting there scratching their heads sensing that an opportunity is present but they need to avail themselves of this opportunity in a legal fashion. They obviously can’t jump into the market in a scenario like this without risking repercussions but there definitely are legal mechanisms available to tap into that explosivity.
In a scenario like this it would have to make sense to both AMC and Medinah to have Medinah act as the “vehicle” for a party seeking a perhaps 25% stake to get what they desired. In the currently crummy sector that mining represents you need to have a little additional oomph to gain anybody’s attention.
This DISCONNECT is going to unwind; it has to. If and when AMC goes public they can’t have people being able to buy percentage points of the action at the mountain at a discount via buying Medinah shares instead of AMC shares or selling AMC shares in order to buy Medinah shares.
From AMC’s point of view, their percentage of the action at the mountain will always be that which they DIRECTLY hold in their name and that which they INDIRECTLY hold via their share ownership in Medinah. After handing Medinah some percentage points of the action at the mountain as part of the purchase price they are obviously going to be buying them back if there is a huge discount involved. These RISKLESS ARBITRAGE opportunities are part of the reason why DISCONNECTS like this have to evaporate. AMC will not put up with a COMPETITOR selling discounted percentage points in the action on their mountain.
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Very cogently said, DOC
I had the good fortune and understanding of arbitrage to make a small fortune on the Palm, 3 COM deal back about 13 years ago. I couldn’t believe that it was just sitting there for the taking. A cool million. Haven’t seen anything else as easy as this could be if Aryun plays it correctly.
A “low risk” arbitrage opportunity That I was fortunate to milk.
Interest rates are dirt cheap right now. Heck they’re negative in Japan!
What kind of production needs to be demonstrated / what needs to be proven before AMC could finance the 100 million from a bank?