You know Newleaf, i have pondering something that coincides with your thoughts. And before I share it, I emphatically state, the Option Agreement has a stated expiration date and a minimum $100 million price, along with 15% of AMC.
So here goes a wild, most likely incorrect, hypothesis. There is a clause in the contract that states each claim is valued the same. $100 million/divided by the number of claims. I found that odd, since the Option considers the ADL a whole package of claims.
But, what if AMC only wants certain claims, those with near term production opportunity. Letâs face it, while the copper is, based on very limited exploration, a very, very long term play requiring massive cap ex.
I could envision a scenario where a new agreement is negotiated extending the option the option on ADL but AMC acquiring certain near term producing claims. Obviously, MDMN would need to agree to such a change, but I could see them doing it for a participation in near term production.
Not trying to start anything, just thinking outside the box and trying to understand why the clause regarding claims value was included.
As an alternative, AMCâs option is unilaterally assignable, and maybe they have a partner that is willing to pay for the non-near producing claims and that clause sets the value.
No. There is no need to come up with out of the box scenarioâs.
The Option is being exercised this Spring. Exactly what Medinah will be receiving at that time remains to be worked out. There is zero chance that Auryn will get anything less than all the claims when they exercise the Option.
mdmnholder, you shouldnât feel like youâre âstarting anythingâ, and itâs actually embarrassing you would have to say that.
Letâs just assume the parties have this negotiated down to âequilibriumâ at this point (everybodyâs happy ⌠or equally sad). If the option period is extended AND AMC gets near term producing claims, then Iâm wondering if there is anything over and above participation in the near term production MDMN could hope for. It seems that they would need to give us at least some kind of consideration - maybe an upfront cash payment or Auryn agreeing to pay ALL of the capex costs associated with commencing near term production, or both? One might say this isnât how the typical deal goes - yet Iâm one given to believe the ADL is not typical.
Thank you Mr. Bubba, everyone is entitled to throw out thoughts, as wild as they may be. My cause for speculation is that the recent AMC acquisitions certainly did not follow the script. Why should the MDMN option be any different.
Yes, we get 15% when the âtypicalâ deal is 2-3% NSR at most. I know exactly where youâre coming from. I think itâs just like brecciaboy has been saying - proximity to infrastructure, possible near-term production (at the time the original deal was negotiated), etc.
I hesitate to be sure as I know you do not care, but for other people who do care, I will be the fool and point out there is no legit comparison of a â2 - 3% NSRâ to a â15% equity interestâ which clearly is what the ADL contract specifies as our post-option destiny.
One is essentially gold right out of the scoop as it comes out of the ground (or immediately after sale), and the other is post operating expenses. Lots of gold companies sell billions and billions of gold each year and 15% ownership in them got you nothing but 90% to the downside over the last 5 years. So that â15â has little to do with that â2 to 3â.
The reason there is no such thing as a 15% NSR is because no one could grant such a thing and still make any money operating - so you donât operate. If you handed over 15% of your revenue you would essentially be trying to make a living with $1045/Oz gold instead of $1230 / Oz gold.
Auryn has set expectations for âpositive cash flowâ. Assuming all the rumors of option exercising etc. all come true exactly as the rumors are suggesting (âifâ), we will still have to wait and see
what we get as compensation as part of the re-negotiated option price (as MDMN referred to in their Update)
Aurynâs operating business case: what they think âcash flow positiveâ will turn out to be (mining rates, costs involved, capital expenses, MDMNâs participation in profits from non-Medinah properties etc. - yes all those real life tedious details).
Then of course we have to turn to Medinah and ask what they intend to do with any money that may come there way.
Plenty of dominoes to fall yet before the âhappy danceâ. But keep practicing.
CH, I donât know what makes you think I donât care.
On my first day of law school, a professor taught us we can put ANY label on any set of facts/circumstances we wish and it is of no relevance (this professor used to call the tort of battery âHoliday Innâ just to make his point). What matters is SUBSTANCE. With all due respect to your industry knowledge (and it is obviously quite extensive), not one of us knows the entire substance of what is going on here. I know what I BELIEVE an âequityâ interest is - it means an interest in the capital and profits of a company. Profits means income, NET of expenses. Yep, thatâs what it normally means. But, I also know that professionally-drafted contracts have Definitions sections in them which lay out the definition of terms. It seems to me there should be such a section in our contract - especially since in the mining sector they have these things like C1, C2 costs, etc. Yet there is no such section and no such definition of âequity interestâ. Consider also the fact that background rumors reputedly from Les indicate that âequityâ might not mean what we think it means and that MDMN will not have to âpayâ for any mining infrastructure costs. The result is we are left admittedly basking in ignorance. Yes, we will have to wait and see - it will be interesting.
Just a FYI, what AMC/MDMNâs end product is a concentrate. They shipped the concentrate to the refiner that refines it to dore bars. AMC/MDMN gets paid from the refiner for the quanity of gold and yes all these rat bastard refiners skim a little. Generally, the refiner will pay you less than spot so they can make a profit in adddition to their skim. So if gold is $1,200, you get paid $1050 to $1,100 per oz au.
AMC/MDMN would then pay a the NSR (say 2%) of the amount received from the refiner. So yes, 15% equity is far different from NSR. OK, beat that horse enough.
Just another FYI, here is link to a video (first video) that shows how surface mining is set up and done. Part way through the video, you will see the charcoal concentrate that is sent to the refiner. The end photos of pouring gold is done in their testing lab as sampling.
Please note that this company has to run its material through two circuits to grind it almost to sand and us aglomeration. That would not be necessary at the Caren.
Its amazing what a couple thousand dollars of normal open market can do to the downward pressure compared to a million dollars in a fixed behind the curtain sale on upward pressure
Anyone who doesnât believe there is an enormous short position on this stock will be surprised if a cash dividend is issued. IMO
For many years we have had two sides in management!
One side was very self serving and could care less about shareholders!
The other side is exactly why we are still alive as a company and looking forward to the best of what was a very bad situation.
Overall a very big pain in the rear for everyone of us including myself!
Canât at all complain about the anxiety of all shareholders, because it has been hell getting to this point.
Iâve lost two investor friends to cancer and another in very bad condition while we wait for this to transpire.
We are now 95% looking into a new life cycle for Medinah and Iâm quite pleased with the current direction of the company.
Still a little clean up required, but nothing compared to where we were a short time ago!
Consider also the fact that background rumors reputedly from Les indicate that âequityâ might not mean what we think it means and that MDMN will not have to âpayâ for any mining infrastructure costs.
I think thatâs true. We will be a shareholder in AMC. Shareholders do not pay for expenses. The company does.
If Medinah, in which you own shares, built a mine at the ADL Breccia, would you as a shareholder expect to âpay for mining infrastructureâ? Would you have to write a new check to pay your fair share? No.
But those expenses one way or another come out of profits (directly, via debt, via dilution, etc). Therefore profits per share are less and so 15% is either less than 15% at the end of the day else it is just 15% of less. It is Less. (not Les)
So I would suggest Lesâ rumors on that topic are in the strictest sense true, but they do not mean what you are taking them to mean. And that is Lesâ art form. It is also taking the ADL contract at face value of what the text says without relying on any other undocumented hopefuls.
BTW - I was also the one who pointed out the reference to âAppendicesâ within the ADL contract. And these âappendicesâ have not been published. So I do not deny there are other documents somewhere that discuss something. But they do not fundamentally alter what the ADL contract states, else they would not be appendices to the same contract signed simultaneously with that contract. But thatâs my non-law school IMO.
Once again another missing piece to our puzzle. Is out 15% equity interest simply straight equity interest, or not. My guess that until Auryn exercise the purchase option MDMN does not have capital contribution requirements. I also believe that Auryn will be public before the option is exercised and we will get 15% of the public company stock. The next piece is whether our 15% could be diluted or not, based on Aurynâs future capital needs. If the outstanding common stock remains fixed and all future financing is done via preferred stock( non convertible) and debt financing (non- convertible) our 15 % could remain undiluted. But if they do convertible debt or equity financing then our equity interest becomes dilutive unless there is a clause that MDMN always maintain 15% equity interest, which I doubt. But we must also realized that Auryn equity in their own company becomes dilutive as well unless they always buy equally into any dilutive financing in order to maintain their equity interest.
The other missing piece of the puzzle of course is what does 15% mean. Does it mean 15% FCI, or 15% straight equity interest or something inbetween. I leave that to whatever you like to believe, my thought is it is probably straight equity interest, but it could be something in-between as well. . JMO
Being a tax professional, I also know that partnerships may be structured in any number of ways. For example, a partnerâs distributive share could be simply his percentage of net profit. It could also be a percentage of the GROSS earnings (before expenses). Admittedly, Auryn is a Chilean partnership, so once again we do not know exactly how it is structured. As you say, we can make âeducatedâ guesses, but at the end of the day we still do not know. From my perspective, since I believe we have had reputable counsel, I believe we are well taken care of - but remain anxious to learn the actual âdealâ.
