The Mining Play

MDMN - 2016-02-22 Weekly Discussion

MDMN discussion for week beginning 2016-02-22

You are so efficient!! :grin: :smile:

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Doc, I have a question for you, if I may.

Following your last post regarding a possible repurchase program, Baldy has written the following:

Let’s say AMC wants to devote $10M to take advantage of the
discounted share price. Let’s also assume they currently own 300M shares
or 25% of the float.

Do they advance the $10M to MDMN for the company to buy back stock?
This advance would be a material event so, to be conservative, the stock
would rally to at least 5 cents on that news. So MDMN could buy
approximately 200 million shares (assuming the stock went nowhere which
is highly unlikely). So there would be 1.2 billion vs. 1.4 billion
shares outstanding and AMC would own 30% of the company instead of 25%.
An improvement of 5%.

Or

Does AMC take that $10M and start buying stock in the open market?
There wouldn’t need to be a public release. Based on the 100M in volume
over the past week let’s assume their cost basis would be 4 cents which
would equate to them buying 250M shares. This would bring their total to
550M shares or 40% of the company. An improvement of 15% with more
upside for appreciation (owning more shares), more control over the
buying, and a lot closer to a controlling interest.

The first scenario is your scenario and the second is John’s.

You have written at length on this share repurchase program so, in your opinion, why scenario #1 is more probable or better suited than scenario #2? Is there a flaw in Baldy’s line of thoughts?

Just food for thought. In my experience on the TSX-V, and yes I know MDMN is OTC, only 70% of shareholders vote. That is under normal terms where every shareholder gets to vote. As it appears MDMN only allows shareholders of record (i.e. those with certs) to vote, Auryn could effectively control the vote with 40% of the shares in cert form. Based on back of the envelope math, if Auryn had 40% of the shares in cert form, there is no way there is another 41% out there is cert form. If so, that would mean that only 19% are held in street name.

JMO, if a normal vote were held today and Auryn has the reported 210 million in cert form (150MM + 60 from JJ et al), my guess is that the many shareholders would vote along the lines of a Auryn mandate, assuming the mandate is somewhat reasonable to shareholders.

Albireo,
One observation, assuming the usual figures…
In scenario 2, they spend THEIR OWN 10 million and still owe us the full 100 million. In scenario 1 it comes off of the 100 million (also minus whatever premium we concede to get the advance) so they would owe us only 90 million or less.
Also, the assumed purchase prices are a WAG, may or may not have that disparity. The other thing is the shares AMC would hold at the conclusion of each scenario would have a different value, more at .05, less at.04

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Some interesting names treading the fine line between investment grade and junk. Borrowing costs increase dramatically when a company drops to junk. Most credit facilites have tiered pricing tied to credit ratings.

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The reality is that we have already heard most opinions from the advit posters until we are all blue in the face. Some try to convince you they are right, others simply express their opinion and try to support in with either facts or logic and then there are those that grab onto others to lead them and just mimic what they say. . When it comes to MDMN, facts and logic seem irrelevant and opinions are a coin toss. I believe we have worked through most scenarios and we should be prepared for whatever comes next.

The entertainment value of this board is waning and the conversations are simply getting old and too repetitive. Hopefully significant news will change all that since the fuse is getting shorter by the day on when the option will be exercised, and what that will actually mean for us. Some of us will be right, some of us will be wrong, and most of us will simply deal with the reality when it happens.

Until then we can discuss all we like whether MDMN gets its hands on $100M or not to do with it as it likes, whether there are auxiliary documents or not, whether Claro has been selling his shares or not, whether Auryn has been buying shares to increase its stake or selling shares to manipulate price . Whether there will be a reverse merger or not, whether there will be a TO or not, whether Auryn will go public soon on the Canadian exchange or will it be Auryn’s Holding company going public… I could go on and on, but why bother it is simply easier to watch the stock price since it removes the emotion from the equation and lets you see what the markets thinks, whether it is right or wrong it does not matter since the trend is your friend. I hope I did not offend anyone by this post just felt like blowing off some steam!.

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This is true. The option would require less ($90 vs $100m) but I was being very generous in my average purchase prices for MDMN vs AMC. Based on the latest price action it wouldn’t be a stretch to say that AMC could purchase 333M shares at 3 cents (as an example). Because MDMN would have to issue a PR disclosing the receipt of $10m and share buyback it could cost them 7 cents or 140m shares (as an example).

AMC would also gain additional upside by owning more shares vs. MDMN as the stock went higher. These additional shares would more than make up for the difference in the purchase price (every two cents would exceed the $10m).

The benefit of scenario 2 is clear as day, if your sitting in AMC’s chair.

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Albireo,

I think we disagree on the underlying premise. What we have is what my mentors refer to as a “capped” market. It just doesn’t react to positive PRs. The causes of “capped” markets are multifactorial. It could be lack of confidence in management, naked short sellers finding the need to apply a blanket of selling when buy orders appear, frustrated existing shareholders, etc. IT DOESN’T MATTER WHAT THE CAUSE IS. THE DIAGNOSIS STILL IS THAT WE HAVE A “CAPPED” MARKET.

When you have a “capped” market with a monster DISCONNECT you simply do whatever you can to raise cash and buy back, demand delivery and cancel as many ridiculously cheap shares as you can. IMHO putting out a PR stating that AMC injected some cash into Medinah is not going to immediately rocket the PPS to 5-cents. “Capped” markets don’t react like that. But if it did then perhaps that would be a good thing.

If AMC knew that they were about to exercise the option and hand over a check for $100 million I personally would think that they would be more than happy to pay that off in 2 stages i.e. perhaps $7 million up front and $89 million following that while cashing in on a $4 million discount.

BEFORE coming up with the decision to finally pull the trigger on the option exercising of course they’d be wise to buy up as many shares as they can as cheaply as possible but I believe the Quijano situation might have complicated that process. The worst thing you want management to do is to be trading at 30-cents with $100 million in the coffers and 15% of a monster project in hand and say to yourself, gee if we just would have bought back and cancelled a bunch of shares back under 2-cents we’d be trading at 45-cents.

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Whoever bought those shares last week is underwater on paper .0183

Exactly. We are flying blind, except what has been publicly disclosed. Only when the option is exercised, and/or MDMN is purchased outright, will there be any material change in the stock price. August, 2017 is the only stake in the ground we have. Any other speculation is just that, speculation.

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What isn’t speculation is Auryn indicating they will be in production this year. If Auryn gets revenue, mdmn gets revenue and finally has cash outside the hundred M. I would also think cash from production could be used for ongoing dividends to shareholders. That is my hope anyways and believe would correct the disconnect.

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It’s pretty funny that CDEL was on the ASK last week around .03 this morning they are showing 250000 @ .0199

Just thinking out loud and trying to figure out why someone would sell 60M shares at 2 cents and how someone could buy 60M shares without driving the price above 2.1 cents.

What if I had around 60 million shares of Medinah at a cost basis of less than 2 cents and I was concerned that it was about to grow in value to somewhere between 7 to 12 cents per share?

What could I do to protect or hide my profits from the tax man?

Could I meet with some offshore brokerage to set up a nameless (xyz) hidden account to buy my shares from myself?

Would I be able to use xyz account to publicly show a bid to purchase 60M shares at an average 2 cents?

Could I then use my own named account to sell through the OTC to an offshore account my 2 cent shares?

Could I then report my sell of all 60M shares at the selling price of 2 cents?

Wouldn’t I then own the shares in my xyz hidden account ready to sell as the price rose to my expected 7 to 12 cents with a potential $6M profit hidden away without any visual evidence of a reportable profit for tax purposes?

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If it was you who followed the outline above then I would say it had nothing to do with Medinah as an investment but if it was someone who was an insider of the company then I would think you would be correct in your statement. It only applies if it were true, but like all the other speculation here, it’s just speculation on one more possibility.

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