MDMN - 2016-02-22 Weekly Discussion

How does you WAG work out for the dividends when you include in the $100M option payment? :joy:

On that we can agree.

I know people don’t understand it, but two months ago with JJ still a MAJOR road block and the possibility of us getting nothing . . . I might have taken a $0.05 a share for all my shares. Today it’s a completely different story.

If one believes what AMC is announcing, the possible near term future yield you can buy for less than $0.02 a share is unreal!

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I don’t think we’ll be seeing much of the $100M option in the form of a dividend. You’ve got finder’s fee, taxes, and debts that come off the top. Then you have to keep some in reserve to cover the cash calls from AMC. I don’t know how much that leaves us. Maybe the first penny or two comes from that?

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  1. I really don’t know but I’ve long thought that Medinah would have a lot of cost credits to write off against income for tax purposes.
  2. Debts should be less than a few million. (I believe I’m being generous)
  3. I’m not sure why you are expecting any cash calls from AMC after the option is exercised, but I would be interested in hearing why you believe that to be true. Thanks.
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Net Operating Loss Carryforward? Do I remember seeing this on the financials somewhere?

Partnerships can be structured so that some partners are not subject to cash calls - and they can be structured so that income/expenses are allocated in various ways (that’s why people form partnerships, as opposed to corporations). Of course, we do not know the current form of entity and the tax laws of Chile - there is a LOT we do not know …

First I am not sure if there is a finder’s fee and if there is it may be a fee that Auryn pays or shares with MDMN. I doubt there is a finder’s fee, especially since this was an open bidding process that the Volcan people have been a party of over at least the last three bidding attempts.

Second, there should be very little taxes relating to the sale of the asset, since one is allowed to deduct all the expenses associated with all the years of getting this asset into a sale position, plus the book value of the asset at the time of the sales which comes to about $48 M.

Third the cash flow revenue from Auryn fproduction would also be taxed on the net (minus MDMN expenses) and then once again by the shareholder’s own income tax. The asset sale can be structured as a return on capital where there is no tax on the distribution until you have recovered your original investment.

Like I have said there are many ways to skin a cat from a tax perspective that will reduce or even eliminate the tax. I just can’t wait when this discussion become relevant based on fact that MDMN is in a positive cashflow situation and there will be shareholder distributions as a result.

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Yes, but I don’t think they’ll have $100 million worth.

I’ve heard around $3 million. Don’t know how it’s so much. I presume there has to be some accounting for it. I just hope they don’t go the preferred share route as that’s awfully punitive to shareholders.

AMC is private. Depending on how fast they ramp up exploration of the porphyry, developing an open pit at NUOCO, milling, etc… It MAY require them to raise funds. If MDMN doesn’t want their 15% diluted they’ll need to contribute proportionally.

(Karl: was told there was a finder’s fee involved.)

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I assumed that was the case it just does not make sense to me why there would be one. If there is a finders fee it usually amounts to about 5%.

Based on expenses and book value you can easily come up to over $50M to be deducted from the $100M before anything is taxed.

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Sometimes I wonder why I spend time reviewing this board and then I’m reminded when I see posters, like those above, working to share information in an effort to educate, encourage, and enlighten without the overt or covert attacks that some routinely include. Looking above at all of this mornings post I’m looking at that sharing. Thank you one and all.

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" Based upon the positive results published by AURYN, negotiations are ongoing between the
Companies to consider AURYN’s outright purchase formula for the Company’s Altos de Lipangue
(“ADL”) property claims at a much higher ownership holding that would enhance Medinah’s longterm
prospects"

This clearly opens up the possibility that a higher ownership in AMC may be an alternative to the $100M.

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Good post and follow up commentary. There is significant risk in assigning any value to AMC, let alone $180M, at this stage in the development cycle. If people spend a few minutes to better understand the sector they would appreciate the same (Hint: reading this board doesn’t count as due diligence). With that in mind, any discussion about taking a larger portion of AMC as payment in kind instead of cold hard cash, ignores some “seemingly” obvious issues.

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The February 25th update clearly states that the $100million is due from Auryn at the execise of the option. This would suggest that attemps by Auryn to alter the original agreement failed.

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The only way there is a finder’s fee is if one of the insiders is grabbing it (wouldn’t surprise me). Otherwise, to Karl’s point, a finder’s fee would not be applicable to a deal like this.

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Hope so. It’s very difficult to parse through the language in any of MDMN’s updates and reach any conclusions. Given that both CDCH and Nuoco accepted shares in AMC it’s hard to assume that the same insiders won’t consider doing the same. The market is telling you what it thinks. If/when this changes there’s no reason for us not to be trading North of 7 cents.

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The following lines are copied from the 9-30-15 financial statements (balance sheet):

Mining Properties (Notes 4 and 9) 44,901,363

Loans From Stockholders (Note 3) 2,123,156

Mining properties had a cost basis of almost $45,000,000. If we assume $30,000,000 is related to the Alto, then MDMN would have a $70,000,000 gain at a 30% tax rate (WAG), we would be looking at $21,000,000 in taxes.

Loans at 9-30-15 were $2,100,000 so the Wizard’s guess of $3,000, 000 seems reasonable.

It appears that after taxes (20 to 30 million) and loan payments (3,000,000) MDMN should retain 70,000,000 to 75,000,000.

The corporate tax rate in Chile is currently 22.5% but will increase to 27% by 2017 https://home.kpmg.com/xx/en/home/services/tax/tax-tools-and-resources/tax-rates-online/corporate-tax-rates-table.html

According to the 9-30-15 Statement of Cash Flows over $500,000 was spent on mining properties in the first three quarters of 2015. I find this interesting. What are they spending money on?

Pretty sure the taxes on that $100 million would be minimal per how it was structured and existing loss. Certainly much less than what you are suggesting per what I have gotten from Medinah/Les previously.

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Is there a loss carryover in there somewhere?

Didn’t we hire a consultant or facilitator to help broker the deal? Could possibly involve a commission?

Yes. I would assume. Any advisor would have been paid when the deal was inked. Finder’s fee are involved when one party introduces financing for another party (that pays the fee). These fees range from 3-5% of the money raised. Based on everything we have heard about the Letts and their previous interest in the property I can’t imagine that somebody was getting paid for an introduction.

If Lester is telling people there is one it wouldn’t surprise me if MDMN is paying him or another insider a few million just because “they can.” There clearly was no need for an actual introduction.

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