MDMN - 2016-03-14 Weekly Discussion

Probably not. Most of the Boyz’s money will still be from Medinah. If they exercise the option now, the cash flow they get will quickly pay off the Medinah debt which will first go to Greg/Les etc. By the end of the year, Les will be able to upgrade his yacht and spend his sunset years doing something more enjoyable than dealing with irate shareholders.

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Selling just will not stop. I just don’t get it with everything positive happening

That big buyer should of waited to get those 62 million from a month ago could of doubled his position

  1. I think many of us are coming to common conclusions on the timing of $100M should that route be taken - not till the end of the Option period.

  2. And I think we agree that a deal sooner could happen as per Medinah’s statement, if they were to restructure with less than $100M and a greater than 15% position in AMC. This is the “wrap up” as you term it.

COMMENTS:

1b. John, it seems to me, is hoping that refusing #2 and forcing route #1 will use the $100M obligation as leverage to force a TO by end of the Option. A pretty decent strategy. Not certain to work but if the fall-back is route #1, that’s not so bad.

CAUTIONS:

2b. If route #2 is taken, if one believes in Auryn and the mountain, then long term could be brighter. But that is not certain. Any % of AMC you trade for $100M has to become quite valuable in order to come out ahead if you judge simply from asset price.

If you include cash flow and potential dividends, I agree the cash flow from profits could be significant and so even if the asset price of that piece of AMC does not make you come out ahead, over time it potentially could yield very well and total return would put you ahead.

However, the real risk in 2 and 2b is either A. “cash calls” as Wiz has been referring to, where MDMN has to contribute capital for construction purposes, or B. even if somehow that were to be waived, if Auryn needs all their profits to plunge back into the mountain then there may not be so any profits to distribute and so the yield is zero.

There would be lots of gold / silver mining companies with great dividends if it were as easy as digging it out of the ground, selling it, and handing out cash. And there are very few with decent dividends. That’s because ongoing capital requirements keep eating up gross profits from sale of metals.

So, route #2 definitely has risks which can probably only be partially mitigated. A trade of say 10% or 15% more of AMC for $100M is quite risky actually.

To make it even more complicated, If one could potentially take 10% or 15% more and still get say a small portion of the $100M in the short term (instead of all of the $100M but not till Aug 2017) and we could somehow get MDMN to support its SP with that then that alternative could add an additional wrinkle into the analysis. So perhaps there is come combination which would be more acceptable than foregoing the entire $100M.

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I am glad I did not buy any more stock earlier today. We are currently at .014 and the bid is .0138. There is no support and I think we will test .012, as I said earlier…My hair has turned gray over the last six years, due to this stock. Why is everyone so confident we will eventually be rewarded. Currently .0135…This is brutal for everyone. Perhaps it is time for a reality check…

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In my opinion, it is irrelevant what category these potential shorts fall under (naked, illegal, etc.) The bottom line is that the timing of these shorts trying to cover, if that indeed is the case, is a positive sign for us. With the April date set for start of production, I’d be running for the hills too if I had a short position. And I’ve scooped up an additional 40% of my total shares over the past couple of weeks during this downturn to lower my PPS. And I am not a even a major shareholder (less than one million shares). I can only imagine a majority of you out there may be doing the same at a larger volume which explains the asks filling.

Take advantage of the situation. Load up. Lower your PPS and ride the wave when the tide comes in.

Hi Mike,

I think the phrase “Based upon the positive results published by Auryn” might be translated into “there is going to be a bunch of early cash flow that Medinah might consider getting a BIGGER chunk of in exchange for offsetting some of the upfront $100 million”. The questions become how much more cash flow would flow to Medinah, when might it flow and when is AMC likely to exercise the current option and pay the $100 million IF MEDINAH DOESN’T BITE ON THE NEW OFFER. To me it is a given that AMC will indeed EITHER exercise the option or design a win-win that is mutually agreeable to both AMC and Medinah and mutually beneficial given the overall circumstances on the table which are no doubt complex.

For Medinah, with the currently crummy share price QUICK CASH which can be used to buy back and cancel a lot of ridiculously priced shares is preferable to deferred cash potentially not arriving until at the end of the option period 17 months away. The key is to estimate WHEN the $100 million might most likely appear IF Medinah says let’s stay with the original deal.

One parameter might be the timing of the arrival of permitting for the ADL properties and what levels of tonnage per day might be involved. If AMC might be able to borrow or come up with $100 million at a 3% per annum rate or so, then if they exercise the option 1 year before the option exercising date it would cost them perhaps an extra $3 million in interest to exercise early. Could they easily recoup that amount and much more if the ADL went into production one year earlier than otherwise? I’m assuming AMC will get 75% of the profits after Medinah gets its 15% and Nuoco and Cerro each get their 5% cuts. Looking at the grades involved, I would think that getting the cash flowing one year earlier would EASILY pay off the extra cost of capital for AMC. Thus I might suggest that in the absence of a new deal being struck OPTION EXERCISING might be pegged to PERMIT APPROVAL TIMING AND THE AMOUNT OF TONNES PER DAY PERMITTED for the ADL 4,500 ha. Money is money and it has a time value attached to WHEN it is received.

Another parameter involves the fact that if a new deal is executed that EXTRA percentage of the action received by Medinah is going to be paying off for a whole bunch of years perhaps approaching 30 or so as a rough guess. The ideal scenario might be an intermediate (less than $100 million) amount of cash being paid up front a lot of which would be deployed into buying back and cancelling cheap shares and an intermediate amount of EXTRA percentage points of the action. The question arises as to what is going to to grow in value more robustly, is it the cash amount between the lesser amount of cash up front and $100 million or is it the extra percentage points in a corporation with this deposit run by Cordova, Alegria and Bocanegra, a group of very savvy miners. Once again let’s peg the earnings of that extra cash at perhaps 3% per annum. At what rate might the NPV of the shares of AMC appreciate in a mining corporation just going into production and containing as much metal as is projected at the mountain?

If I were AMC and I just gave Medinah extra percentage points in AMC in lieu of less cash I would go straight into the Medinah market and buy everything in sight IN ORDER TO INDIRECTLY RECOUP THOSE “EXTRA” PERCENTAGE POINTS I just gave away. This could be incorporated into the terms of any revised deal. I wouldn’t care if I DIRECTLY held “X” percentage points of the mountain via AMC and “Y” percentage of the mountain INDIRECTLY via my ownership in Medinah shares. AMC is only concerned about their TOTAL ownership in the mountain or “X” plus “Y”.

Another question would be would Medinah be more attractive to a major miner with those EXTRA AMC ownership percentage points in their back pocket. Could they quickly sell those EXTRA percentage points for a whole lot more money than the amount of cash they chose to forego by amending the option arrangement? I think the key in this entire exercise is to attempt to project the path in the growth of the NPV of an ownership percentage point in AMC AT THIS PARTICULAR STAGE OF DEVELOPMENT OF THIS PARTICULAR PROJECT.

If we can get the number of shares issued and outstanding lowered significantly then all cash dividends distributed FOR THE ENTIRE MINE LIFE would be much higher on a PER SHARE basis.

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Loading up is not the best advice. I have been trading penny stocks for 30 years. I have had five that have gone to zero. It comes with the territory. Why is everyone so confident that we are exempt from any outcome, that may not be profitable. Like everyone else, I am in over my head on this one, and am losing my ass. Having said that, I am ready for anything. Good or bad…

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Hey Doc, would it be reasonable to only buyback ridiculously cheap shares only if there is additional dollars to dividend out? If we’re being manipulated, wouldn’t we continue to be manipulated even at a reduced outstanding?

@mdmnholder

I like your post but let me offer a slightly different perspective and approach.

As things stand, MDMN is still required to pay surface rights, taxes, office space, trips to Chile, BOD grants for 8 million shares a year, etc. They have NO CASH so all of that means continued private placements and dilution at these ridiculous levels. It’s like we’re in a death spiral.

There is no guarantee that the option expires in July 2017. Read section 22 of the contract. Any number of things could move the expiration date. Also, there is no guarantee that the porphyry proves to be economical. No guarantee that the copper market doesn’t completely collapse. There are any number of risks we face waiting for the option to be exercised (along with the continued dilution.)

AMC has claims that will be going into production next quarter. They expect to be cash flow positive this year. MDMN gets nothing from that and will not until the option is exercised.

What I’d like to see them do is put the entire package in the hands of AMC now. AMC has demonstrated and continues to demonstrate that they will develop the project on all fronts. Based on what I’m reading there is enough cash flow to cover MDMN’s pro-rata share of the package and to issue some dividends. If there is not, negotiate something into the deal so that AMC can put some of the $100 million into the ground and MDMN retains whatever increased percentage it can negotiate.

De-risk the entire option agreement today! Put the property in the hands of a company that was actually established to be a junior mining company. I agree with all your other points. Burn both companies as you and place the stock in AMC in a clean shell as you said. A friend suggested a business trust that pays dividends and trades publicly with little to no overhead instead of a shell.

Anyone can sell whenever they want or someone can come along and buy the trusts for their % in AMC.

I think there is a reason CDCH bounced on their news and MDMN continues to suffer. We are still at risk! I believe the risk of an unexercised option is much greater than the risk would be if we had a nicely increased percentage in AMC that was cash flow positive in 2016 and drilling like crazy all over the ADL!

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Kevin did you talk to Cordova about this plan?

I would guess not. If Cordova is as professional as Kevin read him, Cordova would certainly not release any of his thoughts on these plans to Kevin. Do you think Cordova’s real name is Les?

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Not exactly as I just spelled it out. It’s a combination of several plans suggested by various shareholders. It includes the whole idea of Docs dividend play (also rumored by LP via BigBaboon and others), the idea of a shell from mdmnholder, early exercise of option suggested in MDMN’s Feb 1 news release, and the creation of a business trust suggested by a friend / fellow investor who is very market savvy.

I discussed lots of things and asked lots of questions of MC. Unfortunately, I’m not privy to the “ongoing” state of the negotiations that MDMN mentioned in their news release. However, MC did not deny that they are taking place.

In my opinion something will be agreed to. Here is why I feel that way. The same people are at the table who were at the table for the CDCH and NUOCO agreements. Those were closed before the respective options were exercised. I see no reason that MDMN won’t do the same thing once the two parties come to terms they both can live with.

It’s been clear from the start that AMC was going to end up with the whole mountain or buyout all the companies. My suspicion is JJ not honoring the stock sale makes this path more likely. And the fact that nobody is going to give up 100 million until the porphyry is proven so forget the idea of an early exercise or TO.

The other possibility is we wait until they drill enough until they’re satisfied with the P. But if they do that I think a TO is much more likely. No reason to exercise it then.

So if you are asking me I’d rather exercise now then get diluted even more while we wait. That way if they hit the P we get an even bigger payout. If it takes longer at least we are in on the cash flow.b

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It is really discouraging that the SP is still declining, obviously a larger shareholder is getting tired with this continued waiting and uncertainty, and has decided to move on with his money . But I suppose it is a benifit for somebody with the risk tolerance who wants to average down. Too risky personally forme after all this wait, despite the positive expectations from others. And I hope they are all right on with their short term expectations but nobody really knows obviously.

Funnyman, ironic you should bring up the share price. While we sit around and pontificate and proffer strategies, I don’t think anyone doesn’t feel like we are being hit with a baseball bat each and every day.

Look at the close today, T-trades, jmo, sure sign that more shares are entering the market. Is it any wonder why the company stopped reporting float long ago.

We are getting hammered. We are going to see sub pennies before it gets better.
Somebody must know something that is not good.
It will take years to recover from this levels.
Reality check!!

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mdmnholder didn’t Auryn handcuff Medinah from issuing more shares for 3 years?

Only if it’s years before you see a dividend. If Medinah announced a dividend tomorrow the price would reflect it within minutes as long as the market was open.