The Mining Play

MDMN - 2016-04-04 Weekly Discussion


#254

MDMN effectively becomes an Asset Holding Company. All percentage cash flows, resulting from production on the mineral-rich Altos de Lipangue Project claims, will be disseminated to MDMN by AURYN Mining Chile SpA on a quarterly basis.
http://www.medinah-minerals.com/?p=3479


#255

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#256

Just read this . . .

It’s very straight forward. Forget MDMN’s release. Read AMC’s.

Don’t count on any distributions in the near term. Do watch progress and reports from AMC. Production will start, ramp up, exploration of the Pegaso Nero, and distribution of profits after reaching full scale commercial production and running for while.


#257

Don. Don’t get carried away. I’d focus on the updates from AMC. Not sure how many times it needs to be repeated but this isn’t a royalty deal. If we are lucky, as rumored, there will be a portion of the cash flow/profits distributed back to MDMN but assuming that nothing is being reinvested in the mountain is akin to assuming Les is a trustworthy individual. If 25% of the cash flow were allocated to MDMN the project would NOT be economical.

It’s updates like this, coming from MDMN, that illustrate why it’s so important to replace our existing BOD with one that can be trusted to communicate clearly and effectively (while minimizing the burn rate). As was earlier stated, and confirmed via this update, we are essentially a holding company. Paying directors 2M shares annually for basically doing nothing is a thing of the past.


#258

How a Shareholder Coup at Olive Garden’s Owner Sparked a Turnaround


#259

Hi Mangelsen,

I can’t give investment advice but I can help you set up the calculus for the NPV of Medinah subsequent to this new deal because a lot of visibility has been opened up by the deal and a lot of DERISKING accomplished by the deal (for me anyways). I’m a big fan of the concept to never trust our OTC markets to properly distribute shareholder rewards through share price appreciation. I personally would rather be able to sense a clear pathway to cash dividend flow especially if the dividends are likely to be PROGRESSIVELY LARGER through time. I now feel that I have that.

From here on out everything becomes MECHANICAL. If the share price remains out of synch with corporate performance resulting in abnormally generous cash dividends then I can simply take my artificially generous cash dividends and buy back ridiculously priced shares in order to expose larger shareholdings to subsequent PROGRESSIVELY LARGER CASH DIVIDENDS. I can’t ask for a shareholder reward GUARANTEE any stronger than that.

Medinah’s current market cap is about $20 million and they hold or are about to hold a 25% equity stake in AMC and about 28% of “the action” (on average) for the entire mining district. The new 25% AMC stake plus Medinah’s market cap in combination suggests that AMC, the team they’ve put together and their 100% owned (now open pitable) mining district is only worth $80 million. To some the absurdity of that is obvious but to others it might take more information in order to make that deduction using standard industry metrics which we’ll soon have access to. We shareholders don’t know the projected cash flow numbers but we do know that whatever they are Nuoco, Cerro and now Medinah know them and have all said “heck yes” to the terms of their deals.

For simplicity’s sake, I’d divide the valuation of AMC’s mining district into the net present value (NPV) of the high grade near surface early production opportunities as determined by discounted cash flow (DCF) projections plus the NPV of the deeper porphyritic assets which is a tougher assignment for now. The Caren Mine production will come first and then probably that 400 ha plot of land encompassing the Merlin Veins and the various Fortuna Veins second. The latter early production opportunities appear to be open pitable.

Nearly all porphyries are mined via open pits using bulk mining methodologies. I feel that this deal, in and of itself, has increased the NPV of AMC’s mining district enormously because it is now open pitable and pit optimization studies can be carried out post-drilling without any issues related to Medinah’s intervening ground if Medinah (or Cerro or Nuoco for that matter) didn’t cut a deal. One of my paranoias was that some party might hold up progress in search of a better deal. A tremendous amount of DERISKING for this deposit was recently accomplished for a variety of parties.

Medinah’s market cap now provides us a BENCHMARK to gauge the MARKET’S VALUATION of 25% of the mining district and how appropriate or inappropriate the market is rendering that judgment. The management factor in this industry based on “management, management, management” is now focused on the bona fides of the team AMC put together. Back when AMC merely had an OPTION that they may or may not have been exercised the benchmarking process was much weaker because the mining district might have been worth a fortune but AMC might have had trouble raising the money independent of the mining district’s value. My own fear was that they might opt to raise the entire $100 million by mining the Caren for several years and then exercising the option if Medinah chose to extend it. By no means do I think AMC would have had any trouble in raising the money but THE MARKET doesn’t know that.

Once we get some cash flow numbers out of the Caren Mine the initial NPV of just that relatively tiny aspect of the mountain’s early production opportunities will be more apparent. From my standpoint, the exciting part will be to project the increase in the allowable production rates on a daily basis over time. The Caren Mine is permitted currently for 5,000 tonnes per month. That number sounds modest at first glance until you start multiplying it by the grades encountered to date in those two Caren adits.

As yesterday’s PR stated, AMC has been aggressively going through the permitting processes in order to not only add several other early production centers but also to get the allowable production rates per production center increased. Thus the initial cash flow numbers could take on more of a parabolic growth pattern through time until any future open pit is commissioned at which time the production numbers might take on more of a vertical nature.

With the AMC geoscientists now steering the ship, I think the pathway has been clearly established for a very, very long stream of progressively larger cash dividends. To me, these recent developments has clearly confirmed the existence of an enormous DISCONNECT between Medinah’s current market cap and it’s about to be easier to estimate approximate NPV.


#260

Kevin, I believe the biggest one item that is a dark cloud over Medinah is defining " free-carried ADL production revenues" and what the statement means to the contract and to the future potential of Medinah’s value.

Doc explains it one way, BE goes another, and you offer “straight equity deal”. I think I know what it is suppose to mean but with Medinah’s history of saying one thing only to later discovering that there were either hidden or unexplained meanings behind the statement, I believe we need some clarity from Medinah and Auryn.

Based on some past releases I find myself questioning which, if any, of the following defines “free-carried ADL production revenues”? (I grow suspicious when I see “free-carried” and “ADL production revenues” together, almost as if there is an intention of deception by omission.) So, which is the best answer?

  1. MMC/MDMN will never have to contribute any fund (CapEx or otherwise) toward any AMC exploration or mining activities for the life of this agreement.

  2. MMC/MDMN will never have to contribute any fund (CapEx or otherwise) toward any AMC exploration or mining activities for the life of this agreement. except that Medinah, as a 15% shareholder (owner) of S.C.M. NUOCO, a Chilean Company in which AURYN Mining Chile, SpA holds the remaining 85% interest of the stock issued, Medinah will be responsible to contribute 15% CapEX cost toward the development and production of that (NUOCO) property.

  3. MMC/MDMN will not have to contribute any funds for exploration and mining activities for only the ADL claims that Medinah transferred in total to Auryn but Medinah will be responsible for 25% of CapEx cost toward all other mining claims owned by Auryn that are covered by this agreement.

  4. MMC/MDMN will not have to contribute any funds for exploration and mining activities for only the ADL claims that Medinah transferred in total to Auryn but Medinah will be responsible for 25% of CapEx cost toward all other mining claims owned by Auryn that are covered by this agreement, and as a 15% shareholder of S.C.M. NUOCO, a Chilean Company in which AURYN Mining Chile, SpA holds the remaining 85% interest of the stock issued Medinah will be responsible to contribute an additional 15% CapEX cost toward the development and production of that property.

  5. None of the above. The real difinition is______________________________.

Would you consider offering up a poll to determine if the majority of TMP members would support you as a spokesperson representing TMP membership in contacting both Auryn and Medinah for the purpose of clarifying the definition of “free-carried ADL production revenues” and how it does and/or does not relate to this latest agreement between Auryn and Medinah?


MDMN - 2016-04-18 Weekly Discussion
#261

I believe Auryn update states equity which I believe means we won’t get any monies until ALL expenses are paid and if profits are available to disseminated?


#262

I already know the answer. :smile: When AMC and MDMN close the deal, AMC will likely explain it all.

In the meantime here are the possibilities.

  • MDMN owns 25% of the shares of AMC.

  • CDCH owns 5% of the shares of AMC.

  • Others people or entities own percentages of the shares of AMC totaling another 70%.

If / when AMC makes profits it has a choice what to do with those.
a) Distribute all profits pro-rata to their shareholders
b) Distribute some profits pro-rata and re-invest some profits into exploration and development.
c) Reinvest all profits into exploration and development.

AMC realizes it needs more capital in addition to reinvested profits to fund development. It has a choice.
a) Issue shares and sell those shares to investors (this dilutes everyone pro-rata.)
b) Make a cash call to all parties (anyone who cannot contribute gets diluted proportionally.)
c) Debt financing, i.e. a loan from some entity (nobody gets diluted.)


#263

In CDCH’s Annual Report (4/1/16), There is a statement “… any proceeds from the Auryn transaction will be used to return value to the shareholders directly rather than using such proceeds for exploration of new projects.”


#264

For the sake of candid conversation. Has the market really had it so wrong all of this time? Can we still conveniently blame the evil market makers orrrr is a $80M-$100M valuation for AMC a fair current value (NPV isn’t really applicable yet). As someone who follows the public and private markets for this sector somewhat vigilantly, I don’t see the absurdity and would challenge you to find other $100Mish market cap companies that don’t have more “proven” ounces in the ground. As in ounces that the market will assign value to.

As an investor in MDMN I clearly believe our “NPV” will go up dramatically but, as it stands today we don’t even have a basic 43-101 to support any valuation. Any near-term production opportunities will accelerate an increase in value WHEN they actually occur. Until we place ounces in the measured category and quantify near-term cash flow opportunities, I’d argue that our current valuation is anything but absurd. As soon as the $100M option was off the table we lost our floor and the market was early to discount this reality.

It’s onward and upward from here but in the spirit of “lets learn from past mistakes” category I think it’s time that discussion of leveraging massive disconnects with cash dividends fall into the shadows. But I have a sneaking suspicion the broken record will continue turn. I’m still optimistic that this board can evolve into an educated and realistic discussion vs. fantasy land hyperboles. This transition will be inevitable as more sophisticated investors begin their due diligence (once we get on their radar screen with actual results).


#265

Thank you John. I was poised to draft a similar response, but yours was much more artful than mine would have been. I believe the biggest “disconnect” we currently have is the level of optimism regarding the timing of actual realization of these basic components necessary for increased NPV (cash flow, measured resources), and the reality of the actual timeframe.

I would conservatively suggest anyone expecting material dividends in the next five years will be tremendously disappointed. Do you disagree?

Of course, we have an existential question as well, as the path to a TO may be more clear now.


#266

Not that you’re asking me, but I disagree with that. I expect them within 18 - 24 months of signing. By material I’m expecting more than 50% yield on today’s prices.

::: more housekeeping :: :smile:

  • BTW…regarding my post on free-carried interest. I would be more comfortable saying it would be a carried interest. If there are cash calls or shares are issued to raise capital, we will get diluted. I don’t think that will be the case though.

#267

The most likely to have a free carried status would be our cut from Nuoco, as I believe that agreement was originally structured and should still stand.


#268

#269

I welcome your commentary. You have a much deeper base of knowledge in this particular subject than I. I don’t have analytics behind my “five year” projection, but I do understand that it takes time to develop a mine and that there are capital cost outlays (to recover, and fund on an ongoing basis) and additional expenses as we move forward. I also think it is reasonable that AURYN will require a certain return on investment before rewarding a minority equity party. Perhaps I would be more charitable had Medinah not delivered their usual language butchery, rendering what should be a simple concept opaque.


#270

Can anyone answer why Auryn has not jumped in the Market after yesterday release to buy shares of Medinah knowing that in 3 weeks they will own the mountain?


#271

We haven’t gone to the alter yet. Once the deal is signed by both parties, then we may see some action. (11-16 business days to go)


#272

Any number of reasons.

  • Diversification – they’ll own the mountain, deploy capital elsewhere.

  • Limited capital – better spent in the ground.

  • It’s MDMN – It’s not done until it is done.

  • It’s MDMN – Until they have control they risk MDMN dilution.


#273

The MOU is subject to final negotiation and contract signing in Santiago, Chile before a Ministry of Mines Notary to fulfill Chilean law requirements. This transaction will be formalized by the parties during the week of April 23-30, 2016 in Santiago, Chile.

What final negotiations could there be?