The Mining Play

MDMN - 2016-04-11 Weekly Discussion


#62

Think about it why would they want to release any info to us? They can keep this quite as long as they can so they can A) Take Control on the cheap off er a less TO B) string us along since they don’t have to release anything and just mine the Caren and hold us hostage on our property so no one can step in and take control.

We lost that leverage No Money and gave them the property for 10% more ownership. I would love to see the New contract. Lets hope they publish it so we can put all the speculation to rest.


#63

Andy, I understand that the history of Medianh’s past decisions is causing this attitude but I expect to see the contract published once it has been signed and processed with/to the Chilean government. At that time we will know if we gave away leverage or used it to negotiate for a positive position for Medinah. If it’s just we get 25% of something when AMC gets aground to giving it to us, then we very likely got screwed. If, on the other hand, we negotiated for something such as a guaranteed early and quarterly formula of dividends from AMC then we may have come out of the negotiations in some sort of a win-win position. I’m not hanging my hat on screwed or win-win until I read the contract.


#64

Thank you DonD!


#65

AURYN has termed the acquisitions of 85% of the NUOCO/LDM, 100% of the Fortuna and Lonco Millarepu mining properties, the Caren mine, and the pending MOU for the ADL a partnership. Those doubting that AURYN is moving early production opportunities and all the projects forward should reread AURYN’s announcements. Everything has been “by the book” to date, and will continue to be professionally and methodically developed well into the future.

AURYN Mining Chile is confident the new contract will be mutually beneficial to all parties. The partnership has improved MDMN’s mining claims with the consolidated of a significant area in excess of 10,000 hectares.
http://aurynmining.com/category/news/

Early production (call it bulk sampling if you prefer) will proceed quicker than many here comprehend. Gravity concentrators can recover 40-50% of gold and are relatively cheap! Residual tailings can be saved for later heap leach milling after recovering the easily accessible hi-content gold from surface ore.


#66

August 13,2016
Total volume:757400
Buys-107,000
Sells 650,400 most at the bid and last trade was a paint job of 500 shares to have the last price .0144 instead of .0137


#67

That’s what you see, but I bought today and it showed as a sell. Most of what I hold was bought on or below the bid.


#68

Peter, that is the problem. The problem is that the selling is at the bid or lower most of the time now. That is what is happening to this stock. As a result, the price continues to slide down for months.


#69

For those who believe there is no way to really get a sense of a big discovery before the NI 43-101 comes out, read the following article relating to Aurelian Resources and how all the signs were there well before the NI 43-101 came out:

http://www.24hgold.com/english/contributor.aspx?article=2450998398G10020&contributor=Dirk+Masuch

True, Aurelian was a little more transparent than MDMN, as Aurelian kept the GIS images right there on their website all along. On the other hand, although the 18 holes we have are outdated, they are still of value as one cannot assume AC Howe and Sepulveda-Perez were lying. If nobody invested in mineral exploration companies until the 43-101s came out, it wouldn’t be a “speculative” market. Step right up to the window, and make your bet - tickets are CHEAP these days, and things seem to be moving forward one way or the other.


#70

MB, nice article, not really a good comparison, but the underlying theme is what drove the last mining boom which seems like decades ago. Blue Sky is what drove junior miner stock price, the big dream of investing in a company that was going to make the next big discovery. When juniors did road shows to raise capital, places that were always on the schedule were cities like Yellow Knife and Saskatoon, that were full of people drinking and gambling on the stock market.

An acquaintance of mine, Dave Watkins, used to be CEO/Chairman of Atna Gold. They were producing gold during the boom and their share price would move in direct correlation to the price of gold. He was always frustrated that the juniors in the exploration phase would have significantly higher valuations than Atna which had good deposits, producing gold and generating profits.


#71

Another thing that needs to be recognized is our proximity to nearby infrastructure - and I’m not so sure Aurelian had a good situation on that front. It seems like some of the Canadian plays I have been involved in had good, good mineralization all over the place, and yet were hundreds of miles from water and electricity. These items cost money. Yet another item that is of utmost importance in the fundamental evaluation of an exploration company is when the CEO shows up for dinner with you and starts stuffing tobacco up his nose - that’s a tell-tale sign it’s time to get out (it actually happened … maybe that’s the most efficient way of getting nicotine into your system?).


#72

??? WTF ?


#73

Every transaction has a buyer and a seller. It was only a sell for you. It was a buy for someone else. It’s a trade.

That chart on I-HUB uses the words “buy” and “sell” rather misleadingly. It is really simply an indication of whether the price of the trade was at or near the Bid or at or near the Ask price.

On the i-hub chart page look at the small print just below the chart:

Trade definitions are based on the mid-price and are indicative only

it’s always in the small print. somewhere on an imaginary Les Price web page it must say somewhere:

‘the definition of ‘next week’ is indicative only and is provided for entertainment purposes’

But the week of Apr 23 is the actual Next Week week. Not exactly what was imagined, fantasized, and dreamed about for so many years, but it’s real and actually happening, and then finally it is really onward and upward.


#74

Hi Mr B,

I think the Medinah story has some similarity to the Aurelian story in that for geoscientists of AMC’s caliber the writing might already be on the wall. In that Megaw article I posted a link to yesterday you can read about how low sulfidation epithermal vein deposits like ours often have a “grain” to them involving roughly parallel vein systems emanating from a common stock. You might picture a pitchfork with the parallel forks representing parallel sheets of plywood (veins) in cross section. In the Merlin-Fortuna corridor there are several that run in parallel from SW to NE when viewed from above.

The easternmost of these parallel veins coming from a common source/pitchfork handle is the Fortuna Vein. What do we know about it? The Fortuna Mine which had about 7 levels to it, from 1940 to 1970 averaged 64 gpt gold production. AMC’s recent exhaustive trenching campaign here revealed average surface grades of about 3 gpt gold. That’s a high concentration of gold to be found right at surface when you figure that the average concentration of gold in a porphyry environment is 0.38 gpt (Singer). So obviously the concentration of gold increased immensely with depth as the area where “boiling/flashing” of the hydrothermal fluids occurred millions of years ago and the gold got “dumped”.

Now let’s go to the westernmost fork of this pitchfork i.e. the Merlin #1 Vein. Here AMC found nice grades of gold right at surface also-a little lower than found at the Fortuna Vein but very nice nonetheless. This particular sheet of plywood/vein exited the northern downslope of the mountain which was very fortuitous for us. Somebody came along and drifted 3 adits into this “outcropping” at between 80 and 120 or so meters depth below the plateau surface. Here they found “bonanza” gold grades all over the place. These depths are deeper than where the very high grade gold mining at the Fortuna was done but the adits are where they are.

The IP/CSAMT studies are similar to an “X-ray” of the mountain down to about 200 to 400 meters of depth due to the dipole spacing chosen. The results of these studies were very positive in tracing downwards the veins that made it to surface and they also revealed some very interesting findings in what appear to be veins that didn’t make it to surface.

The other veins/sheets of plywood have not been tested to depth by either mining or adit drifting/channel sampling but they too seem to have come from a common underlying source and the grades found at surface via trenching and channel sampling are similar.

The evidence gathered to date is very compelling that we have something very special here. The trenching program was indeed exhaustive. The lineal dimensions of veins making it to surface was increased from 400 meters to over 5,000 meters. The grades found at the very surface (a rarity) were fairly uniform and anomalously high. The grades found at similar depths in the two sheets of plywood that have had the most work done on them is stunning but similar. The IP/CSAMT findings suggest “continuity” from the surface to perhaps the 400 or so meter depth level. The evidence is already very compelling that this particular epithermal vein system “telescopes” out of an underlying porphyry system which is common. These parallel/“sheeted vein systems” are common in porphyry environments. Unlike many epithermal vein systems, this particular one has been “preserved” throughout time in that the upper levels containing “carbonates” are still intact. Older deposits like this, Cretaceous Age of about 91 million years of age, are preferable in that many, many pulses of “episodic” repeat mineralizing events have occurred as reflected by the “banding” found in the vein structure. This tends to augment the average gold grades found. Our story will probably play out via a combination of drilling and just plain old mining.

The presence of these high grade, near surface early production opportunities tends to act as a “catalyst” for the development of the overall mining district. The fact that the early production opportunities involve the mining of GOLD offers what is referred to as “optionality” as AMC has the option to go after either gold, copper, moly or silver dependent on the relative valuations of those metals in this phase of the metals cycle.


#75

Jim. As someone who probably possesses the most in-depth knowledge of the mountain and it’s potential what, in your mind, would prevent AMC from “leveraging the disconnect” through a TO? To be more specific, as a private company AMC has the ability to control the frequency and quality of any updates as drilling and near-term production advances. Once AMC is comfortable in determining that the NPV of the mountain is worth $X why wouldn’t they quickly move to tender for MDMN at $X-whatever % discount?

If AMC finds some unbelievable results, as most of us anticipate they will, and MDMN is trading at 5 cents (as an example) or a $70 market cap…wouldn’t AMC tender for $100M as soon as their internal metrics valued the mountain at $280M (as an example)?

It seems to be the biggest disconnect that will unfold, hopefully this year, is the one existing b/w our market cap and the growing value of the mountain. AMC has the advantage of having full transparency to the size of this disconnect. We do not.

I’m not saying that AMC could give us a low ball offer (5 cents?) and expect to gain shareholder approval but there’s definitely a number (name your price) that will get a green light from the largest shareholders. With that in mind, it becomes almost impossible for me to envision a scenario where we, the common shareholders, participate in the long-term upside of a potential WCD.

Do you disagree?


#76

John I have to give you kudos for your very well written question and post to Doc. It is excellent in content and value and does nothing to focus on the poster. Well done sir as was Doc’s post. Thank you.


#77

Baldy,
The whole idea of early production is to get each phase of the exploration kick-started without a great deal of debt. We’ll have to see what the MOU says about cash flow before we know where this will take shareholders. We’ll also have to give it enough time to see if AMC’s cash flow from early production is enough to get a great deal of exploration and drilling completed without bringing in additional backers. There is a reason AURYN is not immediately going after the wealth that is definitely in the LDM discovery or following the Paul Jones plan at this juncture, but eventually AURYN will. It requires an open pit and $30M according to the estimate. We are very far from any open pit, or TO for that matter. We (AURYN) have accomplished many milestones. One of the lines from our former poster, Volcan, is one I remember well:

A real mining company, will not offer up front cash for this, but instead, sign a mining option, and go from there, as set milestones are accomplished.
If LDM, or MDMN, NA start looking seriously into this perspective, and take this whole operation to the big boys leagues, then all of the shareholders will be happy campers, specially if they are in business with a mid-tier mining company at least, with enough cash to do this or all the ADL, without any debt.
It will reflect in the sp, since people in the business will know that the partner is a respectful established mining company.
Please don’t loose sight of this, with the original Paul Jones plan; the cash flow is not enough to start an open pit. It will indeed give a few million dollars profit, but it would not create the necessary cash flow for an open pit. And this is a fact.

The MOU is the key all shareholders will need to see before making any further conjecture.


#78

I have mentioned Hecla’s new San Sebastian mine as an example of what could be done on the ADL with near term production. Hecla has announced preliminary Q1 production results. Can we draw some insight from the example?

NOTICE: This is not investment advice or such a suggestion. It is a real market example to be applied to MDMN

HL Summary: Hecla is one of the largest U.S. silver producers. They have been in business since the 1890’s. They are located in Idaho and their primary mine, the Lucky Friday, has been mined almost since that time. That mine will soon be producing ore from 8,000 ft below surface, yes, a mile and a half down. Hecla is finishing a $275M project to make a new deep shaft (#4) to get to that level.

They also had two other producing mines they bought in recent years, and just last fall they started up San Sebastian. HL has a market cap of about $1.2B coming off the very painful recent lows of the market.

San Sebastian History: This is so-far modest sized deposit of high grade veins very near surface. It is in Mexico. Hecla owns the property. They mined there about 10 to 15 years ago. Exploration in recent years found some very near surface veins of very high grade silver, 750 to 1000+ g/tonne! If you figure it out it’s in the same ball park of value per tonne as what 20 to 30 g/t gold would be (aka - similar to Merlin). There are no processing facilities at San Sebastian. The rock is dug up and driven to processing 45 to 60 min away as I recall.

Hecla made a decision to go into production before there was even a formal resource report. They were able to start digging and hauling within 3 mos, with less than $6M in capital expenditure to produce ore at only 342 tonnes per day. The formal resource right now is very modest, about 300 KOz. They obviously believe / know there is more. First Dore was poured on Dec 22, 2015 only 4 months ago.

Q1 Results: So how did San Sebastian do in its first full quarter? Here is a comparison:

$31M in revenue with 342 tonnes per day after 3 months of prep work and $6M in expenditures! It’s over 20% of Hecla’s entire production for the quarter (in terms of dollars) and more than their 100 year old mine they just spent $275M on in capital rehabilitating. That’s what grade at surface does! Obviously profit will be whatever is after expenses, which I do not know at this point. Nevertheless, pretty impressive for such modest production.

That is a pretty real similar example. It’s not 100% completely the same, but it’s a good example.

Remember: 5000 tpm is about 167 tonnes per day. That’s the Caren mine only.

Chew on that for a while.

sanity check:

source data: http://seekingalpha.com/pr/16452404-hecla-reports-record-4_6-million-ounces-silver-55688-ounces-gold-production


#79

I think that your underlying assumption that Masglas/AMC (a private company)is going to willfully withold material information from their 2nd largest shareholder (Medinah) in order to screw them later might be flawed but can’t be 100% ruled out. The terms of the new deal will no doubt preclude such behavior. Trying to systematically screw Medinah, Cerro and Nuoco is also a bit of a stretch. I have not detected any of this behavior by Masglas or MC in the past. Kevin’s comments seem to bolster this opinion. We’ll have to wait and see if Medinah gets a BOD seat or not.

The reason why Medinah has retained their own geoscientists on the payroll prior to the current deal going into effect is to prevent this informational disparity. After the deal closes I would expect Medinah to retain a lesser amount of geoscientists with the job task to prevent exactly what you’re contemplating. If AMC is indeed soon to go public then all kinds of new transparency will be brought into effect as they’ll have the incentive to over brag versus under brag.

As we go into production and cash flow numbers are released and checks cut Medinah’s visibility of reality will be greatly enhanced. Valuation metrics can then be deployed (NPV/DCF) to allow Medinah to get a better read on what exactly the NPV of our stake really is. So too will the investing public who has had such limited visibility in the past. This should reduce the DISCONNECT in and of itself. The process of valuing the longer term porphyritic assets will lag behind the ability to value the early production opportunities.

The information that I personally look forward to acquiring is the projected launch path of the permitted number of ounces mineable on a daily basis. As the last PR stated, AMC has already started the process to open up new production centers (in addition to the Caren) and increase the alotted number of ounces allowed to be mined at Caren and at the newer production centers. I am anticipating more of a parabolic move in these allowances than a straight line function as the Chilean Mining industry has promised reforms starting in Q1 of 2016 to their historically slow processing of the paperwork that AMC has already filed.

As far as me being in a position to handicap whether or not Masglas would launch a TO and at what levels it might come I don’t worry about things like that in which I just don’t have the background information to make a guess. The legal issues surrounding the majority owner of a private company intentionally screwing the minority owners via deception seem to me to preclude this kind of behavior. Obviously some kind of independent 3rd party fairness opinion might be warranted.

A lot of Masglas’s planning might be centered on how comfortable they are in handling a mining district of these dimensions, a twin porphyry system and raising the kind of money needed to pull it off (probably in the billions of dollars). If they foresee the need to bring in a major miner skilled in Cu-Mo deposits then I believe by far and away the maximum amount of money they can make in the long run would be by taking a very large stake in Medinah and brokering the sale of Medinah to that major right after the NPV of the deposit has had a nice pop via perhaps robust cash flow from the Caren or elsewhere or perhaps a couple of long intersections into the porphyry.

Masglas’s profit from their Medinah equity position could conceivably pay a good chunk of their share of the CAPEX. This would keep their “cost of capital” down as they are using other people’s money. In this particular scenario, I believe there are various possibilities for a serious “pop” in the NPV of the deposit as measured by industry standard metrics. The key for Masglas would be to fly solo UNTIL that big pop in the NPV. I think the restructuring of the Medinah option could provide for this and represent a major “win” for Medinah also.


#80

It is very nice when posters of the caliber of Baldy and Brecciaboy have a very civilized conversation on the merits of the mountain and the possible exit scenarios for this investment.

Moreover, it brings in other high caliber people (CHG, Mdmnholder, Easymillion just to name a few) making the conversation even more interesting.

I am enjoying what I am reading. My hat’s off to all of you!

:slight_smile:


#81

I believe AMC is very much tied to its own cash flow problems. I do not believe they have $100M to make a tender offer or they would not of been willing to give up 10% of their company for $100 M. The need to get a positive cash flow going is also key to AMC success and access to further debt financing to make this project grow. JMO