The Mining Play

MDMN - 2016-05-16 Weekly Discussion


#1145

This week a couple of forum participants quoted some often cited mining statistics that got me thinking. We’ve all heard that there is somewhere in between a 1-in-1,000 and perhaps 1-in-10,000 chance of a junior explorer ever making a significant mining discovery that made it all of the way into production.

We’ve also heard that for that lucky junior explorer the average time it takes from the commencement of exploration to that first day of production is somewhere in between 15 years (according to Newleaf’s source) and 27 years according to the World Gold Council as cited by Pierre Lassonde at one of the Grant’s Interest Rate Monitor meetings in NYC.

If you project these stats onto a baseball scoreboard, wherein a run is equal to 1,000 ounces of gold production and an inning represents one month, even that lucky junior explorer that was the 1-in perhaps 5,000 or junior explorers to get a discovery into production posted goose eggs (zero production) for the first 200 or so innings/months. Once a junior explorer with a deposit like that present at the ADL posts its first “run” (1,000 ounces of gold production) it’s probably going to have about ( a guess) 360 straight innings (30 years) of production and no more goose eggs. This gold production/run production will typically ramp up nicely at first and then plateau out.

So the overall scoreboard for the lucky explorers has a couple of hundred goose eggs followed by a very long period (proportionate to mine life) of “run” production. Wouldn’t the optimal investment paradigm from a risk/reward point of view involve WAITING until a junior explorer scored that first “run” (went into production) and therefore IRREFUTABLY PROVED that it belongs in the 1-in-5,000 club before pulling the trigger on an investment? (20-20 hindsight) It seems to me that once the hoops and hurdles needed to clear in order to score that first run are cleared and that first run is scored further run production is fairly low risk.

As far as the ADL deposit’s scoreboard, we’re being told that 2016 should involve the production of 5,000 gold ounces over about the last 4 months in the year. Let’s estimate 1,000 ounces in Sept. and Oct. and 1,500 ounces in November and December. In 2017, we’re being told to expect at least 25,000 ounces of gold production or an average of about 2,000 ounces per month. If we’re producing 1,500 ounces per month at 2016 year end then let’s say we’ll be producing about 2,500 ounces in December of 2017. If we assume we’ll be producing 1,500 ounces per month in the first 6 months of 2017 and 2,500 per month in the last 6 months then you’ll get your “about 25,000 ounces”.

Back to the scoreboard analogy, that’s a pretty “busy” scoreboard after 200 goose eggs in a row. As the sites permitted for production increase over time and the number of ounces allowable AT EACH SITE go up over time that scoreboard could be looking pretty interesting. If AMC is intentionally “sandbagging” their production estimates in order to “underpromise and overdeliver” then the scoreboard could look even more impressive. I’d keep an eye on the first several months of production tdo see if they are indeed near 1,000 to 1,500 ounces per month.

I’m wondering if this current lack of interest in our stock is basically the market saying “hay Medinah, PROVE that you belong in the 1-in-5,000 club”. Those of us that have been following AMC and how they operate have a strong feeling as to what they’re going to do but others not so familiar with them have obviously chosen to take a wait and see approach actually which makes sense. I’d be curious as to how many mining analysts and mining investors follow this investment paradigm because it seems to be kind of a no-brainer.


#1146

No. There is no influence. I’m assuming we can now conclude that MDMN is not correlated to the GDX/J despite the tired posts here claiming the same. Let me be candid. I’m invested here b/c I think MDMN will eventually support a 10-15 cent valuation ( I don’t think 20 cents is realistic anymore given that AMC would need to be valued at $1.5 billion for MDMN to get to 20 cents). We have never been in a better position to eventually become a legitimate mining play. I’m looking to add but not until there are some big hurdles cleared.

The talk about 1 in 5000 mining cos being successful and a typical 10 year development cycle as it relates to MDMN is beyond absurd. The 10-15 year development cycle is not comparable to MDMN where they drilled some holes 10 yeas ago, issued a billion shares, and then finally partnered with someone with the capacity to develope the mountain. The typical “development cycle:” assumes a continuous exploration, permitting, production progression. To claim that MDMN followed this schematic is beyond ridiculous.

Additionally, to claim that MDMN, who is initiating a surface, toll mill production plan is in the same category as the 1 in 10,000 mines that goes into production is equally ridiculous. I’m honestly not sure if Decosta believes what he posts or if the decades involved have permanently warped his reality on this investment. HOWEVER, it’s not rare for smaller mining operations to pursue near-term production opportunities to self-fund larger mining plans (I’m invested in three projects mining a few 100 thousand open pit ounces doing exactly that). This is NOT comparable to the 1/5000 garbage being tossed around which is more applicable to the 30+ mine life, world class depoist, projects.

I apologize if my posts seem overly negative but I’m, admittedly worn out by the misinformation posted by the Breeciaboy’s of the world. This investment will pay some very healthy dividends but I strongly encourage people to educate themselves on the realistic fundamentals of this investment to avoid hyperbole that often goes unchallenged.

In anticipation of your next question. No, I don’t think anything I can post on this board will ground expectations. There are far too may people looking for their next lottery ticket, desperate for “next week”, or Brecciaobys “eternal disconnect”, to seriously weigh my point of view but that’s what makes a market. I hope everyone enjoys the 4rh!


#1147

Yes, I disagree, although there are a few more milestones to be reached. We will be on an accelerated schedule post 2017. The Caren mine exploitation is nearing, with greater accelerated cash flow to follow:

[quote=“easymillion, post:1104, topic:1280”]
Just noting the initial cutoff grade on the Caren mine:

AURYN’s engineers plan to ramp up production to achieve this level of production during the next 6 to 8 months, with a cut-off grade of 15 g/t gold. Metallurgical tests conducted at laboratories in Perú returned an average gold recovery greater than 90%. Test conditions confirmed the best recovery method entails use of a Falcon gravimetric system processing previously concentrated ore.

and for Sepro’s Falcon SB Gravity Concentrator:

The target mineral will usually be in extremely low concentration (grams per tonne) and a very high upgrade is desired (up to 10,000x). :grin:

Surface gold sampling in the Fortuna area was not extremely high. The above use description of a concentrator appears to be most suitable to the planned open pit. It can process up to 400 t/h! AURYN has shown itself to be a short term and long term planner. I would expect early exploitation cash flow numbers to jump very quickly once the open pit Fortuna mine becomes operational.[/quote]

Also note:

An option agreement has been granted to MDMN to acquire an additional 5% of AURYN for US$50 million over a five year period commencing at contract signing. The option can be exercised by MDMN at its sole discretion.

What could the reason be for mentioning this clause when announcing the contract? MDMN has no mining claims at this time to receive additional revenues. Is MDMN expected to be around in 5 years? Will a sufficient number of dividends be issued within the 5 year option timeframe to buy back a boatload of OS and reward MDMN shareholders (including MASGLAS) with cash in hand? Will a TO occur for a percentage of MDMN’s AURYN shares? 2021 is quite a long timeframe for unexpected developments to occur. Time will tell.


#1148

Everybody left standing knows the score. To hold our former Clown School Board of Directors responsible for this travesty is being charitable, but we all know that, and repeating it adnauseum is not going to do a blessed thing to improve our position. Everybody understands the intense frustration of the shareholders, but thankfully it’s a new day. We came perilously close to loosing the whole mountain and our investment to their congenital stupidity…but we didn’t. In many respects we got dumb lucky…it may take some time to show just how much our fortunes turned, but those who can hang on for a bit longer will be glad they did. I feel nothing but anger and sorrow for the many many investors who got corn holed by "done done done’, etc. etc… There’s a thing called karma…may they get a taste of what they’ve got coming sooner than later. In the meantime, look forward with gratitude that the cavalry came over the hill in the nick of time.


#1149

" ( I don’t think 20 cents is realistic anymore given that AMC would need to be valued at $1.5 billion for MDMN to get to 20 cents)"

Do you actually think that AMC will not get a chance to reach that target? In other words what you are saying is that AMC would not be able to prove up 2 mil ounces with the Merlin veins and the Fortuna (including LDM and others) combined with an all in cost lets say 700.00/oz(which is quite high with our infrastructure). And I guess the Pegaso Nero is just wasteland that is not worth anything?


#1150

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#1151

Go back and look at those google images that Davis posted. I think with the work Auryn is doing being aggressive on the attack this stock will be worth more than .20 when we start producing and bring the 5000 in jmo

Gold moving up “Cash flow positive”= perfect storm


#1152

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#1153

I don’t understand your question. I can only hope, for your sake, you aren’t under the impression that you multiply the ounces in ground (in-situ) by spot price $1300/oz to calculate market cap. Ounces in ground are going for $10-$20 per at this point (Using your example $40M). I have to defer to CHG on these matters who has a very admirable patience for walking people thru these subjects.


#1154

We certainly understand you are not claiming that all gold in the ground has a value between $10 and $20.00 per ounce. You know the value all depends on the specifics of the deposit. Examples

  1. Deposit 1 One million ounces - Extract in one year - Cost to extract $5,000.00/oz - No value
  2. Deposit 2 One million ounces - Extract in one year - Cost to extract $100.00/oz - Value in ground is a lot greater than $20.00/oz

#1155

No. You don’t seem to understand.

First Mine Finance has been acquiring attractive projects/deposits for under $10 an ounce. I rounded up to $20 because of the recent bump in precious metals. At the height of the market, the most desirable (low cost producers if you want to use your example) were receiving $100-$200oz in situ. Those were highly profitable projects with long mine lives and, as it turned out in most case, the acquirers paid too much.


#1156

“TO will happen before this and everyone will accept a .10-.15 TO to end this drama.”

I won’t, BE’s followers will just like CDCH was a better play.


#1157

Hulkster. Be careful not to stray too far from your usual posting “blaming the evil maket makers every time the stock goes down.” You may have noticed (or not) CDCH has gone down a lot less than MDMN and, in fact, has been the “better play.”

It’s all relative but if you understand (or not) what CDCH is doing with the private spinoff of the 5% of AMC you’d understand that you’re getting an undiluted interest in the upside. We can’t claim the same with MDMN where more preferreds were just issued. CDCH is the better play unless you want to sell early (liquidity). Plus you get the new business being brought into the remaining business/shell. FWIW


#1158

Slow down there Charlie… I love how you know the future, but I would rather speak for myself! I think there’s going to be a low ball offer at some point (.08 to .12) range, but I would hope that shareholders would hold long enough to see how the properties prove up.
That being said, if Auryn just focuses on production on just a few sites instead of a full exploration program, could take awhile and I would expect shareholders to except a stronger offer.
I myself would prefer to wait, but some others have just lost the patience…


#1159

I hope shareholders have the opportunity to experience at least one cash dividend prior to any takeover.
Anyone claiming the price is not being manipulated is either not watching bid and ask action or has another agenda IMO


#1160

An investor, a geologist, and a miner walk into a bar. Shortly after sitting, the geologist notices a gold nugget in the corner. That sparks a discussion between the investor and the geologist about whether a nugget could be classified as measured, indicated, or inferred without a qualifying 43-101 resource estimate. They phone an engineering friend who reminds them that before they can determine the overall grade and tonnage of any mineral resource estimate they need a study, and he recommends because of the unique nature of the resource; its geometry and proximity to the surface - they move right to the Feasibility Study. But it will still require informed assumptions and estimates of many technical and economic variables. They turn to share the consensus with the miner – but he’s gone.


#1161

I thought the same as you, then found out several day traders have been flipping for the hundred to two hundred dollars they can get on a daily basis… I blame them for the constant over turning of shares… as for price appreciation that will begin as soon as production grades start to come in…


#1162

Good article - going back to the quoted research paper “The average price paid for gold in the ground was $63/oz” for the 23 years starting in 1990. The average gold price during that period was $623. The authors make a compelling case that the price of gold is irrelevant for the in-situ purchase price - but I would think that won’t hold true forever.


#1163

I don’t think is all one or the other but rather a combination of several influences.
No one knows the value of this stock until more is known about the property


#1164

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