Hi mangelsen and mdeman,
Mdeman nailed it on the ratio. Theoretically if you multiply the CDCHD price by 0.0058 you should get the Medinah price. On the day of the distribution/conversion that will almost assuredly be the case due to arbitrageurs.
Between now and then who the heck knows. Over the next 4 or so months the share structure characteristics between the two couldn’t be more dissimilar just like we’re experiencing now. This is currently a SHARE STRUCTURE play. Theoretically the share price of CDCHD could rapidly advance to the price at which Cerro shareholders start breaking even.
Those of us that live and breathe Medinah and Cerro need to take a step back and realize that pretty much nobody in the mining investment arena have a clue that Medinah owns about a fourth of the action at the ADL. The out of kilter ratio between the two might attest to that. I don’t think that Auryn refers to “Medinah” much on their website for those doing due dili on Auryn. When Hochschild puts out a PR on their deal with Auryn I seriously doubt there will be a reference to “Medinah” so the ratio might get even more out of kilter.
Part of the uncertainty comes from the notoriously difficult task it is to place an appropriate “valuation” on the ADL at its current stage of development. The correct valuation is in the midst of a range that is so wide that it doesn’t help matters. This is exacerbated by the fact that we have been held in an informational vacuum for so long.
The dynamics of a market in which the average investor is sitting on a 10-fold profit versus a 5-fold loss is immense. So too are the dynamics within a company with 3 billion shares outstanding like “MDMN” (actually 30 million post-share consolidation) and 3.5 million shares (AUMC) is equally immense.
I can’t use a “market comp” valuation because I obviously can’t find a “comp” with all of these attributes particularly at this stage of development for a deposit with this many different deposit types present. Hochschild’s decision to join in makes perfectly good sense. They specialize in 3 deposit types: skarns, epithermal veins and porphyries. We know that the LDM features skarns, epithermal veins, evidence of an ocoitic andesite porphyry and a stratabound deposit. Recall how Hochschild bought out Andina’s “Volcan” deposit up north of us near Copiapo.
I think the proper valuation estimation to deploy for the ADL Mining District is to study the terms of the strategic alliances/joint ventures that Maurizio enters into. Between the informational vacuum we have been living in and the technical complexity of this industry I think we need to defer the valuation estimates to the professionals willing to write big checks.