The Mining Play

Medinah Minerals (MDMN) - 2016-Q1 - General Discussion


#643

Or you can say that Letts/Volcan needs the Alto now more than ever if you believe in the mountain… glass is half full or half empty.


#644

Because you know the old saying, “Don’t bother me with the facts when I have my own unsubstantiated opinion”


#645

JOHN,

Let’s agree to disagree. IMHO your suggestion that “Claiming that majors are scrambling to find new discoveries in an environment where massive projects are being shuttered and exploration budgets slashed is delusional from an investment standpoint” is 180-degrees off. Brent Cook said it much better than I could in the article I posted yeterday:
“The major gold producers desperately need new, quality gold deposits yet can’t afford to build many of the large deposits they already have on the books.”

The majors are still cranking out production partly because putting a project on “care and maintenance” is very expenive. They need to replace their reserves or DIE. A lot of the nonproducing assets on their books are high cost; that’s why they’re on the books and currently of no use. Masglas/AMC’s Maurizio Cordova made it clear that they want projects that work NOW i.e. low cost, high grade, near surface, in geopolitically safe areas, etc.

As far as Volcan’s share price troubles, note that AMC signed off on the extremely lucrative terms of the ADL option after the share price fell out of bed. AMC’s share purchases of Medinah and expenditures made to date at the ADL suggest they’re financial status is doing quite well.


#646

To be clear. I’m not inferring that the Letts are going to walk otherwise I’d be long gone from this investment. I’m saying that $25M isn’t going to be tossed around like it may have a few years ago. Volcan had been trading down for awhile but it’s down a healthy clip from when the Letts inked their deal with us and, more importantly, the general market in commodities is vastly different than 15 months ago. I have to assume the majority of the Letts wealth is tied with Volcan. If you can find evidence of other holdings that would be welcome.

As it relates to Cook. Obviously a well respected geo who has an investment letter focused on exploration stage miners. He’s been telling people to buy the whole way down and has a natural bias towards names in the early development stage. I’d follow where the money is actually going over he opinion of a geologist trying to support names he told people to buy 75-90% ago.


#647

[quote=“brecciaboy, post:26, topic:785, full:true”]
Let’s agree to disagree. IMHO your suggestion that “Claiming that majors are scrambling to find new discoveries in an environment where massive projects are being shuttered and exploration budgets slashed is delusional from an investment standpoint” is 180-degrees off.

Brent Cook said it much better than I could in the article I posted yeterday:
“The major gold producers desperately need new, quality gold deposits yet can’t afford to build many of the large deposits they already have on the books.”
…[/quote]

I am not a subscriber of Cook’s newsletter but I do tend to watch many of his public interviews. And he has repeated the above position many times over the last year. And that position is that producers have been “high grading” as well as reducing cap-ex and other expenses the last several years to try and get overall costs down.

He claims that this activity, to cope with the falling price environment, is creating a desperate need for reserve replenishment as he states above: they “desperately need” such. At the same time, he states they are currently selling assets, not acquiring them on average, in order to improve debt exposure.

His position is that when the PM price turns around and the majors realize that they have created this situation they will have to go on a buying spree to replenish ounces and that they will focus on higher grade currently producing projects. So one of his suggestions is to start buying companies like that now and front run that activity because they will benefit first (as opposed to junior exploration companies) when the market turns about because the majors will have to go on a round of M&A.

So to summarize he states: “The major gold producers desperately need new” deposits, but currently they are not doing such acquisitions, they are selling properties, in order to decrease their risk to the debt markets and an ongoing low price environment. And thus they are sowing the seeds for their next crisis when they need to replenish ounces and attempt to keep production growing


#648

[quote=“Baldy, post:22, topic:785, full:true”]
…Bottom line: a basic analysis of Volcan concludes there is a real possibility that the company could go under if base metals don’t recover in the short-medium terms (I’m guessing we are only in the 6th-7th inning of this sell off in everything outside of precious metals).
…[/quote]

I don’t know how much it matters via the Letts personal fortune and thus to MDMN and the ADL contract, but Volcan seems to me to be in similar shape as many of the mid-tier miners.

They are about equally dependent for revenue upon Silver (42%) and Zinc (45%) (per Q3 2015).

They were basically break even ($15M positive) in Q3. They will have to have cut more expenses else they will probably have a loss in Q4 since both silver and zinc continued their price declines.

But at least up till Q4 they were not burning cash. And they still had $188M in the bank at the end of Q3.

So they are not desperate in the short term. But they are neglecting their capital investments in order to conserve cash. And that will show up in production eventually.I don’t know when their outstanding debt comes due so I can’t speak to that.

Definitely not good. But similar to many many other producers out there. And there are definitely others who are in worse shape in regard to debt and cash levels. If this market goes on for another couple of years, even if prices stabilize soon, it is going to get very painful for plenty of companies. I suspect there will have to be a few major bankruptcies or big mergers, and then mine closings in many of the major metal markets before things get better. A company even as big as Freeport-McMoran already seems to be nearing the precipice …


#649

CHG, I was reseraching the same thing. $180MM in cash, but definitely battening down the hatches and cash flow is rapidly declining, causing leverage (Debt/Equity) to be near 3x, which is not good for cyclical industries.

Fortunately, the $600MM bond they floated doesn’t mature until 2022, six years and a lot can change in that timeframe. I was trying to see where the bonds are currently trading, but don’t have a platform to get that info. I am sure they have traded well down.

JMO. Volcan can’t comfortably cut a $100MM check for the option agreement and I sure that would be a big ticket for the Auryn/Maglas individuals. Which leads me to believe that Auryn is checking out all the opportunites and will be marketing them in a variety of forms (sale, JV, FCI…) to several different players.


#650

Meaning after all this claim consolidation, it will be divided up like a pizza pie, with Auryn cuttting all the deals.

Yeah, have to say it, if JJ and crew had hired the right and listened to the right people 10 years and 1 billion shares ago, it would of been MDMN cutting the deals and probably during the mining bull run and share price? Won’t go there.


#651

HI CHG,

Lots of good points as usual. What interests me is how to characterize “Masglas Americas Corp. (MAC)” The recent “Chile Exploration Report” interview of Maurizio Cordova cites how MAC just bought up 9 assets from FQM, how they’re in bed with Medinah and how their appetite is “still not satiated”. How much money do they have at their disposal to pay off Medinah, buy yet more properties and advance all of these properties?

We know that they oversee “private Peruvian capital” but how much? Do they just open up the floodgates at their will and voila the money appears? Should we even be discussing the plight of “mining majors” and their need to replenish reserves? In the interview they cite how they want to go after “projects that make sense NOW” and how the ADL is going to be so “low CAPEX”. They cite the proximity to Santiago and how cheap drilling and human resources currently are but I think we all know it’s a lot more than that as far as Medinah’s infrastructural advantages.

Are these guys best characterized as “private equity”? I love the concept of going after Chilean Coast Range deposits with the horrendous POWER and WATER issues present in the Andes and Atacama Desert but how the heck many deposits can they afford to buy and develop? I think we may have “accidentally” hopped into bed with a counter-cyclical dream partner. This might be why it appears that when they say jump our management team seems to be saying “how high?” I definitely do think that we are their “flagship asset” as AMC’s/MAC’s website suggests.


#652

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#653

I believe Volcan is heavy on silver and zinc. Isn’t silver more closely tied to oil?


#654

L&G, why are you so angry all the time? How about a positive thought?


#655

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#656

No problem, btw, while Doc is great on the geo stuff, I disagree with the majority of things he says about NPV, disconnect, and all these majors licking their chops at a shot at the ADL. The CEO and COO of Freeport McMoran are desperately seeking a WC copper deposit. I know them through a geo, and mentioned the ADL, they tried to contact MDMN management and couldn’t get a response, much less info. This was post the U and pre-Auryn.


#657

Also, not surprising, I have no faith that there is any naked short interest in the stock.


#658

How do you explain 1.2 B owned shares by only 400 attending shareholders while there was only 720m shares outstanding
There were many more shares not attending. How many more? I have no idea.
Do you think the mms have magically covered since then and there is no longer a short position. I don’t think so


#659

Dentman, gave up arguing NSS long ago. Where are the fails to deliver and please I don’t want to hear about ex-clearing, dark pools or trades off the tape. If there was/is an irregularity, MDMN would have been better off to order a NOBO, OBO and T/A register and determine the number of shares o/s, than hiring Tom Ronk’s Buyins.net.

I have no faith in anything management has reported. Remember this is the same company that only allowed shareholders of record to vote and not send proxies to brokerages for delivery to OBO’s. Again, we all have opinions and this is mine.


#660

Then provide a good explanation for shares owned to outstanding at the shareholder meeting.


#661

Cant explain it, wasn’t there, don’t know the reporting procedures, the credentials of those overseeing the counting, who ultimately reported the numbers of shares, were any preferred o/s that had voting rights, …

I could go on and on. But more interesting in discussing the project. Sorry I brought it up. Have a good evening.


#662

Does anyone know if the powers at be have left for Chile?