Medusa Share Discussion Threads

[tightfist] 09/7/2016 15:11

Hi cnc,

Agreed, there are quite a few areas where the Seeking Alpha writer is wide of the mark, but the underlying message/prospect is clear enough. In particular the sequence of changes over the next 12 months progressively leading to higher haulage and lower AISC are not well explained. Last October in London, Rob Gregory opined that an AISC of less than $800 was plausible and I see no reason that this figure should not be achieved on Boyd’s watch. Which leads me on to…..

Seeking Alpha have chosen to avoid (or been blind to!?) the management/Board issues which I believe is the main reason the prospective PE/FCF-multiple is being held back (along with LoMP visibility). On 6th May Boyd encouragingly noted the engagement of independent consultants “……;to conduct a long-range mine review to predicate the Company’s shift in strategy AND BOARD RESTRUCTURE” (my capitalisation).

I am eagerly awaiting a Board restructure – IMHO the note released on ASX (but not on the MML website) on 26th May regarding the ASX Aware Query further underscores that a Board restructure is well overdue, as does the opaque sacking of Rob Gregory, judged by the recent time-lapsed case at the Perth tribunal.

Meanwhile, the chart is looking good with a nice prospective Cup & Handle formation developing. But we do need it under-pinned by improving fundamentals which I am looking for over the next two months - based on achievement of the 2016 reduced forecast, the announcement of a mildly-rising 2017 forecast and the 2016 Year End financials in late August.

Cheers, tightfist
PS: Did you notice that Service Shaft was called E15 on 29th April? – very confusing!

[deka1] 07/7/2016 06:06

From R.I

Gold's post-Brexit vote surge continues unabated with Bloomberg reporting today that the price of the safe haven commodity has risen for six consecutive days.



UBS speculates that the commodity could reach $1,400 per ounce "in the short term," with prices averaging $1,340 in the second half of this year, according to Bloomberg. The price per ounce reached its highest point since March 2014 today at $1,374 per ounce before retreating below $1,370 per ounce.

Gold may be in "the early stages of a bull run," Joni Teves, a UBS analyst, told Bloomberg.

The story and an accompanying interview with Robin Tsui of State Street Gloval Advisors state that investors are flooding into both physical gold and gold exchange-traded funds. Silver is also running up, and has topped $20 per ounce. Tsui foresees the trend will continue for the "foreseeable future."

These days strategic investors, rather than retail investors, are driving the market, Tsui said. These investors believe gold "has started or resumed its important role as a strategic asset in portfolios."

There is no bubble in precious metals plays, according to Tsui. He also noted that only 1% of investors hold gold, but if that were to increase to 2% or 5%, upside to the gold price would be "substantial and significant."

Factors affecting the price run of precious metals commodities include Britain's historic vote to leave the European Union and yesterday's decision by the Bank of England to ease capital requirements for banks. As reported by the BBC, financial risks anticipated to follow the Brexit vote "have begun to crystallise. The current outlook for UK financial stability is challenging." The vote also has “eroded prospects for a U.S. interest-rate increase this year

[cncventure] 06/7/2016 02:18

Nice article, I agree with the premise (ie currently very low enterprise value, high FCF just around the corner) though I think he's confused a couple of things and overlooked some risks:

- MML will likely produce well over 200,000oz/year IF their B1 mine gets developed (I think he meant to say that Co-O will probably never produce 200,000oz/year).
- Also I think AISC wil drop much sooner than June 2017, my understanding is that capex will drop in Q1 next year because the ventilation upgrade capex will cease and shaft development capex will reduce from August onwards.
- Also its my understanding that L16 shaft is a "proposal" not "in development" yet he highlighted it in pink in his presentation when the service shaft being developed is to the left of the L8 shaft in the image.
- He's ignored the sovereign risk factor.
- I also think he's overstated the likely future AISC (and therefore understated the likely FCF)
- Though I don't think he's accounted for the fact that MML (particularly Co-O) doesn't have huge reserves, though the deposit is apparently open at depth so who knows what the final ounces produced will be.
- Also MML share price didn't just fall by 90% it fell 96.3% - might not seem like much, but there is a HUGE difference, ie if you bought after it fell 90% ($0.87) by the time it bottomed ($0.32) you would have been down by 63% and you'd still be underwater today! That's how bad the beat down on MML was (and it probably deserved the majority of it at the time, but that is the past now, only the future matters).

[ilostthelot] 05/7/2016 03:56

A pe of 12 is maybe a bit hopeful!If all goes well over the next 12 months then a Forward pe of 12 for FY 18 would be cheap if you don't include cash on books.

[cncventure] 05/7/2016 00:43

Like ILTL I'd like to see Q4 results at or above 25k oz and a FY17 production target of 110k+. Though what is more important to me is to see a drop in the AISC guidance range for FY17.

With the ventilation upgrade hopefully having been completed by now and the shaft's major capex costs peaking in August this year I'd like to see a reduction in the forward AISC guidance as a signal that both costs are beginning to trend down and there is a higher likelihood of increased ounces produced to spread the fixed costs over.

Another important point, from 2009 to 2013 MML was able to increase its reserves by more than the ounces mined each year (ie its reserve ounces grew each year). However in 2014 and 2015 that trend changed and reserves were not being replaced fully each year and as a result probable reserves began to drop...

With a rising gold price and the recent focus on converting resources to reserves I would like to see that trend change.

I doubt the market will be willing to give MML a PE ratio of 6, let alone 12, if they can't acheive that this year.

[deka1] 04/7/2016 21:01

Hi Guys yes still here , I think the Chinese gold set up will eventually restore the correct valuation to the gold markets, things are changing in the world, the old order is gradually being pushed aside, The corruption and fraud that the Americans have spread across the globe through their financial power will bring it down. It looks to me that the people are finally seeing through the the webs of deceit,politics are changing across the globe ,like the curtains have been drawn.
We've always been at war with Eastasia.

[polaris] 04/7/2016 18:25

A decent reaction to pog last night. Still a long way to go before we even mark a 2016 high. At least my position here is back above water, even though i think it should be about $75k AUS to the good right now (conservatively).

I'm just hoping MML management don't find another way to f#ck things up when reporting the FY...

regards,

Paul

iltl - i'd be more inclined for 10x free cash flow for valuation as this is a long life narrow vein miner. Either way the current share price is way, WAY below that...even if you confuse the AUS$ for the $... :-|

[ilostthelot] 04/7/2016 15:44

Thanks Stevie.
Hi Deka and all. I was wondering if you were still here.

A welcomed rise id say we're over due a good correction to the upside.

Catalyst being meeting or exceeding 108k ozs and or gold going higher.

I'd like to see a sensible target for next year say 110,000 ozs.

H1 17/18 cost saving will begin kicking in ,in August onwards so we could well be looking at close to $500 per oz profit for this coming year. That's potentially $55 M profit next year.

Forward pe of 12 for a $660M

or 660 x1.3 for

A market cap of

A$ 850 Million.

Even I half that number it's still clear to me me that this is way undervalued.

[deka1] 04/7/2016 07:56

up 8.6% on good vol and gold now near £1100/oz, HGM selling bullion sovs at £240+

[stevea171] 03/7/2016 10:36

A rising tide floats all boats? Even Medusa?

According to Austex Mining, as of March 31 2016 there were just 37 gold producing companies listed on the Australian Securities Exchange. Sure, there are foreign-owned producers in the country but, even so, that is quite a narrow base considering that Australia is the world’s second largest gold producer (after China).

What this means is that investors have a limited choice to ride the predicted coming gold recovery. Of those 37, only 10 are producing at an annualized rate of 160,000oz or more, so that limits the field even more.

Certainly, also, there are plenty of ASX-listed explorers but when gold is riding high you want to be on the horse that is actually pulling the yellow metal out of the ground and getting full advantage of the rising price.

And, also according to Austex, there are not all the many near-term new explorers. Only five new players were expected to be in operation over the past three months – but together they are expected to add only 200,000oz a year to Australia’s output.

More concerning is that Austex says it could see only one significant new entrant in the second half of 2016. Longer term, nine companies have indicated they will restart projects now under care and maintenance. “Five companies are suggesting 2017, but most lack the cash and market support at this time,” says the report.

Medusa.
No of shares in issue: 207.8 million
Share price ASX 1/7/16: 65.5c
Mkt Cap: AU$136 million (US$102 million @ 0.75 conv)

Co-O resources (30/6/2015): 3.5 million tonnes at an av grade of 10.2 g/t gold for a total 1.15 million oz.
Co-O reserves (30/6/2015): 1.8 million tonnes at an av grade of 7.33 g/t gold for a total 427,000 oz.
Bananghilig resources: 1.1 million oz
Valuation: US$100 per resource oz Co-O only, or $50 per resource oz incl Bananghilig.

Gold price: $1,341
AISC: $950
Profit potential: $400 per resource oz developed

Production 2015/16 FY guidance: 108k oz
Profit HY 2016 actual: $31.3 million (production 61k, av price $1109)
Earnings per share HY 2016 actual: US 15c (AU 20c)
EPS FY 2016 av forecasts: US 26c (AU 34.5c) (H2 fewer oz 47k, but higher gold price c.$1215)
P/E estimated 2016: 1.9

US$1 = AU$1.33 conversion

[chipperfrd] 02/7/2016 09:14

CoT report 28th June.

Gold open Interest 1,909 tonnes
Silver open interest 32,876 tonnes

Commercials net short gold 1,015 tonnes
Commercials net short silver 14,805 tonnes

June gold standing for delivery 49.1 tonnes
June silver standing for delivery 95.8 tonnes

July gold standing for delivery 9.33 tonnes
July silver standing for delivery 55.36 tonnes

Chip

[chipperfrd] 01/7/2016 13:23

You are welcome Gersemi.

[gersemi] 01/7/2016 12:57

Chip

I hope you don't mind but I have cut-paste your post from above onto the MARL thread.

Many thanks

G

[chipperfrd] 01/7/2016 11:52

Paul

AISC was initiated as a WGC advisory from June 2013. Agnico Eagle was part of that development and reported AISC from Sept Qtr 2013 onwards, but majority of companies started doing it from the commencement of their next financial year - which, for most, was from March Qtr 2014.

But the Oz stocks use June as their end of financial year. MML like many other ASX-listed PM stocks also commenced reporting AISC from the start of their financial year - ie from Sep Qtr 2014. So nothing particularly exceptional about that!

MML include ALL outflows in their AISC figure (ie Exploration, Capital Works, Development and Corporate) and, thus far, they have not distinguished between sustaining capital and expansion capex - so they have been reporting worst case figures rather than splitting out non-sustaining capex from their AISC figures.

For interest I have applied this methodology to some of their earlier years and get the following for their All-In Costs (AIC) - ie not just their All-In Sustaining Costs (AISC). Obviously, their AIC went very high during their maximum expansionary Capex years.

FY 11 ~ $733/oz
FY 12 ~ $1926/oz
FY 13 ~ $2120/oz
FY 14 ~ $1826/oz
FY 15 ~ $1079/oz
FY 16 ~ $950/oz (est)

Going forward they look like they may reach an AIC of c. $800/oz for FY17 - but time will tell.
Chip

[polaris] 01/7/2016 11:00

Hi,

In the past i would be piling in for more for exactly the same reasons that you state. Maybe i am letting the recent past history cloud my judgement but i would expect MML to be well above $1AUS at the moment. Maybe that will come with the results announcement sometime in late August, maybe it won't. However, i can't help feeling there is something else going on here that i have missed.

I was an advocate for a long time that MML should use AISC - i know we had our disagreements on that - and now they do report all the development work in the figures. In time, that expenditure should fall and, with it, AISC. Worst case scenario seems to be $1000 per production oz, even with the short to medium term work impacting haulage to surface. Any cursory glance at that sort of performance and the current pog should see a much higher price. Even if MML never gets beyond 100k oz per year, as a certain poster maintains, then the cash generation suggests a valuation much higher than now - take your pick on the P/E you want to use. Is the market really that blind?

regards,

Paul

[chipperfrd] 01/7/2016 10:37

Hi Paul,

I currently hold 25 PM stocks and, although most of them have moved up towards my estimation of current fair value (some above!), a few are still languishing.

But I do not find this particularly unusual for markets. If the market always managed to correctly price equities then people like you and me would have to find alternative ways to make money.

Apart from the March quarter (which was similarly down to the prior year) the qtr-on-qtr progress has been good and this has been clearly indicated by the excellent turnaround in their balance sheet (ie working capital was only US$15.9m at the end of FY14 but had doubled to US$32.4m over FY15. And was US$42.9m at the end of 1H16).

Now this may not have been reflected in headline cash, but, to me, the steady increases in current assets coupled with a steady reduction in current liabilities has been a good indication of their improved financial position and this 'should' inevitably be reflected in a growing cash pile as time passes.

If the market has yet to factor this into their share price then there is nothing for me to do other than wait it out. June qtr results and full year financials should provide the necessary confirmation (or not) of the above.
Chip

[polaris] 01/7/2016 08:55

Chip,

You have to admit that something is not right here as gold is now significantly above where it was when MML hit the high 80s recently. Even with a rising gold price, MML is struggling to even stay positive. It could be political risk due to the recent election or it could be that noone believes the FY forecast - either, neither or both... MML has been a leaky ship in terms of news over the past few years and the price has reacted accordingly before any official statements were released.

I admit that i am worried and i am holding 50k that are underwater. The price action makes no sense to me given a rising gold price.

regards,

Paul

[alquid1] 30/6/2016 23:03

MML going the opposite way no doubt !!

Al

[nielsc] 30/6/2016 19:08

Silver is off. Up by almost 2%. Going to lead the way for gold hopefully.Cheers,Niels

[nielsc] 30/6/2016 08:13

I see ADVFN have lost our posts from yesterday.

Here is the Craig Hemke article again




Watched the Big Short last night. Very good. Currently watching the Big Short II ;-)

Cheers,
Niels