Medusa Share Discussion Threads

[stevea171] 29/9/2016 21:11

Hi Tightfist. Hope you are well.

Yes, mining and drilling at Co-O seems to be on the right track with support from the gold price around $1320-50. There could be a positive surprise with Q1 results next month. Maybe the worst of the 'kitchen sinking' by BT is now behind us.

Hopefully Bananghilig can be put on ice now along with the coal project with no further expenditure incurred.

With 31 out of 41 mining companies suspended or facing suspension I doubt that any miners operating in the Philippines will be rushing to spend on new projects or expansion of existing ones. The government says they don't need a mining industry and seem to be going the right way to not having one! Miners considering projects there would be well advised to steer well clear.

There was supposed to be a DENR meeting with the miners today to advise of the grounds for the new proposed suspensions and the 11 who passed to advise of issues to be fixed. No news on this that I have seen. Also this is supposed to be posted to the DENR web site but I have seen nothing there either. Medusa may have some non-critical issues to be addressed. OceanaGold (gold/copper mine, ASX listed, and facing suspension) is very miffed as, like Medusa, it considers itself to be very good as an employer and with supporting the local community on Luzon. It employs 2000 with 98% Philippino from the local and regional communities and has won numerous awards for being a good employer.

I think Medusa would be well advised to cease all work other than directly to do with CO-O and the mill and look only at projects in jurisdictions that are supportive of miners eg Auz, Latin America, etc.

[tightfist] 29/9/2016 15:30

Hi Justin,

Agreed, based on Mayfair I was looking for a little more too. However, judging by last night's rapid recovery from an initial sell-off, it appears that we market was satisfied..... Maybe indicates how little upside is currently within the share price price? Or maybe it was an anticipated $800 AISC getting registered and heeded.

Cheers, tightfist

[justinjjbuk] 29/9/2016 14:49

My 2 cents on the Resources and Reserves Update. Overall impression: disappointing.

This was the relevant bullet point I posted following the BT's presentation at the beginning of the month:


"7. Very positive on resource drilling. Said that you can already see an improvement in grades at lower depths from the drill results already released. A formal drill announcement is due in 3 weeks and will likely confirm these positive results."

From BT's commentary in the Update:

"For the June 2016 quarter two diamond drills were put into this drill station, but could not meet the originally planned meterage before the 30 June 2016 cut-off date. Drill station L8-85E was completed in September 2016, thus allowing for the resource drilling in FY16-17 period. Based on the amount of drilling and the quality of results anticipated, an interim resource calculation will be considered if a material improvement in resources is estimated before the next full-year recalculation."

I understand that given the June cut-off the positive results from the lower level drilling won't have come through into the new resource/reserve estimate. That said, the release doesn't contain any indication that the reserve situation is likely to get better in the near term beyond the statement that an interim resource calculation may be forthcoming. And the wording is so circumspect in the update that I am not holding my breath.

My disappointment is in the fact that I just attended yet another upbeat Medusa presentation only to have it followed by another downbeat result. I was hoping that BT would break this pattern; no sign of that yet.

I used the expression "gun shy" to describe my investment stance toward Medusa at the minute. That hasn't changed.

[tightfist] 29/9/2016 14:48

Hi Steve,

Thanks for your summaries. The decision to accelerate, mine-out and close the Upper levels looks very sensible, especially during the next 9 months (when there is presumably a variable margin to be generated) whilst MML are not capable of filling the SAG mill with higher grade ore from lower levels. FWIW the average grade across Levels 1-3 reported three years ago was 3,0g/t; I trust that the quarterly reports will clarify the resulting temporary reduction in head grade.

During the informal chatting in Mayfair I got the strong message (twice) that Bananhilig had been probably been over-egged by former management. The new CEO & adjusted BoD are content to reappraise earlier initiatives; certainly we are now seeing a “new broom sweeps clean” approach which is welcomed by me. I always suspected there was more to Gary Powell’s move off the BoD than we were told at the time and I think we are now seeing that with the depth of the Resources work.

When we see the final decision on Bananhilig I anticipate the government may get called-out – new mine taxation, environmental acceptability. I never did “get” the coal mining/contract idea which came out of the blue; it may be virtuous to dust-off that opportunity if the Phillipines heads towards a power shortfall crisis in the distant future, and the environmental lobby have found an equilibrium?

I am content to stay invested and monitor BT’s delivery (infrastructure projects completion timing, ramping production, AISC trajectory, R&R increases) over the next twelve months; BT is the new kid on the block and (together with AT, RD) has started down the road of earning our trust; what I have heard so far plus the potential Reward warrants giving him that time, IMHO.


speedsgh,

You are right, we have heard some previous noises about moving beyond the Phillipines but I do wonder whether that is posturing to the government. I get the impression that BT sees plenty of potential for narrow-vein exploration and mining within existing tenements in the environs of Co-O, rather than acquisitions; however, acquisitions would be a more logical reason for building a big cash pile. If the BoD are truly concerned about cyclicality of PoG and cash generation preventing the resumption of dividends, some tactical share buy-backs could do wonders around the current sp/volume.


Cheers, tightfist

[atlantic57] 29/9/2016 12:43

Hi Blue,
Yes I think we are very much in the same boat ,in all relationships once
Trust has gone it is very difficult to rebuild it.

[stevea171] 29/9/2016 08:50

Whilst talking about unproductive effort on Mindanao, anyone think the latest idea of strip mining of coal for feed for a power generator has any prospects of approval in the next 6 years under this administration?

About 70% of Mindanao's electricity comes from hydro which is sustainable and cheap. Why waste even more money on yet another 'white elephant' project that will never get into production?

[bluelynx] 29/9/2016 08:49

Hi Atlantic

I totally agree with you about the low valuation and the extremely poor management. Hence I have sold up completely. If you can't trust the Management there is no point investing, in a company that keeps promising good things for the future but never quite meets them. So for me their time/trust ratio has finally ended.

[speedsgh] 29/9/2016 08:27

tightfist - I share your aspirations re recommencing dividend payments. However I am sceptical as IIRC they seem keen on an acquisition(s) if they can identify the right opportunity? Not too keen on that personally; would an acquisition spread risk or double it?! I personally would prefer them to concentrate on Co-O + set about sharing some of those profits with us shareholders!

[atlantic57] 29/9/2016 07:23

Thanks for the posts guys very helpful.
My perception looking in from outside is that whilst Mml is lowly valued and must surely go up if gold can have a run there are better miners out there.

The Quality of the management and their record over the last 5 years is not impressive.

Vgm is a painful memory for me where the managements record speaks for it self.

[stevea171] 29/9/2016 00:08

Co-O. Although more tons of ore will likely go through the mill in current Q1 (as per the Mayfair informal Q&A relating to Sunday extra shift working) the average grade overall is likely to be reduced as a result of this Level 1-3 ore being below average grade for the lower levels and the mine generally:

"Cut-off Grades.
For upper levels, where haulage is minimal and major development has already been completed, slightly lower cut-off grades were used, consistent with the lower mining and haulage costs.
Mining of lower grade material on upper levels (1, 2 and 3) is to be continued as a mining policy, so that these levels may be rapidly depleted and closed down. This will assist in reducing the costs associated with the mine services required for these levels."

Bananghilig. They have spent 2 years! updating their resource modelling and resource estimates for this deposit under JORC 2012. The result is a reduction of resource by 62% from 1.1 million oz to 435k oz.
Why was this allowed to proceed when it must have been obvious for a long time what direction this was heading?
Now, of course, it's probably commercially unviable and too late for any mine development to be approved under this new government.

Yet another example of Medusa being operated on a 'jobs for the boys' basis with no shareholder benefit and no one directing company development work into productive and profitable channels.

So all this for Bananghilig now is a complete write off, as expected since 1st July.

[tightfist] 28/9/2016 16:50

Hi Chip,

I agree, the mid/long term opportunity is compelling, IMHO. Now it's a waiting game, for sure. I am not complaining about +130% in the past nine months (and I did have the foresight to top-slice five months ago) but there is a way to go before loyal holders are going to collect their rewards after a trail of mismanagement.

The cash yield will soon be getting crazy, and with Bananhilig seemingly heading for the rocks, setting aside a cash pile for Bananhilig Capex is no longer an excuse - for not paying a chunky dividend!


Cheers, tightfist

[chipperfrd] 28/9/2016 14:45

Hi Tightfist,

Markets are unpredictable at best in the short term. But with MML continuing to trade at such a low under-valuation to it's fundamentals, I consider the upside/downside probability is very favorable.

I make the trailing p/e to be x2.7 currently. Just how low is it meant to get!
Chip

[tightfist] 28/9/2016 14:34

Hi Leedskier, Chip;

The clash of operational priorities, poor haulage planning and delay in commissioning the new L8 drilling stations have now come home to roost. BT sees it as purely a timing issue and hopefully he will be proven correct, especially if MML issue an interim R&R update.

The most refreshing parts are on Page 10, and especially that a prospective AISC of approximately $800 is anticipated; I think this is the first time BT has put this on record. There is also unequivocal restatement of the infrastructure projects completion dates which bodes well for standing and being counted.

However, that is all "Jam Tomorrow" and I wonder if we will see another market retracement to the 62c level? Based on the fleeting comments in Mayfair I was looking for better than this report.


Cheers, tightfist

[chipperfrd] 28/9/2016 13:33

Hi Leedskier,

Yes, MML has had desultory trading performance on the ASX this year. One can only wonder how it would have performed if Co-O was located in Canada, Nevada or Australia. But it is what it is.

Fortunately I have done pretty well with most of my other PM stocks and do not need any of the cash invested in MML, so can remain relatively sanguine about them for another year or so.

Regarding your comment about US interest rates and the USD. With both US bonds and US equities at bubble levels and with US debt at $20T and rising, it would seem unlikely (to me) that US rates can 'normalise' at all! There may well be a rush for safe havens when DB and other European banks are eventually forced to put up fresh collateral and the USD may well get a short-term boost from such an event. But I strongly doubt that the US Fed has much in the way of 'wriggle room' when it comes to interest rates. But we will see what occurs. Hopefully it will not be as damaging as 2008, but I am not optimistic in that regard.

All the best with your investments.
Chip

[leedskier] 28/9/2016 12:07

Chip's informative post reminds me of an exchange of posts I once had on an oil share BB.Someone asked when would the company post positive news?I responded by commenting that if the market would not price in a fair valuation on the basis of what it already knew, what prospect was there of adding to that knowledge changing sentiment?I think that is the position we are in with this Australian listed gold miner. If Australian investors are not buying it when it is trading on a very low PE, posting news of tinkering with the capex or production numbers is not going to so boost sentiment so as to cause it to become a screaming buy.In the background could be a concern that when the US Federal Bank starts normalising interest rates, the US$ will rise, causing the price of gold to fall along with all other US$ priced commodities. Meanwhile this share is as range bound as the price if gold. I know little about technical liquidity on the ASX, but this seems to move 3% even on very low volumes. That volatility may spook investors too.But it is good news that the Philippine Govt has not added it to the named and shamed list.

[chipperfrd] 28/9/2016 11:15

Delays to L8 drilling have certainly impacted the usual replacement of mine depletion. Encouraging that they may report an intermediate update before the usual annual report if ongoing results justify it.

Negative change to Bananghilig, so looks unlikely to be progressed without an overall increase to deposits. Probably has challenging economics at current levels. Overall, ought not to impact the share price as it has not appeared to have been priced in for many years.

Drop in Co-O Indicated resources does reduce my current estimated valuation. But in my view there remains enough upside at current PoG to maintain my current stance.
Chip

[chipperfrd] 28/9/2016 09:49

Cheers Eintracht, I had not noticed it had been released. Will have a look.

[ilostthelot] 28/9/2016 09:48

It's Disappointing.Now we know why Boyd Timler decided to increase this year's drilling budget substantially compared to last year.

I fail to see what is going to move the share price up over the next 6 months.
I still see an undervalued company based on what we know but with this years production to be back loaded,I half expect Q1 to be average at best.

I am holding but beginning to think id be better selling up moving my money elsewhere and buying back in March.

[eintracht] 28/9/2016 09:14

No comments on the Annual Mineral Resources and Ore Reserves Update Statement released today ?

[cp42kx07] 27/9/2016 17:51

Hi tightfist

I'm sure that you are correct regarding the ongoing monitoring however the rigour with which the DENR intend to apply the law in future can only add to the list of uncertainties that appear to beset MML.

I have long since given-up expecting MML to perform according to short term (less than 2 years) management projections / schedules but I remain cautiously optimistic within the medium to long term.

I have some hopes for BT and agree that improved LoM visibility could help interest a particular investor demographic. Likewise a couple of solid quarters and no slippage in the works schedule will doubtless help the share price (assuming no disasters - always dangerous with MML!).

CP

[stevea171] 27/9/2016 10:40

As CP42K says Medusa (Philsaga) has passed the audit and others incl Oceana have failed.

The share price jump near the close is likely to be on the back of the news release in the Philippines. The share price could go much higher in coming days as some of those bailing out fearing the worst get back in ....

20 mining firms recommended for suspension – DENR
(UPDATED) Environment officials bare the results of their audit on mining operations in the country.

‪MANILA, Philippines (UPDATED) – The Department of Environment and Natural Resources (DENR) announced on Tuesday, September 27, that it has recommended the suspension of 20 mining firms following the completion of its audit of mining operations in the country.
Environment Undersecretary Leo Jasareno made the announcement in a news briefing where he and Environment Secretary Gina Lopez presented the results of the audit.

Among those recommended for suspension are the following:

Libjo Mining Corporation
AAM-Phil Natural Resources Exploration and Development Corporation - Parcel 1 and Parcel 2B
Krominco Incorporated
Carrascal Nickel Corporation
Marcventures Mining ‬and Development Corporation‪
Filminera‬ Resources Corporation‪
Strongbuilt Mining Development Corporation
Sinosteel ‬Philippines HY Mining Corporation
Oriental Synergy Mining Corporation
Wellex ‬Mining Corporation
Century Peak ‬Corporation - Rapid City Nickel Project and Casiguran Nickel Project
Oriental Vision Mining Philippines Corporation
CTP Construction and Mining Corporation
Agata ‬Mining Ventures Incorporated
Hinatuan Mining‬ Corporation
Benguet Corporation
Lepanto ‬Consolidated Mining Company
OceanaGold ‬Phils, Incorporated
Adnama Mining Resources, Incorporated
SR ‬Metals, Incorporated
Jasareno said the most common violations are siltation, dust, no tree-cutting permits, and unsystematic mining methods.

These mining firms will be given a show cause order and will be asked to answer within 7 days upon receiving the order.

"I want to make it clear, I have no beef with mining, but I'm vehemently against adverse effects that may happen, that are happening," Lopez said on Tuesday.

"For a hundred years, we turned a blind eye. I don't even blame it on the mining industry; it's because we at DENR have been lax."

On Tuesday, Jasareno also revealed the 11 mining firms that are not recommended for suspension, but will continue to be monitored. They are:

Philex Mining Corporation‪
Rio Tuba Nickel Mining Corporation‬
Atlas Consolidated Mining and Development Corporation‬
Techiron Resources Incorporated
Cagdianao Mining Corporation‬
Taganito Mining Corporation‬
Platinum Group Metals Corporation‬
Greenstone Resources Corporation
Philsaga Mining Corporation‬
Pacific Nickel Philippines, Incorporated
Apex Mining Company Incorporated
Jasareno explained that while these firms are not recommended for suspension, they also have to correct their infractions.

The DENR has already suspended the mining operations of 10 firms, bringing the total of all metallic operating mines in the country to 41.

Jasareno said there are about 18 nickel mines from the 30 mining firms that are already suspended or recommended for suspension. About 55.5% of the country's nickel production as of 2015 are attributed to these mines.

Lopez said she will meet with mining firms that have "failed" and "passed" the audit on Thursday, September 29.

"At the end of the day, what we want is a mining industry that is much, much more committed to the common good," she added.

hxxp://www.rappler.com/nation/147439-result-mining-firms-audit-denr

[cp42kx07] 27/9/2016 08:17

10 miners previously suspended, a further 20 now suspended and 11 (including Philsaga) "will continue to be monitored".

hxxp://www.rappler.com/newsbreak/in-depth/141535-environment-gina-lopez-profile

I have seen no list of miners that passed so it rather looks as though this is the best outcome available to MML...

[ilostthelot] 27/9/2016 08:07

Almost a 10% swing in Australia last night. That suggests good news is on the way? Maybe the government has gave medusa the green light in the review?