Medusa Share Discussion Threads

[bluelynx] 18/7/2015 14:46

Alasdair MaCleod latest on PM's

[stevea171] 17/7/2015 09:11

Some traders in Auz jumping back into MML pre results and pushing the share price up a tad to 84p. This reversal is likely to be maintained next week imo as the share price has been way over sold on the back of a falling gold price. re the gold price:

Today Jason Goepfert from SentimenTrader noted the following: "Precious metals have been taking a hit lately, and that has reflected on the miners. Every stock in the HUI Gold Bugs Index has traded below its 10-, 50- and 200-day moving averages for the past two days, and on both days more than a third of the stocks have reached 52-week lows.

In the history of the index, this has occurred on 9 other days, clustered in four time frames (early September 2008, mid-October 2008, mid-May 2012 and late October 2014). They all occurred within several days of 10% rallies in HUI and other indexes of gold miners. They should be getting a reprieve soon, with any heavy selling in the coming day(s) likely to be exhaustive and quickly reversed."

[nielsc] 17/7/2015 08:27

CP42Kx07,

Thanks for that. Unfortunately ISA wrappers don't allow you to hold share in certificate form.

I saw that Greek safe boxes were actually locked up currently. So people that have tried to exit the system are still possible caught in it. Under the mattress is the best bet perhaps!



Cheers,
Niels

[chipperfrd] 15/7/2015 09:47

Purely nominee accounts for me.

CP, thank you for the interesting and informative link.

[cp42kx07] 15/7/2015 09:07

nielsc

An interesting question. Like many I hold my MML via nominee (TD Direct) which facilitates trading (not that I trade them frequently) but this is less secure than certificated form.

Clearly such a decision is based on the status of the broker. For example, TD are part of a group rated the 11th safest bank in 2014:

hxxps://www.gfmag.com/advertising/press-releases/global-finance-names-worlds-top-50-safest-banks-2014

For anyone first considering the subject, this is a reasonable starting point:

hxxps://the-international-investor.com/investment-faq/stock-broker-account-safety

Obviously this refers only to non-cash holdings.

[nielsc] 15/7/2015 08:07

Was just wondering how investors in MML are holding their shares? Was pondering holding them in certificate form as this would remove any third party liability.

I noted that TD Direct has the information

Broker Financial Services Compensation Scheme £50, 000 per client



Cheers,
Niels

[tightfist] 14/7/2015 16:27

Steve,

The whole article seemed pretty wide-of-the-mark to me, and very very historic in it's perspective/positioning (as Chip has already remarked). Not up to the usual standards of SeekingAlpha, as far as I am concerned. Personally I doubt if it and it's readership has a significant impact (eg the OTC trading reference?) on the share price

Cheers, tightfist

[deka1] 14/7/2015 16:07

CP42 cheers, the otc market has no bearing on the share price then, why did he mention it I wonder,i think he was just trying to knock the co .

[stevea171] 14/7/2015 15:30

Tightfist. I don't know what readership the Investment Doctor has but if it's significant it could have been partly responsible for the share price fall of MML these past few weeks. The disappointment expressed in the article over no 200k oz/year production and higher costs could also be a mirroring of what other investors felt after reading the production guidance RNS who weren't prepared for the new realities.

Now that disappointment is out of the way and we are approaching the realities of Q4 production, hopefully the share price which got back into the 80's last night will make further progress and sub $1 will become a largely forgotton nightmare .... !!

The author seems to be unaware that the 200k oz target hasn't been revised to 135-145k oz but should reach 170+k oz when the new service shaft allows the L8 shaft to reach max capacity for supply of ore to the mill which could be 2016/17 or at the latest 2017/18.

[cp42kx07] 14/7/2015 14:18

deka1

MML trades (barely, around 2,000 per day) on the OTC market.

[chipperfrd] 14/7/2015 14:11

It rather invalidates the SeekingAlpha authors opinion when he fails to appreciate that the outlay for the Service Shaft is obviously a non-recurring CAPEX item and that the Development outlays are recurring costs as they are a completely necessary expense for maintaining the mining advance underground.

Even the published Reserve is quoted in terms of 'diluted grade', ie. it already allows for the scheduled tonnage of development ore that is part and parcel of narrow-vein stoping.

I am also surprised that the author is still quoting cash costs and production guidance made by the previous management some years ago when clearly those targets were unreasonably optimistic and the main culprit has long gone from the scene.
Chip

[deka1] 14/7/2015 13:59

Where does Medusa trade in the USA ?, because as far as I am aware they traded on the TSX but dumped it over two years ago.

[tightfist] 14/7/2015 13:47

Hi Steve,

Hmmmm.... maybe the "investment thesis" should explicitly take into consideration the fact that MML shares are now trading at about 30% of where they were 2 years ago, and 13% of where they were trading three years ago.

[stevea171] 14/7/2015 13:14

Medusa Mining Will Produce More Gold In 2016 And 2017, But Should Provide More Clarity
by the Investment Doctor, Jun. 25, 2015

Summary

Medusa Mining will produce 120-130,000 ounces gold next year, increasing to 140,000 ounces in FY 2017.
Any improvement is good, but its 200,000 ounces at a $200 cash cost promise will never come true.
I would have liked to see a longer term capex guidance as well as I think some parts of the FY 2016 capex are non-recurring expenditures.

Introduction

It's been almost two years since I wrote my first article about Medusa Mining (OTCPK:MDSMF) which operates the Co-O gold mine in the Philippines. I was originally attracted to the story by the company's promise to produce 200,000 ounces of gold per year at a cash cost of $200/oz. After a series of disappointments this target was never reached and Medusa is on track to produce 100,000 ounces of gold this year. It has just released an updated expectation for next year and I will provide my opinion.

The company's US listing is quite illiquid so I think you might want to trade in Medusa Mining's main market in Australia. The company is listed on the ASX with MML as its ticker symbol and with an average daily volume of 560,000 shares the liquidity is much better down there.

The new production and cost guidance

Medusa Mining's financial year runs from July 1st until June 30th, and as we're closing in on the end of the current financial year, Medusa Mining has already provided a new guidance for FY 2016.

The company now expects to produce 120-130,000 ounces of gold next year which is 20-30% higher than the expected production for 2015. The company's cash costs per ounce are still relatively low at $380-430/oz (it's twice as high as the $200/oz they were promoting, but oh well, it's still acceptable). Unfortunately the company will have to spend a lot of money on capex, mine development and exploration.

(click to enlarge)


Source: company presentation

Medusa indeed plans to complete a $11M exploration program in 2016 and will also have to spend $20M on sustaining capex and servicing the mine shaft. On top of that, an additional $40M has been earmarked for (underground?) development. If you add everything up, you're talking about some serious money as Medusa is facing $71M in expenditures which qualify to be included in the 'all-in sustaining cost'. That's why even though Medusa is guiding for a cash cost of $380-430/oz, its all-in sustaining cost will be much higher at $960-1060/oz. Ouch.

(click to enlarge)


Source: company presentation

Does this make me happy?

Not really. I'm glad the gold production rate will increase once again and I secretly hope Medusa will be able to achieve the upper part of its guidance (130,000 ounces of gold). However, Even though the cash cost is still acceptable, the all-in sustaining cost is higher than I was hoping for and the main culprit is the $40M development cost and a $10M expense on the mining shaft. Unfortunately the company hasn't said if these costs will be recurring (if the development cost would be reduced to 20M next year, the situation would look much better as that would immediately decrease the AISC to $825-900/oz), so I can't really guesstimate the AISC for FY 2017 just yet.

(click to enlarge)


Source: company presentation

It doesn't look like Medusa Mining will generate more than $25M in net operating cash flow in the next financial year and that definitely is a disappointment and I can forget about the company ever meeting its promises. The longer term outlook also isn't too great as the production guidance for FY 2017 is still just 135,000-145,000 ounces of gold and even though this would be another 7-10% increase compared to FY 2016, I'm still not overwhelmed by the production guidance.

Investment thesis

I originally thought Medusa Mining would be able to realize its promise of 200,000 ounces of gold per year at a cash cost of $200/oz. We're now two years later and the guidance calls for 40% less gold to be produced at a 100% higher cost base, and I can't really be happy with that.

I would still like to give the company the benefit of the doubt as the new production and cost guidance seems to be acceptable and Medusa should be able to meet its guidance. I will keep an eye on the evolution of the cash flows and the balance sheet before initiating a position in Medusa Mining.

[stevea171] 14/7/2015 11:47

Niels.

Yes, silver shortages are here with more likely just around the corner. This has to be tempered by it has happened before in the past 4 years and silver just gets smashed ever lower ...

Thanks for the ABX update. They say launch date is now 'early Autumn' ie September?
Andrew Maguire said a week or so ago he is using the system now so it seems to be live for some users. Maybe this is for final beta testing and changes to make it more user friendly and resilient when it comes under attack by the powers that be? I should think what happened to the NY Stock Exchange last week would be nothing compared to what the US authorities have planned to put it out of action the day after launch .... !!

"Bullion Capital is set to launch a new institutional offering later this year, Finance Magnates has revealed. The Allocated Bullion Exchange or ABX Global is a diversified international bullion market facilitator.
The new project is due to be officially launched in early autumn."

[nielsc] 14/7/2015 10:10

stevea,

With paper price controlling what miners get for their product there will come a point that there will be a supply shortfall. Probably more likely for silver as it is an industrial metal as well as a precious one.

If people are willing just to hold paper gold then it will be to their own detriment when they find they can't get the physical that is supposed to be backing it.

Spotted that ABX Global is still going, but looks like a going live date is towards the end of the year.



Cheers,
Niels

[stevea171] 13/7/2015 10:02

I expect that by now Medusa will know or should know the Q4 production result.

If it's a record as expected there would seem no point in holding on to the news to 31/7 just to keep to recent tradition. On the other hand, given the interest in the company and PM miners would anyone be interested if, or when, or what they announce ..... ?!

One silver miner I hold (HOC) has Q2 results coming out this Wednesday.

[chipperfrd] 10/7/2015 09:44

The waste tonnage from the service shaft is relatively immaterial compared to the overall ore tonnage being hauled.

They have driven up 250m at 2m x 2m. That is 1,000 cub metres.

At an SG of 2.5 that would equate to c. 2,500 tonnes over the 3 months, compared to the overall current mine haulage capacity of 180,000 tonnes per quarter. ie 1.3% reduction.

I had estimated c. 170kt of ore hauled and milled over the June quarter, so I will stick with that as it should be more than adequate to cope with the extra waste from the service shaft - but we will see!
Chip

[pete678] 10/7/2015 00:27

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[anatolius] 10/7/2015 00:01

Not followed this for a while. Also glad to see that they finally report AISC which some incl me have been calling for for ages and came out just as predicted. Cash costs were always irrelevant as evident from absent free cash flow over the years. This will rise as the gold price rises, like any miner. The ones who think that this is the best amongst its peers remain delusional at best or maliciously misleading as the well known poster at worst.

[tightfist] 09/7/2015 16:03

Steve,

Agreed, I think Geoff is keeping a lid on PI aspirations for Q4. If you don't temper it by allowing for shaft sinking spoil, with the increasing following wind you could readily expect ~34k Oz in Q4 which isn't going to happen, it seems!

Cheers, tightfist