Medusa Share Discussion Threads

[cp42kx07] 28/8/2015 09:02

deka

From the little I know the HKSE would appear the obvious choice. I doubt that there would be any point considering either the BSE or the PSE.

Whether HK investors would be less likely to be traders I cannot say...

Obviously the main exchanges for PM producers are ASX, TSX & LSE but for a secondary listing I quite like NYSE (although I can't confirm comparative listing costs and requirements).

Not that I anticipate a secondary listing anytime soon.

[atlantic57] 28/8/2015 08:52

Some interesting comments !
Blue you have explained your position .
Yes I think investor communication could certainly be improved but I believe that if gold surges all will be forgotten. I remember norsman gold went from from 2p to almost a pound.

T1ps.Com built my fortune and then effectively took it all back as I backed shares they were tipping on the way up eg MMl cey and on the way down eg ngl ascot and vgm

What has happened in Egypt is very sad as centamin looks a quality miner with a decent size resource.

[deka1] 28/8/2015 08:35

CP42 morning,if Medusa were to consider listing on an Asian market , which one would you think would be the best for them,i ask because the OZ market is just mainly peopled by traders at this time,that would change if the gold price improves a lot,but until then !!!.

[atlantic57] 28/8/2015 08:15

Markets look very twitchy the elephant in the room remains government debt relative to gdp.
The UK relatively better off with lower ratio I think around 80%of gdp and the big advantage
Of longer dated debts.

Central bankers have thus far succeeded in kicking the can down the road, but surely the end of the
Road must be hit.

[nielsc] 28/8/2015 08:02

Looks like MML will be able to last at current gold prices and is still undervalued at the current gold prices.

What whets my appetite is the thought of gold getting back up to levels of $1300-$1400. That would represent quite a bit more revenue for MML.

Think the time is growing closer to such an event happening. Looks like the ppt pulled out the stops to prevent a bigger market drop. However the market still looks very twitchy. Gold will be a safe haven when this occurs.

Cheers,
Niels

[atlantic57] 28/8/2015 07:30

Cheers dek we live and hopefully learn.
My investment portfolio has ended up looking like the German dive bomber ( the Stuka)
Luckily I managed to pull out of the dive to avoid complete decimation.
I hope you have fared better.

Blue Lynx performance is staggering good given the decimation in the sector.
Again with the benefit of hindsight the perceived of some seemed to be tea we would lead to rampant inflation which in turn would drive the gold price higher.

I still believe gold will rise from the ashes and probably quite soon but difficult to predict.
Always good to have intelligent discussion.
Cheers

[deka1] 28/8/2015 06:25

Atlan morning, I take your point,and as you say the way of calculating the resource has changed by the introduction of the JORC 12 ,so this is in with the impairment report.The Ausies don't look bothered by it ,looking at the trades last night,perhaps there is a tax rebate for it after all LOL.
When I first bought into mml 2009,i knew nothing about underground mining, I would ask chip questions all the time and google it as well,but i'm a mechanical tech by profession ,so I understand machines.
what put me off VGM initially was the fact that they had only diesel gens for mine power, and they were very old , and with out them no power ,and then the thought of why did the owners walk away from it if it was viable,i would never touch a born again mining operation EVER.
Back in the day I got screwed out of 20grand by MCR ,AUS miner born again, no more.

[atlantic57] 28/8/2015 03:31

Hi dek I agree they publish all in costs now !
However historically they published the cash cost and presented themselves as a low cost producer.With the substantial write down now taken,the development costs were it could be argued in reality cash costs.
If this was a conventional company you could argue that this is effectively a prior year adjustment.
No doubt Chip will look under the hood at the detail but impairment to me means an overvaluation of an asset.When that asset is effectively capitalisation of cash costs the distinction between cash and development becomes blurred.

Anyway this is all in the past now.
Going forwards as you say they do publish all in costs so an investor can fully understand the position and make an informed choice.

With the benefit of hindsight you need to have a good understanding of mining engineering which I think you have.The big mistake I made with vgm was that I believed management when they informed shareholders that the development work would lead to access high grade ore.
As you come from a technical background you are better able to assess whether the write down represents a fundamental change in the resource. Good luck

[deka1] 27/8/2015 21:17

atlan hi, they publish their aisc now ,so where is it misleading,
They also publish the prod costs without sustaining costs all the other stuff, but both are there for all to see.

I think they are on the first page 4qtr report

[atlantic57] 27/8/2015 20:54

As an accountant operating in the UK I believe that capitalised revenue expenditure would be allowable if it is now felt that it cannot be covered by future earnings.

However I would want a lot more detail before committing myself.
I have always found medusa's accounting methods puzzling there claim to be a low cost producer
Is misleading in my view.

If the gold price were to go back over the previous r high then all will be forgotten and forgiven.
However if it goes below 1000 dollars an ounce then ...

[stevea171] 27/8/2015 15:36

Been away for a few days and come back now to this!

No warning of impairment prior to release of these results (which should have happened in my limited experience of these matters). The share price has been in almost free fall from $1 in May for a 50% fall in 3 months so the insiders as usual will have been told and contributed to this selling.

ANNOUNCEMENT
27 August 2015
FULL YEAR RESULTS

Medusa Mining Limited (“Medusa”; or the “Company”;), presents its financial results for the year ended 30 June 2015, with a Statutory After Tax Loss of US$218.1million (and includes asset impairment losses of US$259.6 million).

HIGHLIGHTS OF THE FINANCIAL YEAR:
Financials
 Revenues of US$123.2 million compared to US$84.2 million for the previous year, an increase of 46%.
Medusa is an un-hedged gold producer and received an average gold price of US$1,220 per ounce from the sale of 97,200 ounces of gold for the year (2014: 65,943 ounces at US$1,299 per ounce);
 Earnings before interest, tax, depreciation and amortisation (“EBITDA”;) of (US$186.8 million), and includes asset impairment losses totalling US$259.6 million (2014: EBITDA of US$48.3 million), a decrease in EBITDA of approximately 487%;
 Basic earnings per share (“EPS”) of (US$1.050) on a weighted average basis, based on NPAT of (US$218.1 million) (2014: EPS of US$0.154 based on NPAT of US$30.9 million), a decrease of 782%;
 The Company had total cash and cash equivalent in gold on metal account of US$14.6 million at year end (2014: US$13.68 million);

Description Unit 30 June 2015 30 June 2014 Variance (%)
Revenues US$ US$123.2M US$84.2M US$39.0M 46%
EBITDA (1) US$ (US$186.8M) US$48.3M (US$235.1M) (487%)
NPAT (1) US$ (US$218.1M) US$30.9M (US$249.0M) (806%)
EPS (basic) US$ (US$1.050) US$0.154 (US$1.204) (782%)

(1) includes asset impairment losses totalling US$259.6 million
 Depreciation of fixed assets and amortisation of capitalised mine development and mine exploration was US$31.7 million (2014: US$17.5 million);
 US$11.2 million was expended on capital works associated with the new mill construction and infrastructure, mine expansion and sustaining capital at the mine and mill (2014: US$23.6 million).
 Exploration expenditure, inclusive of underground diamond drilling was US$11.3 million (2014: US$15.8 million)
 Capitalised mine development costs totalled US$37.7 million for the year (2014: US$36.3 million);

Operations
Description Unit 30 June 2015 30 June 2014
Tonnes mined WMT 659,495 521,899
Ore milled DMT 582,311 460,004
Head grade gpt 5.61 4.76
Recovery % 93% 85%
Gold produced ounces 98,359 59,904
Cash costs (1) US$/oz $385 $418
(1) Net of development costs and includes royalties and local business taxes but no by-product credits
 The Company produced 98,359 ounces of gold for the year, compared to the previous year’s gold production of 59,904 ounces, at an average recovered grade of 5.61 g/t gold (2014: 4.76 g/t gold);
 The average cash cost for the year of US$385 per ounce, was marginally lower than the previous year’s average cash costs of US$418 per ounce.

Production Guidance to 30 June 2016
The production guidance for the fiscal year to 30 June 2016 is expected to be between 120,000 to 130,000 ounces.

Reserves and Resources
New Resource and Reserve estimates for 2015 are currently being compiled and will be reported in accordance with JORC 2012 in the September 2015 quarter.

Exploration
Budgeted exploration, inclusive of underground diamond drilling for fiscal year 2016 of US$11 million (2015 FY actual: US$11.3 million);

Corporate
Resignation of Managing Director
On 19 August 2014, Mr Peter Hepburn-Brown tendered his resignation as Managing Director and as a Board member of Medusa.

Appointment of Interim Chief Executive Officer
Mr Geoffrey Davis agreed to the role of Chief Executive Officer for an interim period following the resignation of Peter Hepburn-Brown and officially commenced his interim role on 1 September 2014.

Dividend:
No dividends were declared nor paid during the year.

[cp42kx07] 27/8/2015 15:22

chip

Wow - 176! I guess that the scale of the R-Score has expanded as I don't recall any stock being above 20 when I last checked (: Time to back up the truck I guess.

I haven't used Greenblatt as I had always thought that his formula was perhaps too US-centric. That said I guess earnings yield & ROCE are pretty international.

Re: a predatory offer, until recently I had always expected to, at worst, break even with my MML holding but now the share price has sunk so low that this would be unlikely. IMO our best protection is probably now, ironically, our limited reserves.

[dor54] 27/8/2015 15:04

For those interested in mining companies check this Interview with Charles Gibson: Head of Mining at Edison Research

[chipperfrd] 27/8/2015 14:45

chapv

Yes, I have been expecting that for ages.

[chapv] 27/8/2015 14:42

Well if the Chinese or anyone else wants some cheap gold they could just make a lowball bid for us now!!

[chipperfrd] 27/8/2015 14:31

CP

There is rather a lot of them! But some have had negative adjusted NPAT even after impairments of several Billions!

I had not got around to checking the R-Score yet - will have a quick look:

... it is currently the highest at 176. But I still have most to do - so bit too early to make proper comparisons.

I recently added the 'Magic formula' promoted by Greenblat (I think his name is!) which comes out at 81.1%.
Chip

[cp42kx07] 27/8/2015 14:21

chip

Thanks for the above recap. Do you have an "R-Score" for Medusa?

[cp42kx07] 27/8/2015 14:18

chip

How does the scale of Medusa's impairment compare to other PM producers that you track (over 6x current year NPAT excluding impairment)?

I agree with you regarding future D&A reductions (and presumably capital allowance reductions which one hopes will be offset by the impairment loss).

For me the main surprise is the size of the impairment when one considers that there was nothing shown for the previous year.


CP

[chipperfrd] 27/8/2015 14:12

Basic run-down of FY15 results (with FY14 number in brackets).
I will try and avoid repeating figures that are already available in the financial report.
Figures in USD and rounded to 1 sig point unless ratios or cents.

Cash = 10m (13.1m)
Debt = 6m (9.3m)
Ev/OPCF = 1 (6.8)
Operational Margin/oz = 664 (754)
Free Cash flow = 4.3m (-24.1m)
Equity = 192m (412.3m)
P/E = 1.7 (11.1)
Net Profit After Tax (adjusted) = 41.5m (30.9m)
EPS (adjusted) = 20c (15c)
Ev/Sales = 0.5 (4)
Working Capital = 32.4m (15.9m)
Altman Z score = 3.6 (7.6)
Current Ratio = 2.6 (1.6)
Price to Book = 0.37 (0.83)
Price to Sales = 0.58 (4.07)
Return on Capital Employed = 21% (7%)
Return on Equity = 22% (7%)
Net Margin = 34% (37%)
Earnings Yield = 60% (9%)
Asset Turnover = 57% (19%)
Piotroski F-score = 8 (4)
Return on Total Assets = 19% (7%)
Gross Margin = 41.6% (49.2%)
Operating Margin = 34.7% (39.3%)
Pre-tax Margin = 33.1% (36.4%)
Net Profit Margin = 33.7% (36.7%)
Sales Growth = 46.3% (-32.5%)
Trailing P/E = 1.7 (2.3)
Cash Cost per tonne milled = 69 (55)
All-in Costs per sold oz = 1122 (1628)
Value of Resource backing/share = 8.3 (10)
Share Price as % of Resource Value = 5.8% (18.9%)

Chip

[cp42kx07] 27/8/2015 13:57

deka

Thanks, we could probably benefit from some input from an accountant here but this is how I understand it (this may be complete nonsense so please correct me as required!):

1. The amount shown as capitalised expenditure has to be assessed each year to ensure that there is a reasonable likelihood of it being able to be charged against future profits.

2. During 2014-15 the key components in the calculation all suffered from negative changes: PoG down 8%, reserves down 28%, discount rate up 10% (strange), operating costs up 17%(?).

3. The result of these negative changes is the ~ 260m impairment charge.

However... given that all of these changes (with the exception of the JORC 12 reserves) are just continuations of trends experienced over some years now (certainly over 2013-14, last year) why was there no impairment charge in last year's accounts?

Of course in the end the question now is "How much real profit will Medusa make and how much actual cash will it generate in 2015-16 and future years?".

In the meantime I fear that the share price will dive tomorrow on ASX irrespective of forward-looking projections.


CP

[chipperfrd] 27/8/2015 13:27

Most of the 75 producers that I track have reported impairments over the last couple of years due to the drop in PM prices and also due to the changes to resource/reserve accounting in the revised JORC12.

In order to get fair 'apples to apples' comparisons I discount the non-cash impairments shown in the Profit & Loss statement.

Of course, companies re-calculate whether impairments are necessary every reporting period and if the market prices for the PM's improve then their past impairments may be reversed.

I think the main impact of the MML impairment will be to dramatically reduce the D&A component of Cost of Sales. The carried value of prior expenditure has been reduced from US$402.691m to US$143.096m after the impairment. This is a drop of c. 65% and would therefore appear to lead to a corresponding drop in Depletion & Amortisation (D&A) booked within the CoS figure of the Profit & Loss.

Given that the (non-cash) D&A booked for FY15 was US$31.7m I estimate that the likely figure for FY16 will be c. US$11m - with a correspondingly higher input to NPAT of c. US$20m (around US$14m extra to the bottom line after tax), all other things being equal.
Chip