Medusa Share Discussion Threads

[ohisay] 03/9/2015 06:56

As a UK based investor something that keeps me away from adding to ASX stocks at the mo is the sliding currency .

[eintracht] 03/9/2015 05:29

Chip,
You are a brave, brave man. I've bought several times on the way down but now I've lost complete faith in anything fundamental about MML or the stock market in general. We have seen the most extreme of financial problems recently which, if basic economics makes sense should have seen Gold half way to the moon. But, no. Now, that we are seeing a so called recovery in the US you can bet your last dollar (if I had one!) that Gold will dive like the Titanic. How ever hard I try, putting all emotion aside, I just cannot see MML recovering from this. It's only pure stubbornness that is preventing me from selling, plus the realisation of a huge paper loss !!!!

[chipperfrd] 03/9/2015 03:42

Eintracht,

I sympathise and feel the same.

I have just bought below the best price I received in the midst of the 2008 crash. Unbelievable!

[arja] 03/9/2015 02:01

now at 41 and down 4 but might bounce later . Where is next chart suppport level as I think it must be about 10 years ago ? Not sure looking at my IG chart .

[bluelynx] 02/9/2015 16:21

The Directors should never have delisted the company from the UK - I still believed they should return to a listing in the UK surely the cost is not prohibitive.

[deka1] 02/9/2015 10:21

CP short term its down to POG and higher grades,and max throughput maintained.
That's it imo.

edit , I don't know which gold miners are listed on Asian exchanges,or how well they are traded vol etc, as we discussed the other`day, would be interesting to see how they perform.

[cp42kx07] 02/9/2015 09:55

stevea171

I saw that post on HC and it may indeed have had a bearing on the fall.

This link shows useful information on the ASX indices constituents (and can be sorted by MC). There are 7 companies (out of 296) with lower MCs currently in the ASX300 and just 48 (out of 491) in the All Ordinaries. This doesn't bode well for the re-balancing even if one considers that the methodology excludes and adjusts quite a number of stocks.

hxxp://www.marketindex.com.au/asx300

Methodology:

hxxp://eu.spindices.com/documents/methodologies/methodology-sp-australian-indices.pdf?force_download=true

I completely agree with your comments on jam and cash but I also think that there is now a pretty good, forward-looking case to to be made by the company. How best to make it is perhaps the key question.

[cp42kx07] 02/9/2015 09:26

deka

I take your point about the 'marketability' of open-pit operations and I think that this (Bananghilig) played quite a part in the previous share price highs for the company. Sadly such a (possible? economical?) solution would, as you say, be years away and as such isn't going to get us out of the (not open-pit!) hole that we are now in.

My previous post should probably have said "Anyone have ideas as to how the short term, 6 month, market perception of Medusa might be improved?" as I have less concern beyond that point.

[stevea171] 02/9/2015 09:20

CP42K.
A likely contributing factor to last night's further fall in the share price was this BB posting before the open in Auz:

"Is Medusa Mining about to get dropped from the ASX300?
Reweightings occur twice a year. 5th September is when the reweighting occurred this time last year.
Hard to tell where the Market Cap cut off is with all this market volatility."

Medusa was dropped from the ASX200 last year which resulted in selling both before and after the exit. However Medusa has remained in the ASX300. Other companies in the ASX300 have fallen by much larger percentages than Medusa and have lower Mkt Caps currently than MML that are included in the ASX300. The criteria for inclusion and exclusion are not given.

Imo this is a storm in a teacup and exclusion is unlikely to happen but if it does I don't see the share price going a lot lower as I see the gold price going much higher in coming months.

Personally I am very disappointed by Q3, Q4, and now the Annual Results reporting by this company. They very much need to provide more jam today rather than all the jam tomorrow, next year, 2017 or whatever .....

That means cash generation and getting their cash balance up and spending less.

[deka1] 02/9/2015 09:12

Niels hi , yes worth a tickle imo at these prices mate,near 5 for a quid lol
good luck

[deka1] 02/9/2015 09:09

CP hi, an open pit operation on BI/B2 ,or a sudden dramatic increase in grade to double figures for the CO0 operation lol.
An open pit mine would make a big difference to large investors,free dig for years, larger proven reserves,sadly a new operation would take a few rears to get up an running after a successful BFS, and around 200 mil for a 200k/oz pa operation,perhaps once the BI/B2 area is proved up may be they could utilise the old mill , which is fully restored and ready to go, they could run a thousand tons a day through that ,if the grades are above say 3gt, hell they wouldn't need the ball mills running,its just jungle soil going through , just leach it to a concentrate , BUT is B1/B2 near enough to the plant to make it worth while.

[cp42kx07] 02/9/2015 08:49

MC AUD93m / GBP43m means we are almost into nano-cap territory...

Unfortunately we still have around 8 weeks until the next quarterly report and (hopefully) some confirmation of further progress. Fundamentals aside, in the meantime it looks to be a question of "How low can you go?" (made even more painful for UK holders by the decline of the AUD). Ouch.

p.s. Given the volume was over 1.2m, is this an institution exiting?.

With regard to the share price since the return of GD, I don't see what more he could have done (excepting, IMO, perhaps the recent poorly-presented 2015 results assets impairment). We are still suffering the consequences of chronic mis-management over several years and the market does not readily forgive such wealth destruction.

Anyone have ideas as to how the market perception of Medusa might be improved?


CP

[deka1] 02/9/2015 08:38

I thought the kids were back at school today.

[adyfc] 02/9/2015 07:42

Davis has decimated the share price since he took over from PHB and you all thought he was gonna be the saviour. He's had a year to sort this out. Average grades declining.
This mines best days are long gone and if gold falls much more it's over for this company.

[atlantic57] 02/9/2015 07:29

A rising gold price and consistent quarterly production turned the corner in 2009 onwards and I guess
The same formulae would work again.

[arja] 02/9/2015 07:12

atlantic 57 - whatever the fundamentals say it seems the aussie punters are wary and even down 3.5 to 45 today with a slightly better gold price . Seems it has not yet bottomed .

[deka1] 02/9/2015 07:10

Mornin all , well I never thought I would see this , Medusa now back to the price it was when I first looked at it back in 2009; 22p and the bid of 50p/share came not long after iirc, unbelievable !

[stevea171] 01/9/2015 23:07

Medusa Mining Has Turned A Corner And Is Now Profitable And Cash Flowing
Aug. 31, 2015 3:11 PM ET

Summary

Medusa Mining has been killed by the market after an abysmal 2014, but was actually free cash flow positive in 2015.
2016 should be a year of breaking even as the capital expenditures will be relatively high before easing down towards 2017.
Medusa Mining is now an excellent speculative buy as its balance sheet remains very solid and the operating performance is improving and the gold output should increase by 25%.

Introduction

I have written several articles about Medusa Mining (OTCPK:MDSMF) before and my optimism changed to a neutral point of view when the company encountered some problems and didn't seem to be able to meet the expectations. Meanwhile, the share price has been sliding to not just a 52 week low, but also a 6.5 year low, and this might indicate the investing community has given up on the company. However, the just-published full-year financial statements indicate Medusa isn't FUBAR but is actually turning a corner. This article is meant to continue to keep my readers up to date on the most recent developments.

I'd strongly recommend to trade in Medusa's shares on the ASX as the liquidity is much better there. Trading with MML as its ticker symbol, Medusa has an average daily volume of almost 800,000 shares.

I was hoping for a positive free cash flow, and Medusa has met my expectations

Medusa's Co-O mine in the Philippines has produced almost 99,000 ounces gold in FY 2015 (which ended in June), a very nice 65% increase compared to the previous year as the total throughput and average grade increased.

Source: financial statements

Despite the lower average gold price, this production increase obviously had a direct impact on Medusa's revenue which increased from $84.2M to $123.2M. However, Medusa's pre-tax profit was actually negative but it doesn't take long to figure out where the loss is coming from, as the company has recorded a $260M impairment charge on the value of its mining assets. This caused a net loss of $218M.

Source: financial statements

Of course, an impairment charge has no impact on a company's ability to generate cash flow, and the cash flow statements are giving a more upbeat impression of the situation. The operating cash flow increased by 30% to $64.6M, and after deducting a $60M capital expenditure, Medusa Mining was free cash flow positive. The free cash flow wasn't much, just $4.6M, but at least it's a clear improvement compared to the negative free cash flow of $24M in FY 2014.

How will Medusa be able to increase the free cash flow?

The company is sticking to the plan to continue to increase its production rate to 125,000 ounces this year (up 30%), and that's still very much achievable, considering its most recent quarter was one of the best quarters despite a lower mill throughput. The recovery rate increased to 94% and as the head grade was now in excess of 6 g/t, the production increased to 26,500 ounces (for an annualized production rate of 106,000 ounces).

The sustaining capex (including development expenditure) will be $61M for the current year whilst an additional $10M has been earmarked to complete a service shaft which should improve the efficiency of the underground mine (as it will be easier and faster to get people and equipment underground.

(click to enlarge)
Source: company presentation

So in FY 2015, Medusa generated an operating cash flow of $64.6M or $656/oz. As the average gold price will be approximately be $100/oz lower, the operating margin per ounce will be reduced to $550/oz. If I'd use the mid-point of the official production guidance of 125,000 ounces, the operating cash flow would be $69M this year, but as Medusa should be profitable again, the tax rate will also go up (unless it can continue to take advantage of the tax holiday which it has been benefiting from - but I have no information about when this tax holiday ends), so the after-tax free cash flow will be approximately $50M. That's not sufficient to cover the capital expenditures, but I'd dare to bet a part of the $40M development expenditures will be non-recurring in FY 2017 and later on.

So this seems to be the final year of higher-than-average expenditures on the property and as Medusa Mining has a working capital position of $33M with virtually no long-term debt, it does look like its balance sheet can handle one year of being free cash flow negative.

Investment thesis

Based on the available details now and the current gold price, I don't expect Medusa Mining to be free cash flow positive, even if it would be able to avoid paying any taxes in the current financial year. If Medusa can continue to benefit from the tax holiday, I do expect the net cash outflow this year to be very minimal ($5-10M), and this should be reverted to a positive free cash flow from the next financial year on as the production and operating cash flow will increase, whilst I'd expect the capital expenditures to drop from $71M to around $50M.

If you believe the price of gold could stand its ground and the Philippines won't do anything crazy like confiscating gold mines, Medusa Mining is now very attractively priced, as the company should be able to generate $15-20M in free cash flow from FY 2017 on (that is, if it can continue to benefit from the tax holiday at the Mindanao processing and refinery complex).

[deka1] 01/9/2015 14:09

DOW could open down 400+, footsi down around 200, Chinaitis again, still think the Chinamen will devalue again soon.

[augustusgloop] 01/9/2015 11:41

atlantic,

future capital expenditure is very difficult to quantify.

I believe that all the low cap gold miners, greatly (and deliberately) underestimate it to the point that it is a worthless indication of potential profitability.

[atlantic57] 01/9/2015 11:13

August loop your Comments on Medusa have proved to be accurate.

Anyone who had listened to you would have saved themselves a huge amount of money.
i think when you first voiced concerns the share price was roughly 10 times higher than now.

Yes the information coming out of the company has proved to be grossly misleading.

Agreed.

However if capital expenditure is not in all in costs this would make a colossal difference to the Companies future prospects.

[atlantic57] 01/9/2015 07:26

Arja i think the central premise of the article is reasonable ie Medusa is a call option on the gold price.

However the guy who wrote it made very serious observations which could have misled potential investors.

good luck to you also.