Medusa Share Discussion Threads

[deka1] 04/9/2015 13:41

Thanks chip, to me that ratio shows how much mml is under valued by the market,
using it as a simple measure, unbelievable !.I mean there's well over a hundred million dollars worth of new plant on the surface,not to mention the under ground stuff lol

[chipperfrd] 04/9/2015 13:12

Deka,

Actually 30% of NAV!

I had not already used the Ev/NAV ratio in my producer workbook (I was already measuring the more usual MktCap/NAV). So I decided to add it across all stocks. So thank you for the prompt :-)

Not surprisingly, MML now comes out as one of the lowest!

On it's own, like most ratios, it is of limited value. But coupled with other data it does offer another way of highlighting under/over valuation situations. So I will probably consider playing around with it when I have the time and see if back-testing throws up anything of use of a predictive nature.

Just for interest, here are the Ev/NAV figures for earlier financial years:
FY10 ~ 3.59
FY11 ~ 4.14
FY12 ~ 2.95
FY13 ~ 0.94
FY14 ~ 0.82
FY15 ~ 0.30

Worth noting that without the impairment the 2015 figure would be even more extreme (around 0.15!).
Chip

[deka1] 04/9/2015 12:21

Cheers chip, so MML is now trading at about half its asset value.
Thanks again chip

[roguetreader] 04/9/2015 11:13

Interesting link posted on AGQ(thanks dler543) which has a long interview with Charles Gibson head of Edison's Mining Research. It is split into a number of separate videos around a variety of different questions posed to him. The focus is primarily around Gold and to a lesser extent Silver, covering Price, Mining Companies, Central banks intervention, Macro view etc.....I found the whole thing very interesting as although bullish he retains a large amount of objectivity. Was published in June 2015 so may already have been sampled by many, so for those who have the interest, inclination and some time the link is below:



RT

[chipperfrd] 04/9/2015 11:00

Deka,

I was away yesterday but note that you asked about the NAV of MML.

It was US$192m as of 30th June 2015.

Enterprise value (Ev) is US$57.1m at today's price on the ASX.

Chip

[jfishy55] 04/9/2015 08:47

Resource update:

[arja] 04/9/2015 00:02

augustloop- as i have said before , most directors of these aussie mining specs or midcap stocks are only in it to feather their own nests at expense of shareholders . No doubt this applies in MML too and is why mining stocks are just for trading with perhaps a very modest core holding if a stock is trending up.
Atlantic - thanks for comment ,
nice weekend to all.

[stevea171] 03/9/2015 22:41

Medusa Mining (ASX:MML) A$0.41, A$85.2m – Asset Impairment of US$260m
SP Angel

• As the carrying value of the assets within the company were considerably higher than their market value, the company had to perform an impairment test.
• This has resulted in an impairment charge of US$260m to FY 2015 year accounts in accordance with AASB 136.
• The impairment is based on changes in the economic assumptions for the assets with the main changes related to gold price and discount rate assumptions.
• The gold price assumption has fallen to US$1,200/oz for the period 2016-2020 from US$1,300/oz for the period 2015-2019.
• The post-tax discount rate used is now 11.1% against 10% used previously.
• The probable reserves fall from 820,000 oz to 590,000 oz.
• Production capacity increases from 120,000 per annum to 135,000-150,000 per annum.
• The break down for the impairment charge is broken down as follows:
Development carrying amount of US$274,386 is written down by US$187,339
Plant & Equipment of US$113,148 by US$68,126
Mineral Properties of US$15,156 by US$4,130

• The key sensitivity to impairment charges is the gold price with a US$100/oz move resulting in a US$54,200 charge.
• A 1% move in discount rate impacts by US$4.780 and a 5% increase in operating costs by US$36,700.
• The cash profit for the group is not impacted achieving US$41.5m against US$30.9m last year.

Conclusion: The impairment charge was inevitable given the current market cap of the company. Medusa remains profitable even under current gold prices with an AISC of around US$1,000/oz with scope for this to come down as operational improvements are put into place to improve mining throughput to match plant capacity. Continued generation of cash and return of management credibility will be key to re-rating the shares as well as a stable gold price.

proactiveinvestors.co.uk/columns/sp-angel/22883/www.spangel.co.uk

[stevea171] 03/9/2015 22:32

Medusa Mining plays down A$260mln impairment
13:01 03 Sep 2015

Philippines-based gold miner Medusa (ASX:MML) has taken a A$260mln write-down of its assets due to the slide in the price of the precious metal.

As a result of the write-down, Medusa reported a net loss of A$218.1mln for the year to June.

Geoff Davis, chief executive said: “Given that the carrying value of the company’s asset was considerable higher than its market capitalisation at 30 June 2015, the company was compelled to perform an impairment test, which resulted in a charge of almost US$260mln to its 2015 financials.

“I wish to add that this is purely an accounting treatment and has no bearing on our JORC resources and reserves in the Co-O mine and therefore will not affect operations.

“On the positive side, the impairment will decrease future depreciation and amortisation charges.”

Ignoring the impairment, Medusa made an underlying profit of US$41.5mln (US$30.9mln), an increase of 34% and a good result, said Davies.

House broker share price Angel said that the charge was inevitable given the current market cap of the company.

“Medusa remains profitable even under current gold prices with an AISC [all-in-sustaining-costs] of around US$1,000/oz with scope for this to come down as operational improvements are put into place to improve mining throughput to match plant capacity.

“Continued generation of cash and return of management credibility will be key to re-rating the shares as well as a stable gold price.”

The impairment was based on changes to a number of assumptions notably a reduction in the gold price forecast by US$100 to US$1,200 per ounce, an increase in the discount rate to 11.1% from 10%.

Under the new assumptions, probable reserves fall to 590,000oz from 820,000 oz.

proactiveinvestors.co.uk/companies/news/110509/medusa-mining-plays-down-a260mln-impairment-110509.html

[augustusgloop] 03/9/2015 13:52

arja,

I would suggest that if you spend $400m to increase production from 100k oz to 200k oz then it is definitely CAPEX.

If however production is not even maintained at 100k oz then it should be in the P&L.

I suggest that Geoff Davies knew all along that 200k oz was unattainable.

If he really thought that spending $70m and taking only two years to attain 200k oz was realistic -- then he is one of the biggest fools on the planet.

He either lied or is grossly incompetent.

I go with lying - since he managed to do very well out of it, whilst share holders got thoroughly shafted.

[atlantic57] 03/9/2015 13:41

Arja it must surely be based on a realistic assessment of:

a) Productive capacity

b) Whether the costs can be recovered in the future.

Yes there will always be subjectivity in making these calls.

However making a call based on all in costs is definitely the preferred option.

[arja] 03/9/2015 13:32

It is probably a grey area as to whether to capitalise certain expenditure or write it off in the P & L .

[chapv] 03/9/2015 11:35

I'm still here and holding like many at a deep loss.The problem here is the price of gold all the other things would be background noise if gold was allowed to trade on a true market.The problem for me is I still can't believe gold is where it is when I watch the news each day.I should have sold all my holdings on the delist,with hindsight, although I would have still made a big loss but no where near where we are today!

[tightfist] 03/9/2015 11:21

Steve,

Thanks for the GDXJ insight. I see that it is the Market Vectors Index, but it is also the Van Eck ETF traded on NYSE.

The last filing on 19th June reports that Van Eck held 6.43% of MML within the GDXJ Junior Gold Miners ETF. According to the rules you posted (MML Mkt. Cap. of ~US$60m versus floor of US$75m), presumably ALL of that holding has to be disposed of, the anticipation of which is intensifying the astonishing price spiral we are experiencing:


The share weights of the Junior Gold Miners Index components are adjusted also on a quarterly basis (every third Friday in a quarter-end month).
This suggests the rebalancing will happen on 18th September.


HOWEVER, eyeballing the volume chart indicates an 3-month average daily volume of about 600k, or $180k at today's price, which suggests the criterion of "......Stocks must have a three-month average daily trading volume of at least $1 million to be eligible for the Junior Gold Miners Index..." is IMHO irrevocably failed with only 11 trading days to go.

Whilst the ETF will presumably trade MML shares to match the inflow/outflow of investors investing in the ETF, does the ETF manager have the authority to pre-empt the rebalancing date for replication purposes - it appears not:

Looking back at the Van Eck MML share trading data, there are notably large trades on 19th December (Sell), 20th March (Buy) and 19th June (Sell), which are 3rd Friday in the quarter months and suggests that the index replication holdings are adjusted on the precise day. The MML ASX chart shows the quarterly volume high on precisely the same dates.

Does this suggest share price carnage on the 18th September? Looking at history it appears not, (but I don't have intraday charts for the three days noted above). More likely short positions are now being taken that will be closed on the 18th by canny investors as Van Eck sell out? Comments please!

====================================================================

Regarding Impairment communications, I am very surprised/disappointed that the very poor handling of the Impairment charge has happened on GD's "shift". Why-Oh-Why this was not pre-empted and also not fleshed-out in the Full Year Results seems out of character.

I suppose we could individually see the next two weeks as an amazing buying opportunity, but we will need a big change in Gold investing sentiment to reap rich rewards over the next few months/years.


Cheers, tightfist

[deka1] 03/9/2015 11:19

What is the NAV of MML anyone?

[adyfc] 03/9/2015 10:18

It deserves to be kicked out, it's run by liars and failed for years. Don't forget they were meant to be producing circa 400k oz by now lol.

[cp42kx07] 03/9/2015 08:21

nielsc

Hopefully so. I thought the actual re-balancing took place later in September but clearly many will be heading for the exit before then.

I'm trying to recall if I have ever seen such an undervalued gold producer (gold suppression not withstanding).

[nielsc] 03/9/2015 08:11

deka1:

Always worth waiting that little bit longer.


Eintracht:

Although not holding all of what I held I still have a fair few. That delisting from LSE was actually a blessing for me as I did offload some then.

Well done for making it this far.



Think we have made it to stage 12?

Market is very fearful at the moment, which should help gold, it being a safe haven!



I would be surprised if we aren't at a higher price than this in 3 months time.

Cheers,
Niels

[cp42kx07] 03/9/2015 07:37

Good to see an asset impairment explanation from the company. I believe that the idea was to discuss this in the next quarterly report but clearly the 20% fall over the last two days has led to a re-assessment.

IMO someone took their eye off the ball here. Had the 2015 results been presented in this way in the first place then the focus would more likely have been on the USD 41.5m amount (equivalent > AUc 43 at current rates).

At this rate we run the risk not just of external predators but also an MBO.

ASX 300 & GDXJ re-balancing selling still to come?

[arja] 03/9/2015 07:02

now 40 just before the auction but oddly often there is a bigger quantity in bids than offers but makes no difference with this stock