Medusa Share Discussion Threads

[cyberbub] 21/2/2016 11:53

Sorry all for the continuing slightly O/T here, but there isn't a Troy BB on ADVFN!

Justin,

The Troy mine appears to be close to the town of Tumatumari in Guyana, if you want to look it up on Google Maps.

Having done more research, Guyana appears to be something of a troubled country at the moment, politically and socially.

The mine itself is also located west of the Essequibo river, land which Venezuela has claimed for centuries - the dispute is still ongoing.

I guess however that there has been growing gold mining going on for decades in Guyana it seems, without any problems?

NAI

[deka1] 21/2/2016 10:43

Gold sovs on ebay , bullion grade now selling for 238 + postage,

[justinjjbuk] 21/2/2016 00:35

Cyberbub

Troy got access to Guyana permits when it took over a junior explorer Azimuth in 2013. I will need to dig deep into Azimuth's releases to get more visibility of the permits. Note Guyana is an ex-UK colony, so is English speaking and follows UK law. Good questions! I will follow up but am going to bed now!

Justin

[justinjjbuk] 21/2/2016 00:13

8% royalty at a gold price above $1,000. There is a 20 October 2014 press release that gives more details. Corporate tax at 30%.

[justinjjbuk] 21/2/2016 00:09

The presentation with the AGM shows 290 million shares outstanding. They then did another issue in December, which gets us to 340 million. They also did prior issues in 2014 and 2015, so I guess they just haven't updated the number on their web site.

[cyberbub] 21/2/2016 00:08

Do Troy have full ownership of profits, and full title to the claims in Guyana for a decent length of time? What is their tax and royalty position?

[cyberbub] 21/2/2016 00:06

Medusa have the advantage of being unhedged if POG keeps rising over the year. Obviously it can work the other way if POG falls!

As you say, Co-O may be subject to more weather problems, and is an underground mine which is riskier. But I think the Philippines are (more or less) politically stable these days, despite the sabre-rattling in the South China Sea. I have no idea whether Guyana is also politically stable.

[justinjjbuk] 20/2/2016 23:57

Sorry, I see where you got that number from on the website. Looks too low. Let me dig around.

[justinjjbuk] 20/2/2016 23:54

Think you are taking that number from the Factsheet on the Website. That dates back to 2013 so is out of date.

[justinjjbuk] 20/2/2016 23:52

Open pit will almost always have lower grade than underground mine. But grade of 3.12 is good. Look at page 33 of the Feb 17 presentation for a pathway into the future. The results they have to date are very, very good and if they replicate this going forward, the potential is massive.

[cyberbub] 20/2/2016 23:50

Justin, that's not what their website says:



Says that there are only 168M shares, fully diluted.

[justinjjbuk] 20/2/2016 23:47

Cyberbub

340.8 million shares outstanding at share price as of Friday close of A$0.415. That gives a market cap in Aussie dollars of 141.4 million. Current USDAUD rate is 1.4, which gives us a market cap of US$100 million.

[cyberbub] 20/2/2016 23:35

Justin,

I have just had a look at TRY. Their grade in Guyana seems a bit lower than MML, but you can't argue with an AISC of $550! They must have very low costs, presumably because it's open pit, but they are going to need to go underground soon, it looks like from their vein plans?

Don't know where you got a cap of $100M though - their current market cap is only A$70M = US$50M... unless you meant their EV = cap US$50M plus about US$50M in debt, would match your figure of US$100M?

In general Troy's reports and presentations are not very clear in distinguishing between A$ and US$, it's a bit confusing which is not helpful.

Is Troy's production target of 100-120k oz sustainable for a number of years, with exploration?

They seem to have engaged in some unfortunate hedging of most of their production for FY16. I suppose it offers certainty, and with an AISC of $550, then an extra $100/oz doesn't make a colossal difference... but they will be spitting if gold goes to $1300+ !

Cheers.

[justinjjbuk] 20/2/2016 23:16

Cyberbub

The mine is up and running. Started production ramp in December 2015 and will hit full capacity in March 2016. Big CapX is done. $75 million in debt being paid off at a rate of $15 million a quarter. Yes valuation is crazy cheap, but then so is the valuation of MML: although not as crazy cheap as TRY.

Check out TRY's 17 Feb presentation. The Guyana mine results are stunningly good.

[cyberbub] 20/2/2016 23:11

Chip fair enough, no criticism was intended. Sounds like you've got your system working really well!

[cyberbub] 20/2/2016 23:09

TRY - $80M cashflow and market cap $100M?? What's the catch - massive debt, or massive capex upcoming?

[justinjjbuk] 20/2/2016 22:36

I know is an MML thread, but I thought it would be worth putting MML up against three other names that I like (and, for full disclosure, I own): Troy Resources (TRY), Resolute Mining (RSG) and Silver Lake (SLR).

All these stocks have run: a lot! I am measuring all the gold miners from the January 19 low, which I hope is the low for this cycle. Since then the NYSE Gold Bugs Index (HUI) is up 58%. This puts MML’s move (up 62%) in perspective. Indeed, Barrick is up 58% from its 19 Jan low, Goldcorp 48% and Newmont 52%. So MML’s move is almost in line with the large cap gold stocks. In comparison, TRY is up 108%, RSG up 92% and SLR up 63%.

Investment thesis for each as follows:

TRY

- Last few months has seen transition from 2 mines coming off line (Casposo, Argentina and Andorinhas, Brasil) and 1 mine coming on line (Karouni, Guyana).
- New Karouni open pit mine looks super productive. Company forecasting CY 2016 production of 100k to 120k ounces at an AISC of US$525 to 550 an oz.
- The results from Karouni just keep getting better and better: check out page 9 of their Feb presentation. This moved the stock big time.
- Forecast operating cash flow of US$80 million compares with a market cap of $100 million, but given recent Karouni results and gold price movements that operating cash flow may be too low! However, TRY has sold forward 75k oz of gold, so won’t see any big jump until 2017.
- Companies drilling programme suggests that we will see a lot of positive news flow around resources and reserves.
- To fund the mine transition, company already did a $10 million equity raise in Dec and has a $75 million Investec loan facility. But given cash flow, TRY will be debt free in 2017.
- I think TRY still looks cheaper than MML (despite the stock price having outperformed MML) and will have better near-term news flow to act as positive catalysts.

RSG

- FY16 production guidance 315k oz at AISC of US$940. OP target of $100 million plus against market cap of $217 million.
- Company going debt free by June 16.
- Massive resource base, so we have better life of mine visibility than with MML Check out slide 5 of 9 Feb presentation.
- Flagship Syama mine in Mali will produce positive news flow with release of definitive feasibility study for underground mine in June quarter.
- If we have seen the bottom for gold, then at some stage the market is going to reward a) large resource stocks and b) stocks that have potential for production uplift. In some ways MML is quite defensive with no debt and a low and falling AISC. But in a market with gold running higher, we may want to add some stocks with a bit more leverage than MML, such as RSG.
- Dimensional became major holder on 5 Feb 2016.


SLR

- Three years ago, I owned MML, SLR and SBM. I sold SLR and SBM because I wasn’t sure if they could lower AISC quick enough to avoid bankruptcy risk if gold continued to plummet. How wrong I was on SBM, the star restructuring play of 2015! (but now looks very, very expensive)
- Like SBM, SLR has had a lot of success at getting ASCI down by basically withdrawing from Murchison and Great Southern, and focusing on Mount Monger. ASCI has come down a lot and we are looking at around $900 for FY16 for production of 130k (similar to MML).
- Check out their presentation of 28 Aug 15 called “Setting a New Course”. They have gone and done what they said they would do: impressive!
- Like MML, Dec quarter showed everything coming together for SLR. Cash rising on balance sheet, debt coming down. Company will be debt free by June 2016. 53k oz of forward selling, so will only get half of uplift from rising gold for 12 months.
- Operating cash flow going forward of $45 million against market cap of $120 million, so stock is a little more expensive than MML.
- Company had 830k of reserves as of June 2015, which gives us a pretty good visibility. Better than MML.
- If we are now in a strong gold environment, then Mount Monger looks like it will provide more near-term growth opportunities for SLR than Co-0 for MML. Obviously, for MML, the mill capacity restricts any production uplift and even if gold goes above $1,300 it will be a long time before MML can bring Bananghilig on stream.


Overall, I still think MML is incredibly cheap and am a long-term holder, but I think TRY, RSG and SLR are cheap as well.

But there exists some risk specific to MML. At the end of the day, it operates one underground mine. If there were to be a major accident with multiple miners killed, then you could see a prolonged suspension of operations. Same for such risks as earthquake, volcanic eruption, typhoon, insurgency: the Philippines has it all.

And TRY, SLR and RSG have large open pit components to production; they are not dependent on one underground mine. You can, therefore, diversify away some mine risk by just holding a basket of these names.

Would very much look forward to any comments on RSG, TRY and SLR from Chip and all those who have better experience on the mining side than me. I am not in love with them. If anyone thinks my investment thesis is wrong on any of these names and can explain to me why I am wrong, I will kick them out of my portfolio :)

Justin

[chipperfrd] 20/2/2016 18:41

Cyber,

It has happened this week with CEY, but I don't mind that, I still have a portion from every closed position banked as free shares and there have been numerous times when it has gone the other way (so far I have completed 54 round-trips with CEY since I first started using this system!).

The main aim is to get my holding costs down to zero eventually and to continue to use the freed-up cash on other under-valued stocks. I don't need to get greedy and I cannot predict short-term market movements.

In the case of CEY, if it goes lower (by -7.5%) I will buy back in. If it goes higher then I still have 4 positions to clear. So I don't mind either way. It is over-bought on technical's and it usually has a c. -14% 'zag' after a decent positive 'zig'. So I may get to buy more shares back at less than the 82p at which I last sold.

I am doing the same sort of thing across lots of stocks. I normally find that when I get a portion of cash back from one stock there will be an opportunity to buy back in elsewhere - it's just a steady process of ratcheting up the overall portfolio due to market zig-zags irrespective of overall sector trend.

Anyway, we all have to do things that feel right for our own preference. I am certainly not making a case for others to do as I do.
Chip

[cyberbub] 20/2/2016 18:18

The buy on dips and sell on spikes to get free shares is fair enough Chip, but surely you must have had times when you sell but then the share price runs away northwards?

[chipperfrd] 20/2/2016 13:41

Atlantic,

I suppose I would have to make the comment that share price is very often a poor indicator of actual value - why else would we be seeking out good under-valued propositions!

Surely we need to avoid over-valued stocks and to direct all our resources (and cash) into the very lowest value propositions that offer eventual highest risk/reward upside.

Frankly, I have no idea why Iamgold is on such a lofty market rating (based on it's market Cap) as it looks loss-making over 2015 and 2016. But as it is not one that I include in my 'balance sheet' workbook and as (outwardly) it looks to be a waste of my time to include it, I am obviously not the best person to comment on it.

There is certainly a correlation between daily movements in the gold price and market movements in gold stocks - especially amongst the liquid larger cap miners.

I do find that somewhat irrational as my main targets are 3-5 years out, but I have to accept that with so much of the market being day-traded/algo-driven/etc., it must also be something that I factor into my own trading.

Hence, I have incorporated £gold movements into my own 'staircase' system and use the accumulation of those £gold movements to automatically adjust my preset 'buy' and 'sell' margins for each and every position currently in play (normally 90-100 positions are open).

I hasten to add that my system is designed to take ALL profits as free-carried shares and to only open new positions on dips. It has been a real help in efficiently re-cycling cash flow during a difficult few years but, in turn, it has enabled me to accumulate at very low prices across a range of gold stocks that I consider have good prospects of upside at c. US$1,100 gold, let alone at a higher gold price.

Chip

[chipperfrd] 20/2/2016 13:07

Cyber

The average gold price over MML's 1H was US$1,117/oz.

The average (so far) over 2H has been US$1,123/oz (although I have not yet added this last week's closing price - so the average will have crept a little higher).

So basically, taking the gold price down to (say) US$1,100/oz does not really make a big difference to my estimate of full year EPS as I was not factoring-in a big jump in gold.

At US$1,100/oz for the rest of 2H16, the second half EPS would appear to be c. 15.6c, making a total of c. 30c for the financial year. For a PoG of US$1,050/oz the 2H EPS drops to 14c and the full year falls to 29c.

Chip

[atlantic57] 20/2/2016 12:09

Chip in the spirit of Constructive Discussion how do posters feel about the following.

Yes it is true that from your postings the table of goldies traded in Canada,
say does indeed show sky high pe ratios.

However medusa has never had to my knowledge a sky high rating.

However in relative terms the rise and fall of say i am gold and medusa does not appear to dissimilar.

In other words everything is relative to a particular market.

[cyberbub] 20/2/2016 11:45

Chip

You were estimating A$0.33 EPS for the FY to June 2016.

What does your model suggest if the gold price were to fall back to $1150 or $1100?

I am just trying to run some risk scenarios here and see if they match your estimates.

Thanks.

[greenleaf] 19/2/2016 11:05

Does anyone know what was the reason for the 20 minute halt in trading of MML on the ASX starting around 11.20pm last night?

I can't see any announcements from that time

greenleaf

[justinjjbuk] 19/2/2016 10:22

I am not sure that H1 will provide a positive catalyst to move the stock higher. Think for the near term the stock will swing around on POG.

Main point of interest for me when H1 comes out is to determine the quality of the cash build on the balance sheet we saw in the quarterly update. We saw cash move up by $4.4 million. I hope this isn't due to a large jump in payables. The quarterly mentions that various large pieces of equipment related to the service shaft were due to be shifted from South Africa to the mine in January. This will likely give rise to some lumpy cash payments related to this equipment, so cash build could be quite erratic from quarter to quarter. The H1 report will give us more visibility on this.

Obviously, in terms of the share price, what we want to see is a steady build up in cash on the balance sheet from quarter to quarter.

I also maintain a spread sheet that records the London fixes (at which most mined gold is sold) and just forecasts the current gold price out to the end of the quarter. Based on this, my estimate for average gold price for MML in Q3 will be $1,168, which compares with $1,096 at Q2. If we assume that production in Q3 is identical to Q2 (30,835), then the $72 jump in the average price of gold sold will lift cash flow by $2.2 million; of course, no additional cost for this (just a product of the jump in gold prices), so it should all fall to the bottom line.

The good news, therefore, is that even if we get some lumpy cash outflows in Q3 for new service shaft kit, this extra $2.2 million gives MML a nice cushion (and if gold keeps rising through to the end of Q3 it will be bigger). So, hopefully, that $4.4 million cash build on the balance sheet in Q2 won't be an outlier.

Justin