Medusa Share Discussion Threads

[goldminer70] 06/5/2016 14:31

I was very pleased with Boyd Timler's Market Briefing. To me it is an unusual but welcome way of updating shareholders.
I was thinking of following Justin and divesting my modest holding in MML, but it has changed my mind.
I was particularly struck by his statement
".....having spent a considerable time on site completing my own due diligence process on the project and its operations to investigate issues impacting production...." Was this before accepted the job? If so it partly accounts for the interregnum between Rob Gregory and his appointment. If that's the case it is reassuring he decided to take the job.
I have sent him an EMail to Botd Timler thanking him and encouraging him to keep us informed. I wouldn't divulge his EMail address on this board but if you know Geoff Davis's or Rob Gregory's EMail address it follows the same format.

[chipperfrd] 06/5/2016 12:33

They reported a JORC resource for Bananghilig on 28/8/2012.
Indicated 16.06mt @ 1.5g/t (774koz
Inferred 8.46mt @ 1.4g/t (380koz)

But they need to upgrade it in line with JORC12 - hence the current comments. But it should not be a big deal to re-run the software using the existing drill data plus the additional mineralised area which they hit during sterilisation drilling. So I cannot see this having much of a delay.

Also worth mentioning that Bananghilig is a straightforward 'truck & shovel' porphyry, not narrow veins, but I have always assumed that a local plant will be required to process the open pit ore from this area. Years ago GD stated that Bananghilig is 'free dig' for the first 50-100m due to the local geology and some of the drill intercepts were from surface. It will be interesting to see if that is all borne out by more up to date commentary.
Chip

[justinjjbuk] 06/5/2016 12:03

All: I'm still here (although not currently invested in the stock)! Try to make it an investment philosophy to never fall in love with a stock but also never to get bitter over a stock which has jilted me :)

So at the right price and with the right change in circumstances I would be perfectly happy to come back in to MML.

My ongoing concerns, however, tie into some of the posts above.

Paul

I think that Guinhalinan has been knocked into the long grass. From Page 10 of the quarterly report in the Guinhalinan section:

"Results of the recent drilling program were disappointing, especially given the size and tenor of the 'gold in soil' geochemistry anomalies and the previous (2006) drill results. Only one drill hole (DGN005) returned assays greater than 0.3 ppm Au....

The project is currently under review to determine if future exploration efforts are warranted in this area, given the poorer than expected results.'

As for Bananghilig, we will get a JORC compliant resource release for Bananghilig (Boyd refers to this again in his briefing), but I wouldn't hold your breath.

Timler's briefing contains a significant negative which I think could give us a steer on Bananghilig.

The significant negative is this statement: "That said, the high grade, narrow vein deposits in the Philippines synonymous with the broader geological setting of the Southeast Asian region, so for the first time we have expanded the scope of our activities internationally which is very exciting."

This ties in with a throw-away remark Rob Gregory made at one of the London presentations a while back. He said that a mine like Co-O wouldn't be possible in Australia because the costs would be too high. I guess this is because this kind of narrow vein mine needs a large labour force, which Aussie wages wouldn't justify.

Timler seems to be reinforcing this point; i.e., saying Philippine narrow vein mines aren't hugely attractive from an economic perspective, that is why they are looking abroad.

This then ties into my second worry. Up until the last quarterly release, I thought MML would stay on a run rate of 30k oz per quarter and throw off around $5m in cash a quarter. With a market cap of $100 million, that would almost make MML a buy even if the service shaft was hypothetically never completed. Although we may bounce a little from Q3 production (Timler suggests to 25k), his commentary very much emphasises the ore shifting constant as opposed to treat Q3 as a one-off development ore problem. So until the service shaft is completed in June 17, MML will throw off a few million of free cash flow here and there every quarter but not that much. Certainly, not enough to justify a market cap of $100 million.

Which brings us to the promised land of post-service shaft completion. At that time, MML should for a while start throwing off meaningful quantities of free cash flow. But my worry is: For how long? Way back last year Rob Gregory and Geoff flagged the L16 shaft development.

We really need some detail of when work will start on this and how much it will cost. At the presentation last year, RG suggested that L16 could be developed without a major hit to AISC, but I am skeptical: he also suggested production should hit a run rate of 30k per quarter due to new compensation system and that didn't work out too well.

If the service shaft has kept AISC at $1,000 plus then won't a new mine shaft be even more expensive (albeit the mine will be producing more ounces of gold at that time).

The marginal positive in Timler's briefing is that they are looking at the 'near mine halo around Co-O' for small open pit deposits of 100k oz to supplement the mill feed. My only worry about this is that if the service shaft is really to be completed by June 2017, then at that point the mill should have sufficient ore from the main mine to operate at capacity. I can't see how they can economically start mining that pit ore economically within the 15 month window before the service shaft comes into operation.

So a lot of question marks still hang over MML. I hope Timler follows GD and RG in visiting London, so allowing us to ask him some questions about these issues.

[chipperfrd] 06/5/2016 11:44

TF, that was certainly my thinking. Once the winder is there they should be able to use that for hauling all the widening waste.

[tightfist] 06/5/2016 09:54

Hi Paul,

A much welcomed communication. One thought - will the Service Shaft overhead crane be capable of hauling to surface the rock arising from the widening of the shaft (and the blind sinking from L8 to L10) thus relieving the L8 shaft for more ore :-)

Cheers, tightfist

[polaris] 06/5/2016 09:49

Hi all,

In that short interview Boyd certainly talks the talk. I hope he can also walk the walk. We will know by the time the FY are announced in mid to late summer. The shaft widening will still have an impact on haulage rates until complete with the associated knock-on effects on AISC. Reading between the lines on the interview i would say that FY17 should see production in the 120k oz region but with AISC beginning to fall. Noone can really predict where pog will be in 12 months time, but barring further calamities (and there have been a few!!) we might be close to a bottom in the pullback. They really need to find a way to fill the mill so the other possible local to Co-O minor deposits would be interesting if seen to be ecomonically viable.

The announcement on the resource at Bananghilig will be important going forward as this was always flagged as the second producing mine. I'd like to see some idea of when this might be developed. It is already much delayed compared to the plan of 5 years ago but then MML has been a serially under-performing beast for a good part of that time!

The 18 month plan would be to get mine infrastructure work finished and get the throughput in the mill closer to nameplate. That would imply starting FY18 with a production target in xs of 140k oz. I base this on FY17 looking something like 27k oz, 30k oz, 32k oz, 35k oz and FY18 at least averaging at least 35k oz per Q. If AISC fall to the $700-750 range and gold stays in the $1250-1300 range then things begin to look much better. However, there is a long way to go to reach this.

regards,

Paul

[ilostthelot] 06/5/2016 08:41

Nice to see better communication from Medusa & Boyd. Plenty to like about his words.

The part about the service shaft increasing the L8 hoist by 40% I liked.

[augustusgloop] 06/5/2016 08:32

Or put it this way:

since starting consistent mining, MLL have probably taken out about 700,000 ounces of gold from the mine.

The amount paid to shareholders less placings, less increased borrowings are a rounding error.

Thus, the cost of producing this gold - the easiest to get at -- left no profit for shareholders.

Unless the POG is considerably higher in the next few years --- why on Earth would anybody assume that production of the next 700,000 ounces would result in a profit for shareholders?

--------------------

On a cash flow basis, I have looked at several miners where I believed that the management were liars.

Over a period of several years - they have managed to pay everybody, without generating a profit for shareholders.

How likely is it that each one had costs of production that almost exactly matched gold sale price???


Much more likely is that many of them made a profit -- that was skimmed off.

OMI and MML = 2 very different beasts -- but over the last 6 years, both had costs such that gold sales revenue was just such as to leave the cash change at almost zero.

I simply do not believe it.
Well stuffed brown paper bags all round!

[deka1] 06/5/2016 08:15

Unit 7, 11 Preston Street COMO, WA 6152
Attention: ASX Company Announcements Platform Lodgement of Market Briefing
06 May 2016
Medusa Mining Limited’s CEO on March Q3 results and short term strategy
Interview with Boyd Timler (Chief Executive Officer, Medusa Mining Ltd)
In this Market Briefing interview, Boyd Timler, Medusa’s newly appointed Chief Executive Officer, gives an update on: • March quarter results • Infrastructure projects and AISC (all-in sustaining costs) • Group strategy relating to resource conversion, near-mine exploration focus, and exploration projects • June quarter (Q4) and full-year outlook
After only a short period at the helm of Medusa can you give us some early comments on what issues you see as having an effect on the company’s performance?
Boyd Timler I have certainly hit the ground running since my appointment, having spent a considerable time on site completing my own due diligence process on the project and its operations to investigate issues impacting production. As noted in the March Quarterly report, production over the period decreased to 21,980 ounces which is a reflection of culminating material management issues. As it stands, Co-O’s production is bottlenecked by the mine shafts’ hoisting capacity of 60,000 tonnes per month and an increase in development waste over the quarter, directly impacted the mine’s capacity to bring ore to surface and delayed completion of the L8 drilling station. Having spent more than 15 years in operational roles on narrow vein underground gold projects I’m very familiar with the inherent issues associated with underground mining that make mine planning and strategic scheduling critical to an operation’s success.
That said, YTD production is up 14% on the previous corresponding period and I expect the average production over this nine-month period is reflective of the mine’s sustainable performance until necessary infrastructure projects are completed.

Market Briefing │Medusa Mining Limited │06 May 2016 Page 2
The second issue that drew my focus is the growing AISC. Given Co-O’s cash costs remain comparably low within the sector, it highlights the importance of controlling sustaining capital costs given the work undertaken is also affecting current production levels, but needed for future efficiencies. Positive cash flows of US$800k in the March quarter and YTD cash flows of US$2.2M, whilst encouraging, are not greatly improving the balance sheet. More importantly, the operating free cash has covered the costs of the sustaining capital (YTD US$39M), plus Corporate overheads and has still generated positive cash flow.
Medusa reported cash costs for March quarter of US$494 per ounce and AISC of US$1,033/oz. Can you explain the variance between these two numbers? Boyd Timler The AISC costs for the March quarter includes sustainable capital costs of US$10.5M attributable to the infrastructure Service Shaft, upgrading the primary ventilation system and underground development, including exploration development and reserve drilling. Upon completion, the Service Shaft will handle all manpower and materials movement, allowing the L8 Shaft to become a dedicated skipping shaft. These changes will increase the L8’s current hoisting capacity by 40% but have added short-term capital costs to the project. The completion of these projects removes material movement and development constraints, facilitating greater resource conversion and reserve definition at L8 drilling programs. The ventilation upgrade is on track for completion in the June quarter and the majority of the long-lead Service Shaft costs will be sunk by August 2016 so there will be a noticeable drop off in sustaining capital costs and AISC improving free operating cash flow after this date.
In your short time as Medusa’s CEO do you have an understanding of how you will focus the company’s growth strategy? Boyd Timler In simple terms, refocussing Medusa’s growth strategy is a matter of allocating our resources to highest percentage plays to build value in the short to medium term, generate additional cash flows and build a higher level of certainty around the life-of-mine plan (LOMP) at Co-O. Currently all production is from L8 and above but we know the epithermal vein system is open at depth and plunging to the east with Reserves drilled off to approximately level 10 and Indicated and Inferred Resources extending down to level 16. The immediate focus is to drill reserves between levels 10 and level 12 to underpin a robust LOMP for the coming 5+ years. From there we can further define the resources to L16 and convert them to reserves. Only then can we design and develop the full potential of the Co-O deposit. To date, regional exploration projects have focused on company held tenements and exploration licences along the 80km mineralised trend that hosts the Co-O ore body. As reported, we will be releasing a JORC compliant resource for the Bananghilig (B1) Gold Deposit, followed by an economic scoping study. In the interest of conserving capital, we will limit additional field work until this study

Market Briefing │Medusa Mining Limited │06 May 2016 Page 3
is completed. Given the low associated cost, the Agpan Coal Project drilling will be completed by August 2016 at which time we will have a preliminary resource, however any further work on the Lingig Copper Project for example is on hold due to low commodity prices. Given most of the regional exploration activities are transitioning into economic assessments, drilling in the near future will be limited.
You seem to have a clear plan for the development of existing assets. Is there any blue sky exploration in the pipeline? Boyd Timler Exploration activities stepped away from the near-mine targets while Bananghilig and Lingig were being explored but the near-mine halo around Co-O has significant potential for smaller +100,000 ounce deposits that could augment the mill feed. The mill is currently at 80% utilization due to mine hoisting constraints so these types of deposits would make a lot of sense if they prove to be economical. The near-mine exploration will become a very definite focus area. Additionally, the Board approved a generative exploration program in December beyond the Company’s existing land position. It’s well known that Medusa’s experience and ability to do business in the Philippines is perhaps the Company’s key differentiator for ASX listed gold producers, so assessing advanced green and brown-field projects along the country’s major gold belts is the logical first priority. That said, the high grade, narrow vein deposits in the Philippines are synonymous with the broader geological setting of the Southeast Asian region, so for the first time we have expanded the scope of our exploration activities internationally which is very exciting. This is at a generative level at this time.
The March quarter results reported YTD production at 83,149 ounces and full year guidance of 108,000 ounces. How confident are you in these numbers? Boyd Timler The constraints at Co-O are obviously disappointing, but I’m confident we are through the worst of it. The full year guidance of 108,000 ounces implies Q4 production of 25,000 ounces at AISC of US$900 to US$1000 per ounce which reflects increased production and lower sustaining costs in Q4. In the December quarter Medusa engaged independent consultants with specialist knowledge in narrow vein, high grade reserves and narrow vein mining to conduct a long-range mine review to predicate the Company’s shift in strategy and board restructure. The comprehensive review assessed the short, medium and long-term capital and infrastructure requirements, reserve depletion planning-scheduling and the resource conversion strategy. The findings of this review have fed into work currently underway at Co-O and support the full-year guidance announced in the March quarterly. Additionally, the review will be key in developing the 2016-17 budget and strengthening Medusa’s medium to long term strategy.

Market Briefing │Medusa Mining Limited │06 May 2016 Page 4
What is critical for the short to medium term, is the completion of the mine capital projects as quickly and prudently as we can, alleviating infrastructure and production constraints at Co-O and enhancing our ability to convert resources to reserves.
Thank you Boyd.

[cncventure] 06/5/2016 08:05

Indeed I think the market appreciated the briefing (SP was bouncing around between 66c and 67c, but moved up to 69c by close.

Hopefully that will offer some positive reinforcement to keep up the communication with shareholders.

I enjoyed the following comments:

"The immediate focus is to drill reserves between levels 10 and level 12 to underpin a robust LOMP for the coming 5+ years. From there we can further define the resources to L16 and convert them to reserves. Only then can we design and develop the full potential of the Co-O deposit."

"As reported, we will be releasing a JORC compliant resource for the Bananghilig (B1) Gold Deposit, followed by an economic scoping study."

"The constraints at Co-O are obviously disappointing, but I’m confident we are through the worst of it."

"The ventilation upgrade is on track for completion in the June quarter and the majority of the long - lead Service Shaft costs will be sunk by August 2016 so there will be a noticeable drop off in sustaining capital costs and AISC improving free operating cash flow after this date."

[rrr] 06/5/2016 08:03

Thanks from me too for the interview. It is indeed an improvement to have such a communication at all.

[tightfist] 06/5/2016 07:41

Yes, the "Market Eye" interview is interesting and is a useful interpretation of some of the recent scant info, especially regarding costs and LoMP. For me the most important aspects are a desire to communicate with shareholders and an intriguing mention of the Board towards the end of the article.

Cheers, tightfist

[stoph] 06/5/2016 07:05

On the Medusa website there is a market briefing with CEO Boyd Timler on March Q3 results and short term strategy. well worth a read.

[cncventure] 06/5/2016 03:38

I still own MML as well.

Sold a third of my position immediately after the quarterly announcement, but have since started accumulating again in parcels at 71c, 68c and 67c.

Personally I think gold would need to fall (or more bad news be announced) to get MML back to 62c - I'll certainly continue accumulating down to that point until there is reason not to...

At this price I think MML is priced for "additional problems", so I'm not sure if we are at below 70c because the market is just exhausted from being let down my MML management or if there is actually more bad news in the pipeline.

Will be keeping an eye out for this:

"A detailed geological re-interpretation of the B1 deposit has been completed and is currently undergoing verification and geo-statistical analysis prior to final modelling and estimation of a mineral resource in compliance with the JORC Code 2012."

I think something like this has the potential to be both positive and negative. Decent results would be a welcomed distraction from other issues and may allow the market to put things back in context. An unexpected let down will only make market sentiment worse...

[ilostthelot] 05/5/2016 16:57

I agree Paul. They'd be mad to give us production target much higher than 110,000.

[deka1] 05/5/2016 16:55

Paul it think you made that 62c a little while ago because of the gap,pretty good call by look of it good shout mate.

[polaris] 05/5/2016 16:45

Hi all,

I would still work going forward on gold $1250 and AISC of $900-1000 for any valuation for the coming year. I cannot see production being much in excess of 100k oz during that time, maybe up to 120k oz (taking this current Q as the starting point and i'm expecting 25k oz to meet bottom end of forecast). At 100k oz you are looking at cash generation of $25-35M. Not to be sniffed at looking at current valuation but not exactly setting the pulse racing either. I would like to see some stability return and the share price build towards 1AUD. I really cannot see much more than that without a serious gold breakout or some unexpected good news...

On the chart there is a small gap around 0.62-63 to fill. Might get there looking at the current trading. I will probably add a few there if it gets reached to bring my average back to below 0.70AUD.

regards,

Paul

[ilostthelot] 05/5/2016 16:31

In the December Quarter they said this , which was perhaps a warning to us for the coming Q. -
"
The L8 Shaft continues to operate satisfactorily since it was upgraded. However, the increased movement of materials required for greater production from the lower levels competes with skip ore hoisting time. This will continue until the construction of the Service Shaft is completed, commissioned and operational. "

So we had 31000 and then 29600 odd in previous Quarters then the recent Q of 22,000 ozs.
The above statement has me thinking did they intentionally stack the so called skip ore in order to produce 30k ozs in previous 2 quarters?

Going forward they are still going to have the same haulage problem while sinking the service shaft.

For me I can't see them producing over 120,000 for FY 2016-17 .

It's still decent and profitable at that production level of over 100k ozs if they can keep the AISC below 1000 per oz.

The defining year will hopefully be 2017-18 once the shaft is complete .I'm kind of going over old ground here.

Going back a few years in 2011 the grades were double figures 13g/t and 11g/t
Was that year just a one off grade wise?
I remember the black leader's discussion more of that gold would be nice!
There is always the posssiblity we'll see really good quarters like that when the grades are significantly higher than 6.5g/t..

So on completion of the shaft I'm hopeful for FY 2017/18 140,000 produced ozs at AISC 850 gold price 1400 for profit of $77,500,000

Pretty sure I've missed something in my figures.

[atlantic57] 05/5/2016 12:40

Good luck to all of you !

We each have our own specific strategies and circumstances which are applicable
to our own circumstances,

i have much less in the way of investable funds and of course am 10 years older
than the previous era when medusa started its bull run.

I Accept the points made about the technical difficulties of mining but the failure of the board to keep shareholders informed in crucial for me.

[deka1] 05/5/2016 09:44

Cheers guys, be lucky lol

[eintracht] 05/5/2016 09:39

Still here too - although sometimes I do wonder why. Have not sold any since my initial investment back in 2007. I'll sit this one out until the end. Share your sentiments completely RT.

[roguetreader] 05/5/2016 09:09

Deka
I'm still here, though reduced stake and banked some profit on my more recent purchases, where I'm still slightly down overall on MML. I intend to hold my core holding going forward as I still think medium to long term they are under valued. My main frustration is as with most on this board is the poor comms from the Exec. I understand that mining is a difficult and unpredictable business but the recent guidance and shareholder updates have been poor. I cannot believe that there has still not been a single mention of Rob Gregory's position to shareholders, for someone to be appointed COO to the company and then simply disappear is baffling. My current state of mind on MML is disappointed but still (maybe foolishly) optimistic.
RT

[nielsc] 05/5/2016 08:47

Chipperfrd,

Thanks for that.

Cheers,
Niels

[chipperfrd] 05/5/2016 08:37

Just as an aside - to address one of the points raised by Justin regarding the cash balance.

Cash is just part of current assets on the balance sheet. What is more important is the balance of assets to liabilities, ie working capital.

This peaked in FY2011 at US$119.9m and fell to it's minimum at the end of FY14 at US$15.9m due to the heavy investment in their expansion.

Since then we have seen an increase to US$32.4m at the end of FY15 and US$42.9m at the end of 1H16.

The March quarter was down compared to the prior quarter but they still had a surplus of US$3.1m from sales less all outgoings. That was not shown as an addition to cash but will therefore have been a reduction in current liabilities on their balance sheet and therefore an increase in working capital - presumably lifting it to c. US$46m.

Given the improved gold price it would therefore appear likely that at the financial year end their working capital will be well north of US$50m and growing at a faster rate over FY17+ as the mine improvements incrementally kick in.
Chip

[nielsc] 05/5/2016 08:35

deka,

Still here. I am disappointed that investors weren't informed earlier of the reduced production target.
I can understand why some investors have now sold up.

Still MML is in a reasonable place. It is debt free and unhedged so will benefit from an upwards moving gold price. From memory the grade should increase with depth. Looks like the large investors of late are holding firm. I still think there is reasonable upside, but maybe not quite as much as previously.

I think Justin's point about AISC being a true value is valid and that you may be able to get more bang for your buck elsewhere.

Back at the start of 2010 MML was valued at around A$3 when gold was around the same price it is now. It produced 39k oz for the half year to Dec 2009 (EPS US$0.168). Cash in bank was over double todays.


Cheers,
Niels