Medusa Share Discussion Threads

[polaris] 25/9/2021 10:26

Why would a major buy it? It's a near 100 k oz producer in a specialised part of the extraction methodology. It isn't a good fit for a Tier I player.

AUS$0.74 is a market cap of AUS$154 M. Net tangible asset value is $0.83 per share, US not AUS. MML has $51.1 M in cash and around $72 M if you include the value of inventory, though i'm not a fan of including non-metal inventory in the total. $51.1 M is around AUS$70 M and the published value near AUS$100 M.

FY21 came in at $97.7 M EBITDA, $47.3 M NPAT and $0.23 per share (US$)...or $496 per production oz and AUS$0.31 for NPAT.

Leave out the cash entirely and the FY21 results have MML on a P/E of 2.4 or so, for a steady 90-95 k oz producer.

Yes, FY22 will come in lower on pure production (pre Tiger Way costs) as a result of a small increase in AISCs and the likely lower pog cf. FY21. I predict the NPAT will fall to $325-350 on pure production at an average gold price of $1750 and $200 per production oz in Tiger Way build costs.

Taking into account the cash pile then that P/E falls to the 1-1.5 range. That does not add up in anyone's world, even with the cap-ex project.

I suggest people read the annual report and look at the production stats since MML first starting producing at Co-O, page 24, graph 3. Never really much of a reserve, due to the narrow vein mine type and the way you firm up reserves as you mine, but now over 1 M oz produced.

MML isn't some punt explorer play. Teo is a drag on the share price and probably always will be. However, i see absolutely no reason for MML to trade at a significant discount to NAV (tangible). That is in the region of AUS$1.14 today.

MMl should be trading at P/E of 4-5 plus cash pile (only the cash and extracted metal inventory part). On FY21 that comes in at $250-300 M, something in the range AUD$1.60-1.95.

Look at the terms of the performance rights that the board gave to themselves and what they need to firm up to get them in 3-years time. If they meet the full vesting criteria then MML will be set for at least another 10 years of production...plus the 3 to get to vest point. They will have a long term access tunnel to Level 10+ for extra haulage, which will make some previously uneconomic resource reclassifiable.

I think MML is ripe for an offer in the AUD$1.20-1.25 range, entirely down to the perceived weakness of the board. Right now, i'd take that, such is my disillusionment with the share price performance.

[geckotheglorious] 24/9/2021 20:45

Surprisingly none of the majors want to buy this company and fire the management (and make some real money running it properly) so begs the question why?

[cp42kx07] 24/9/2021 20:11

In Medusa's case more likely unloved management. It's immensely frustrating but no longer surprising given their ability to shoot their own shareholders in the foot at every opportunity. Still, that's why we pay them the big bucks!

[polaris] 24/9/2021 09:27

Talk about unloved sector. AUS$0.74... never thought it would see these levels again.

[c9ajl] 17/9/2021 09:13

Annual Reporthttps://www.medusamining.com.au/wp-content/uploads/2021/09/210917_Annual-Report.pdf

[cp42kx07] 27/8/2021 17:14

I'm disappointed that there appears to be no final dividend.The statement "No further dividends were declared during the year" is (typically for Medusa) somewhat unclear: does it mean "for the year" rather than "in the year" which "during" suggests?The lack of a final is not very clever given the cash on the balance sheet and the current year projections. In order to attract income investors a company needs to develop a reliable dividend record by reliably paying both interims and finals even if these are small. Even if there are insufficient funds for a final (unlikely) the smart move would have been a 2c interim and a 3c final. Yet the again the directors display their investor relations incompetence

[glavey] 26/8/2021 14:18

The bar chart in the 2022 guidance doesn't inspire. The only good thing about it is that there's a fair chance that they can get close to target. But then there's the decline...

[polaris] 26/8/2021 11:34

Further note to cash holdings.

This is made up of $51.1 M in cash, $16.7 M in inventories and $5.4 M in restricted cash. Yes, i know that doesn't add up to $72.2 M either!

Based on the report notes, i'd reduce the actual cash to only the $51.1 M liquid assets and the gold inventory, which is $7.9 M, to give $59 M. The rest, while on the balance sheet, is not 100 % available cash, IMO.

The $16.7 M inventory, after the actual gold inventory of $7.9 M, contains consumables, $7.1 M, and ore stockpile, $1.7 M. The restricted cash is the rehabilitation fund for post ops environmental work. Some might say that it is just a number while ops continue and no end of LoM is obvious.

Either way, net tangible asset value in previous post is the killer for me in terms of undervaluation. I'd at least expect the share price to meet NTA level, which is near A$1.15. That is base case current valuation.


edit
Seems the reconciliation is in how they deal with short term borrowings and restricted cash... something for the accountants among you. Teo all over!! (he is an accountant)

[polaris] 26/8/2021 11:16

Here's another small snippet from the full report, which i am reading.

Net tangible assets per share of $0.828, US not AUD!
SP is about $0.585 so trading at a huge discount to net tangible assets, while also being profitable.

Honestly, none of this makes any sense to me.

(Yes, i am biased as holding near 100 k of these at average A$0.835 so under water right now)

[polaris] 26/8/2021 10:45

How undervalued is MML?

Taking the 2020 and 2021 FY results then we have some simple numbers to start with:
Cash and cash equivalents are up $25 M on the year
Production is steady in the 90-95 k oz region
AISCs increased by $99 but average pog received increased by $275
NPAT was a whopping $496 per production oz!


What else?
The cash pile was up $25 M but MML also spent $6.5 M on cap-ex for the Tiger Way project and paid $8 M in dividends, so cash generation from operations was almost $15 M more than the $25 M reported.

What about the next 12 months?
Tiger Way cap-ex pencilled in as $15 M
Operations flat but AISCs projected to rise to $1250-1300 region from $1231, lets say a round $5 M, which is $50-60 per production oz
pog received $1856 in FY21, lets say it falls to $1750 in FY22. That's another $10 M wiped off possible cash generation

Put it all together and i'd say direct revenues will be impacted by about $150 per production oz at $1750 average pog and then Tiger Way will take another $150 in cap-ex costs. That still leaves a NPAT of around $200 per production oz, including the project.

If MML pay a similar dividend in the next 12 months (A$0.05) then that is equivalent to $85-90 increase in AISCs.

After all of this spend then MML come out with a NPAT of over $100 per production oz in cash generation to add to the cash pile, which would increase to something in the range $82-85 M.

MML shares in issue are around 208 M.
SP is A$0.80, giving a market cap of around A$167 M.
Current cash pile is $72.2 M, or approximately A$100 M
Cash pile increase after cap-ex and dividends was $25 M, or A$34.5 M
EV is A$67 M!
EPS is A$0.31 per share... at 208 M shares this is A$64.5 M... near as dammit the actual EV!!

Assuming $1750 average pog in FY22 then the state in 12 months will be
projected cash pile $82-85 M
another A$0.05 dividend
NPAT margin reduced to around $200 per production oz ($350 excluding Tiger Way)

If you add all that in then MML will still be operating at P/E of 1 next year at A$0.80, while in the middle of a big cap-ex project to extend mine life (by access routes as veins are never going to run out, just get harder to mine economically) for 10 years+


Finally, for the play...

A$167 M market cap at A$0.80 SP
A$100 M in cash
generated A$64.5 M earnings in FY21
Long standing disgruntled shareholders
Poor management and PR

White knight to punt A$1.25 per share and it is accepted
Total outlay A$260 M but you immediately get A$100 M back
No dividend to pay. Taking that into account means a NPAT around $300 per production oz in FYs 22-24 (A$410 or so)

To get back the A$160 M outlay at this rate would need near 400 k oz gold produced, or less than 4.5 years production. This while happily funding Tiger Way.

Tiger Way is finished in FY24 and access allows small increase in production output to 100 k oz, costs go down as cap-ex is reduced and the white knight gets all the future benefit. This reduces payback to 3-3.5 years.

Disgruntled shareholders get a 50+% return on their current holdings but no part in the future of the mine complex. I'd say that is a bad deal but i can see many holders snapping your hand off at A$1.25

[polaris] 26/8/2021 10:06

What a distortion of a headline that is.

Reckon MML is in play. I'm just outlining the case and will post soon.

[c9ajl] 26/8/2021 09:35

Medusa lowers output guidance at Co-Ohttps://www.miningweekly.com/article/medusa-lowers-output-guidance-at-co-o-2021-08-24

[polaris] 26/8/2021 09:26

Shame no further divi IMO. EPS of A$0.31... once you take the A$100 M cash pile into consideration then these results show MML trading on. P/E of 1! Oh... and throw in the dividend yield. What is wrong with the market?

[c9ajl] 26/8/2021 08:06

FY2021 Financial Resultshttps://www.medusamining.com.au/wp-content/uploads/2021/08/210826_fy2021financialresultshighlights.pdf

[tightfist] 25/8/2021 11:13

Hi Polaris, thanks for your Dividend thoughts. Let’s not not get too enthusiastic. Recall ultra-conservative Mr Teo; he’ll want to sit on pots of cash until Tiger-way has been commissioned……… and possibly RCV satellite ore accessed, etc. etc.

[deka1] 25/8/2021 09:29

Thanks again for your take polaris , much appreciated .

[polaris] 24/8/2021 10:03

On that forward guidance then i make a dividend of $10 M for the next fiscal year totally reasonable on $500 margin on AISCs on 90 k oz. Once you pay for Tiger Way cap-ex and taxes then the cash pile should remain steady to slowly growing. $10 M would be between A$0.06-0.07. If they meet guidance then anything up to A$0.10 is possible, assuming Tiger Way cap-ex is as stated.

[polaris] 24/8/2021 09:02

Management have listened. Tiger Way costs will not be included in AISC for next FY. Cap-ex will be $15 M or so. Wonder whether the AISCs will be restated for the current FY when audited numbers come out? That should be next week.

[c9ajl] 24/8/2021 07:40

FY2022 Gold Production and Cost Guidancehttps://www.medusamining.com.au/wp-content/uploads/2021/08/210824_fy2022productionandcostguidance.pdf

[c9ajl] 24/8/2021 07:39

Termination of Agreement at Banaghilig Project Areahttps://www.medusamining.com.au/wp-content/uploads/2021/08/210823_terminationofminingagreementatbananghilig.pdf

[polaris] 23/8/2021 16:13

As for FY audited figures, which should appear next week, the HY dividend was A$0.05. The share price is currently A$0.775. That's already a hefty yield. If they want a progressive divi policy then you have to be looking at A$0.03-0.05 for H2, which will get the yield into the double figure % range!

The cash pile is still well over half the Aussie share price (pretty much A$100 M with current exchange rates) and last figures already included $6.5 M of spend on Tiger Way, yet cash pile remained steady. MML also paid out $7.5 M in divis in H1 (A$10.7 M). With gold pushing back towards $1800 (broken now intraday) then MML remains a good leveraged play, with the backstop of huge cash reserves wrt market cap.

[polaris] 23/8/2021 16:05

MML pull the plug on Bananghilig, after years of inaction



Tiger Way it is then!

The current investment in the Tigerway Decline Project will underpin the next decade of underground mining at the Co-O operation and allow more efficient access to higher-grade ore zones beneath Level 12 of the mine. In addition, the discovery of the Royal Crowne Vein project within 3km of the Co-O processing facility provides future flexibility for a satellite ore source.

[cp42kx07] 20/8/2021 19:50

Always a downer when the trading of 0.14 % of the shares leads to a drop of 5.49% in the share price I hate to think what will happen if there is no final dividend. This really has been the share from hell over the past 10 years!

[tightfist] 03/8/2021 08:30

Hi Polaris, I agree that it’s another piece of extremely poor and unnecessary impact on PR from Medusa. It seems to me that the headline numbers (which people do skim-read) could easily have been far better without any lack of transparency.

As has always been the case, Teo has little regard for PR expectations with a public listed company.
The jury is out on whether this (1) insensitivity/lack of connection, (2) ultra-prudent accounting behaviour, (3) a legacy from his private company CV, or (4) to ensure the MML gravy-train stays on his and the BoD’s rails to a comfortable destination.
.
One thing is for sure, the shareholders continue to be low down the pile! tightfist

[polaris] 02/8/2021 09:27

JH - agreed. It's a matter of communicating effectively.

A one-liner covering the impact to AISCs with and without the Tiger Way cap-ex before they started and none of this is an issue.