Public Presentation by Rob Gregory, Medusa Operations Manager, in Mayfair, London 8/10/2015.
This was included in addition to presentations to Institutions in the UK from 5/10 to 9/10.
Key points:
• The grade of the ore drawn from the stopes has improved to 8.43 g/t gold at 31 August (from 7.20 g/t gold at 30 June 2015);
• Mill grades are trending upwards towards the 2015 reserve grade of 7.3 g/t gold;
• The AISC is expected to improve steadily;
Attendance notes from an ex fund manager. "I got a very positive impression." Key points:
- Change in stope protocol (payment method) has now reached the stage where new regime is rewarded by a jump in stope grades. He said there was a lag between introducing the new protocol and grade improvement which was one reason for the elevated AISC. Now this has run its course, AISC should trend from around $1,000 to $900 on this factor alone.
- In the annual report and on page 16 of the presentation, there is mention of high AISC for "the medium term". I was rather worried by the phrase and asked Rob Gregory what was meant by it. He replied that it meant until June 2016, when the new service shaft expense would fall out.
- Gregory is now talking about a long-term AISC of $800. Seems very confident he can hit that number.
- I was a little worried that as soon as the service shaft was out the way, we would be looking at expenditures on the L16 shaft, so elevating AISC yet again. Gregory suggested that this would not be the case and they could phase in the L16 expense while keeping AISC at that long-term target.
- I challenged him on why if AISC is improving and production going up, we are not seeing cash accumulating on the balance sheet. He said that there had been some legacy one-off expenditures and we should see cash on hand rising from the interim results. He talked later about cash on hand going up by about $2-3 million a quarter in the near term.
- Later in the bar, I mentioned his stock option holding and the $1 strike price he has. He is well aware that with confidence in Medusa lost in the past, the only way the market is going to take the company's recovery seriously is by seeing cash going up. This was very encouraging given my fear that as a company run by mining engineers, capital and cash management had been very poor in the past.
- Just like in April, I was really impressed with Gregory. He appears completely on top of the running of the mine, confident that the improvements to date will flow through and fully aware that the market will only reward the stock when it sees solid improvements in cash flow.
- I added to my position substantially last week at around 45 cents and am feeling very happy with that action after this meeting.
- Now if only the gold price will cooperate (or at the very least not go down), I think we could see some monster moves in the stock price by early 2016.
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My view. Over the next year Medusa should multi bag from 53.5c.
Imo Medusa should go back to above $2 or £1 in the next 12 months if current plans are successfully completed and the gold price does not go lower.
Longer term it could easily 10 bag or much more depending on when, if ever, the gold price breaks free from the manipulation ......
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Ex Fund Manager. I think this is a multi bagger. Even with gold at $1,150, I think we are a four or five bagger over 12 months. If gold moves about $1,200, then I think the upside is pretty stunning. You not only get better earnings and cash flow on the current mine, but you also can start to price in growth from the other prospects as the company will be throwing off enough cash to develop them with ease.
Note also the stock has been killed on the downside by repeated index exclusion trades. This vicious cycle will turn virtuous as the stock recovers. As the market cap expands, all the index funds that were forced sellers will turn to be forced buyers. That alone gives potential for PE and PCF multiple expansion. It's been a volatile ride, but hopefully volatility will now be on the upside.
MML Price at posting:
53.5¢ Sentiment: Buy Disclosure: Held
