Medinah Minerals (MDMN)

[Hurricane_Rick]

Excellent blog post written by kmt on how MDMN can build (change) its reputation

Building a Reputation

By kmt Jun 14, 2014

On one of the chatter sites MDMN shareholders were discussing a list of mining contacts that MDMN is rumored to have. They suggested that MDMN should begin using it to improve the share price. I thought I would add my 2 cents regarding public communications to shareholders or would-be shareholders.

Investor Relations - Grade “F”

My view is that MDMN is (a) relatively incompetent OR (b) has chosen not to communicate in ways that bolster the share price until a JVA is 100% complete with money exchanged and titles altered to include the JVA partner.

I believe it’s likely that MDMN doesn’t have the bandwidth or is challenged in this area. Even without a JVA partner, there is plenty Medinah could be doing to strengthen corporate communications and investor relations. However, if the answer is (b), can you blame them? “Done, done, done” has been shoved down their throat more than enough times by some disgruntled shareholders.

The truth is, it was “done, done, done” with Amarant. It’s just that Amarant never fulfilled their end of the agreement. Currently it’s “done, done, done” with a new JV partner. Perhaps shareholders are not going to read much about the JVA until everything is official, legal, and binding in Peru and Chile, and MDMN has money, and the JV partner is on the title.

Nevertheless, I hope MDMN hires someone skilled in corporate communications. One of MDMN’s biggest weaknesses (aside from failed attempts to JV the ADL) is their public image and relationship with shareholders. Their branding and communication gets an “F” grade. A large portion of their own shareholders don’t trust them, and MDMN doesn’t trust their shareholders.

Management has pointed to shareholders discussion forums, chat boards, and other areas for making it difficult to execute and for contributing to the sullying of the company’s reputation. Granted, it may be a contributing factor. However, execution and corporate message is completely on management and they have earned their grade, and it’s up to them to change things.

The Cost of a Reputation

A poor reputation is costly. Consider this illustration.

In January 2011, MDMN agreed to and announced a purchase contract for the ADL properties. At the time, MDMN only owned a 49% stake in the properties. There was no work done on LDM other than Gordon’s drill program from many years ago. Nobody knew what the glory hole actually contained or that there was a large amount of copper on the properties. There was no known connection to any mining people or companies. (No Letts, no partner named.) During that time MDMN sustained a market cap of approximately $90 million for four months. Given today’s ownership of 100% of the claims, that is like having a market cap of $180 million ($0.14 a share fully diluted.)

In September 2011 it was apparent that the deal had fallen through. Over a short time the price drifted down and the market cap settled into the $33 million range from September to December 2011.

In January of 2012 another deal for the ADL was struck. It was another unnamed partner. This time MDMN also had a contract on the LDM, although there wasn’t much going on there. MDMN still only owned 49% stake in the ADL properties. The price rebounded strongly on this second contract to joint venture the ADL. The market cap recovered into the $80 million range ($160 million if MDMN had 100% ownership.) The price bounced around for many months until it became clear to everyone that Amarant was not going to fund. The price began drifting lower. When MDMN finally announced they had vacated the contract, the market cap settled in the $23 million range (10% lower than the previous bottom.)

Non-performance and poor communication of the facts have devastated MDMN’s reputation and trust in the marketplace. After consolidating the claims, adding a well known and trusted mining name (Letts) to the BOD, accepting a JVA (still no name) on the ADL, hitting terrific results on LDMC and going into production on the NUOCO claims, Medinah Minerals is struggling to hold a $91 million market cap (fully diluted).

Basically, MDMN is in profitable small scale production with terrific assays on gold and copper, they added a member of a well-known and respected Peruvian mining family join the BOD, and they have agreed to Joint Venture the ADL. Yet MDMN’s market cap is half of what it was in 2011. That’s a punishing discount for failure to perform. I expect MDMN to correct it. They can start today, not when the current JVA closes.

Communication is the Easy Part

MDMN is starting to execute on the mining side. That’s the hard part. But they are still dropping the ball on investor relations. The website is amateurish. They have no means of communicating directly with shareholders. They had a toxic date to accept or reject a JVA on June 9th and were not able to have a news release or update on the wires BEFORE the open on June 10th. Many shareholders consider this unacceptable.

Why is it unacceptable? Because in a weekend a couple of shareholders can setup this blog, a Facebook page, and a Twitter page. In one month the blog and discussion forum have more reach into MDMN’s shareholder base than MDMN has after seventeen years. Since launching, this blog has 18,000 page views per week from over 3,000 visitors. There are 303+ people alerted via email, 764+ via twitter, and 297+ Facebook fans (with some overlap) being notified every time something is posted. Over 1,000 shareholders will read this post within days of it being posted. Yet, after all these years, it’s still not clear how an investor or perspective investor can sign-up for Medinah Minerals corporate updates. Not that it matters. I don’t think any of who signed up for them are receiving them. Is anyone getting answers from a contact form or email address that doesn’t even make use of the official company domain?

If Medinah Minerals is going to succeed in removing its “reputation discount”, it needs a communications overhaul. MDMN needs to replace the current website with a professional website. In addition it would help to add Facebook and Twitter pages. Then MDMN needs to consistently deliver a concise, clear message in plain english written at a fifth grade level. They need to tell the world 3 things over, and over, and over again. They need to say who they are, what they own, and where they’re headed. At the same time they need to execute!

Who Is MDMN?

I am told that for junior explorers, it is all about management. MDMN is almost at the point where this is an area they can highlight. With the addition of José Roberto de Romaña Letts to the board of directors, Medinah finally has a mining person on board. Although Juan Jose Quijano Fernandez has lost some luster from bringing in two failed partners, he did give control of his share in the claims in exchange for far less than they were worth. He still is one of the largest land owners in Chile and a highly qualified expert in mining law. Kyle Kirkland doesn’t have any mining experience, but he does have experience in corporate governance for a publicly traded company. That may score some points with MDMN investors. Greg Chapin has been the most instrumental in keeping things afloat, raising cash, paying the bills, and bringing MDMN to its recent restructuring of the claims. But I get the sense that Mr. Chapin would much rather be running a private company than dealing with public shareholders.

MDMN should focus the “who” information on the two mining board members. In addition they need to begin opening up and leveraging as much as they can from people they are associating with – those who are bringing the deal to a conclusion and bringing the properties into production. For example, they should leverage the names of consultants, qualified mining engineers, project geologists, and others they hire to bring the ADL and LDM projects to the next level.

What MDMN Owns?

This has always been an issue for MDMN, and it needs to change. More often than not shareholders updates have been ambiguous and raise more questions than they answer. Updates and Q&A postings end up contradicting each other and shareholders don’t know who owns what, how much MDMN benefits from the various transactions, and why it seems that terms of transactions can change on a whim.

MDMN needs to spell this out plainly on its website and in its financial reports so that shareholders can make proper fundamental evaluations of their investment. When possible and appropriate contracts should be published so that there is no misinterpretation as to terms and conditions.

I realize that I am asking for more than is legally required for a non-reporting company. However, if MDMN wants to correct it’s 50% reputation discount, it may be necessary to do more than what is legally required. Hiring someone to clearly articulate to shareholders what MDMN owns and how they participate in the various deals that have been cut is a great place to start.

I think MDMN should continue posting pictures of what they own. Adding a detailed explanation of what shareholders are viewing would also be helpful.

Up until now, most of the claims map information that has been posted has been researched and posted by shareholders. Perhaps MDMN can leverage some of this work, validate it, and use it on their website. However, at some point, they need to produce this information themselves and share it with rest of us.

Where is MDMN Going?

Building a better “who” and knowing a clear “what” will give shareholders confidence in the prospects of the company. However, past performance has shattered much of the confidence that shareholders have in “who” monetizing “what.” There have been many forward looking statements from management in updates that have not materialized. This includes failed JV deals on the ADL and development timelines on the LDM.

I realize management now wants to under promise and over deliver. But “under promise” does not mean, “say nothing.”

Management can begin restoring shareholder confidence in their ability to execute by brining home the accepted JV in a timely manner. Then they can provide regular updates as to the direction and execution of the exploration and development efforts on both properties. Most importantly, if announced plans are not met, the company should provide timely answers as to why they weren’t.
Conclusion

There is a lot written here and it was written quickly. It’s the result of years of hearing the frustrations of other shareholders and experiencing my own. I’m not an insider and I don’t have all the facts. It’s possible I have painted management in an unfair light. Nevertheless, regardless of how the reputation has come about, I believe I’m accurate in my assessment of MDMN’s public reputation.

Like the Perez Report states, I believe MDMN has a world class deposit in the LDM and ADL claims. However, until they change their reputation from that of a penny stock scam to that of an exploration / upcoming junior mining company, their price in the public market will remain severely discounted. To succeed in being a world class mining company MDMN needs to tell the world 3 things over, and over, and over again – and they need to deliver.