Medinah Minerals (MDMN)

[Hurricane_Rick]

You're only doing the math on the initial $5.4 million sale price and ignoring the medium term $5 million out-performance provision and the longer term 4% NSR ad infinitum. The NSR in particular is what makes the value of the deal, though that will be a long term investment for the company.

From the November 29, 2011 Q&A:

"Data interpretation of IP size and mineralization patterns observed from geochemical assays of rock chips and surface trenches and geophysical survey, app. 48 km. Inter-polarity (IP) lines resulted in the indication of three main mineralized bodies. These projected ore bodies are contained within the first preliminary estimate area of the Ciclon I & II drill target project area. Geologist and Mining Engineer data estimated tonnages of copper ore contained in each area are as follows:

Ciclon North: 300 MT
Lower Orito: 187.5 MT
Ciclon Sur: 262.5 MT

The total mineral potential contained at the first priority targets is estimated to be 750 million tonnes (MT). Grades are inferred to reach up to 2.5% Cu/t with interesting gold credits.

This data has been extracted from a report done for the land/property owners by SMM Am. Inc, Santiago Office in August, 2007."

We can only do a very rough estimate of the NSR potential with the given parameters. We can use the deal's baseline 0.6% copper content and the inferred 750 million tonnes of mineralization as reported by Sumitomo's geologist and mining engineer.

2200 pounds in a tonne. With 0.6% copper, that comes to 13.2 pounds of copper per tonne. At a current spot price of $3.40 per pound for copper, that comes to approximately $45 per tonne. Multiply that value by MDMN's 0.04% NSR (10% interest of 4% NSR) and Medinah's take comes to $0.18 per tonne. Multiply that by 750 MT and you're looking at a very rough potential for MDMN to earn $135 million, not including the "interesting gold credits" over the lifetime of the deposit as it is known currently. Of course we have to factor in CAPEX and time premiums. The copper content could be more or less, but we won't know until Serena Minerals starts drilling.

Bottom line, Medinah is paying now to participate in the long term risk/reward scenario, without the burden of drilling and exploring or capital expenditures. If the deposits prove to be economical, then the company stands to make tremendous multiples on its investment by virtue of its otherwise miniscule 0.4% NSR.

It's a long term mining investment, not a quick flip.