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85.0¢ medusa mining limited

Ann: Investor Presentation May 2016-MML.AX, page-19

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17/05/16

11:50

Post #: 17788073
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Originally posted by cncventure ↑

I agree that there is usually a reason for stocks being lowly valued.

However I think there were a couple of "market/accounting events" rather than "mining operation events" that pushed MML lower than was rational.

I think the forced selling from the ASX200, GDXJ and ASX300 rebalances probably pushed the MML share price lower than it should have gone.

In contrast most other Australian based gold miners who were being benefiting from $A gold price were benefiting from being acquired by these indexes.

And the $260m write down in the FY15 Annual Report looks quite overstated in hindsight and again was a result of $USD reporting and something that the $A based gold miners were not being anchored down with.

And whilst I tend to agree that further falls in the AUDUSD are more probable than not, I'm less certain about the AUDPHP falling much further. Whilst it may happen, I wouldn't be surprised if the lows are already in for the AUDPHP.

Fair enough. And I think charts are important too, especially when you understand the fundamentals. Though on that basis I think MML's charts looks alright all things considered.

I don't see MML as a USD miner. I see it as a PHP miner.

I'm not sure if Australian housing will fully revert to 100z - but irrespective of whether it will or not the current trend certainly suggests that it's probably not an ideal time to buy a house.

Yes I've seen silver ratio charts as well.

I don't tend to put as much focus on silver ratios because I don't see it as a pure monetary metal.

If the central banks around the world start storing silver a part of their reserves then I would change that view, but that doesn't seem likely at this stage.

That said, in 2015 I did try and find some decent ASX based silver miners because I thought silver was oversold (but I couldn't find anything decent). Got anything you think is worth looking at?

My thinking exactly - though I will probably wait until it goes below $69 (hopefully with global market weakness - particularly in Asia).

And I'll probably sell using CFDs.

That said I think shorting when governments and central banks seem committed to avoiding deflation is a risky proposition. I think going long the gold miners is the safer bet.

At the end of the day you have to expect existing institutions (governments and banks) to act in their own self interest which is why I expect them to push for debasement/inflation rather than allow deflation, ie...

Inflation leads to less a disgruntled populous, employees keep getting pay rises in nominal terms, government tax revenues go up and debts continue to be paid and the status quo remains in place.

Deflation on the other hand leads panicked populous due to nominal price falls, sticky wages leads to higher unemployment, falling wages and higher unemployment leads to lower tax revenues and default on debts and a general push for change in society.

Whilst deflation should be celebrated as a symbol of improve productivity, in a highly indebted and democratic society deflation is the enemy.

Extremely hard to say, and like all things I think it depends on how those in power (government and central banks) deal with the problems that are likely to arise.

As mentioned above I'm expecting inflation and currency debasement will be opted for over the alternative.

But how aggressively they deal with the problems will determine if we see a slow Japanese solution to China's over investment in productive capacity - ie 25 years of an appreciating currency and slow growth?

Or will they look to achieve a more rapid response to maintain their growth rates which would likely require a debase the currency and high inflation (good for gold)?

And whether either of these scenarios will be orderly or disorderly is hard to know.

As always there are a lot of moving parts at play so the best we can do is try to understand the fundamental drivers and then let the market tell us which way the herd is moving and then try to stay ahead of it.

My base case scenario is gold will go to new USD highs some time in the next 3 to 5 years and we will see the RMB float next year followed by a markedly depreciation relative to the USD.

That said, if the USD keeps going higher the Chinese might be forced by the market to depeg sooner than that.

I also think with the USD strength being destablising for China that will limit the number of interest rate rises the Fed will engage in until the RMB is floating (which is good for gold in USD terms).

But I'm very open to being wrong on that thesis and will change my plan quickly if the market tells me I am wrong - but for now it appears to be the right one - and the trend is our friend until it bends...

And the MML is up again today and so is the XGD - so gold miners are still a buy for me, and I will likely add to my positions as gold moves past $1306, $1350 and $1400.

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Thanks CNC, all the best and appreciate your time.

As for Silver plays on the ASX - none worth your time unless your willing to speculate.

AZS/SVL are all that could be worth anything. Best of luck, ill be back.

MML Price at posting: 73.8¢ Sentiment: Buy Disclosure: Not Held
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