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MEDINAH MINING HAS BEEN RE-STRUCTURED IN PREPARATION FOR AN EVENTUAL BUY-OUT
Medinah Mining, Inc. ("MDHM" on OTB – BB) is a well-funded company that is aggressively exploring two significant and potentially world-class gold-copper discoveries located near Santiago, Chile.
In April 1999, following the announcement of major discoveries on the Alto de Lipangue and Las Dos Marias properties, the company went through a major re-structuring.
First, Medinah Energy incorporated a new, wholly-owned subsidiary called "Medinah Gold, Inc." All of the assets of Medinah Energy (except for the Lipangue and Dos Marias properties) were sold to Medinah Gold. Medinah Energy then declared a dividend of one share of Medinah Gold for every 10 common shares held in Medinah Mining (preferred shareholders received a dividend based on a ratio of 1:2.5); the result of the dividend was to give 100% ownership in Medinah Gold to the current shareholders of Medinah Energy in the same ratio as their present equity positions. Lastly, the Board of Directors voted to changed the name of the company from Medinah Energy to Medinah Mining, effective May 14, 1999.
We believe that there were two reasons for dividing up the company's assets into two separate entities.
First, as the true magnitude and potential of the Lipangue and Dos Marias properties became apparent, it was a wise move to streamline and re-structure Medinah Energy (Mining) to prepare for what everyone believes will happen - an eventual merger with a major mining company following further work at Lipangue and Dos Marias. Effectively transferring all of MDHM's other mining properties (Andacollo, etc.) was an astute move - if the company is ultimately going to be sold, why give away all of the other assets? So, rather than giving away many promising properties, all of the non-Lipangue assets are safely tucked away in Medinah Gold, which we understand is on track for an IPO sometime next year.
Secondly, we believe that the Medinah Gold dividend was a very clever and effective way of establishing how large the MDHM short position is, and who the guilty parties are! After all, the transfer agent knows that with ~72 million shares outstanding, that as the MDHM certs are sent in and registered, that there should only be 72 million MDHM shares coming in. Obviously, if investors are claiming a total 90 or 100 million shares (or more), then there's a problem!
We understand that Medinah Mining has been working on getting the issue of the short selling resolved once and for all, and that a significant short position, reportedly on the order of 20 to 30 million shares, has been established, with the bulk of the short selling originating from a handful of well-known brokerage houses in North America and Europe. The law of the markets is that at some point shorts have to cover - the questions are when and at what price does the covering begin to take place, and what news event(s) might trigger a frenzied short covering?
We should also point out that although MDHM is currently a non-reporting company, we have been advised that the financial audits are nearly completed, and the SEC filing is being prepared. Medinah Mining has until February 9, 2000 to become a fully-reporting company. Also, we understand that the next annual meeting for Medinah Mining & Medinah Gold has tentatively been set for October 25, 1999 in Reno, Nevada; only registered shareholders may attend.
News releases, letters to shareholders, and other corporate documents can be reviewed at medinahmining.com and technical reports on the Dos Marias and Lipangue projects can be viewed at medinahmining.com
For investors interesting in doing further due diligence on Medinah Mining, there are several active discussion threads. On SI "Medinah Energy - A Junior Gold Mining Company With Great Potential" ( Subject 22738 ) is dedicated to research-related due diligence postings (lots of good links and honest discussion about Medinah Mining), whereas "MDHM: Medinah Mining, Inc." ( Subject 16900 ) with nearly 19,000 posts, offers a more general discussion about MDHM and mining plays in general. Medinah Mining's discussion thread on Raging Bull is also quite active ( ragingbull.com ).
SHARE STRUCTURE & RECENT TRADING RANGE
Total Shares Outstanding: 72,300,334 Common 8,965,000 Class A Preferred
Public Float: 12 million shares (est'd)
1999 Trading Range: US$0.21 (low) by US$0.48 (high)
Current Bid & Ask: US$0.32 by US$0.34
Last Trade (September 9, 1999): US$0.34
Our due diligence suggests that the short position on Medinah Mining may be two to three times greater than the number of shares in the public float. Having such a huge short position overhanging the market can have a tremendous impact on expected trading patterns and prices, particularly in a firm where the majority of the stock (> 80%) is held by a relatively small number of investors with a long-term perspective.
On the question of the MDHM short position, we encourage readers to do their own due diligence and draw their own conclusions. A good site specific to Medinah is the "Short Squeeze of a Lifetime! Medinah Energy MDHM" thread on SI ( Subject 27948 ). It is imperative that any potential investor in this stock understand the implications of the potentially huge short position in MDHM and its possible impact on market prices before getting involved in this stock.
WHAT's LIKELY TO HAPPEN NEXT ??
The next key milestone for Medinah Mining is going to be the release of the GeoDatos geophysical survey results – news is anticipated within the next few days.
We believe that the IP results should give everyone a better idea on exactly how many breccia pipes are on the Alto de Lipangue Plateau, and how deep they go – do they extend to the limit of the IP survey depth (about 1,200 meters), or does the IP indicate an intrusive or porphyry at depth? During our site visit to the property last month (in the midst of the IP surveys), our interpretation of the preliminary field data was that there might be one (possibly two) additional potential breccia pipes on the Alto de Lipangue plateau.
The IP results are very important because the last survey correlated extremely well with where the breccia zone was actually intersected. In the discovery drillhole (L99-03), information from GeoDatos indicated that the breccia would be intersected at about 100 meters; Medinah Mining intersected the breccia at a depth of 92 meters. With the experience of last spring's drilling, we expect that the most-recent IP survey will be even more accurate at defining and hitting drill targets.
Following release of the GeoDatos report, we expect that things will get very interesting in regards to the major mining companies and mutual funds looking to get involved in the properties. We expect that a strong, positive report from GeoDatos will precipitate one or more significant financing / joint venture offers from one or more of the major mining companies and mutual funds that have signed NDA's
Investors should be aware that MDHM is a prime takeover target. Medinah Mining is one of the few junior companies that has been able to raise significant exploration funds in the post Bre-X era, and with the money they have raised, MDHM has made two major discoveries this year, each of which have the potential to host a world-class deposit. In the current climate of low metal prices, major companies are looking for large, potentially low-cost deposits to replace existing, higher-cost mines with limited reserves, and, quite honestly, Medinah Mining is one of the few quality opportunities available.
Assuming positive results from the geophysical survey and follow-up drilling program this fall, we believe that Medinah Mining will be "in play". Investors should review what happened to Argentina Gold, as the same scenario may unfold with MHDM. We view Medinah Mining as a STRONG BUY at current prices, with potential for very significant capital appreciation over the next six months.
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