It is February 1, 2006 and I’d like to review Madison Minerals with you. This is such a compelling story and yet in the big picture, we haven’t even scratched the surface understanding the full potential of the properties involved here. News and events have been unfolding over the last six months in what I consider to be a very positive direction.Madison is involved with two projects, one in Lander County, Nevada called the Lewis Project and one in Papua New Guinea called Mt. Kare (pronounced Karey). If you’ve been an investor in Madison, the patience of a Monastery Monk has been needed. However, it would appear:
- “the future is looking so bright you need shades” (the resource market will continue to shine; MMRSF is well positioned)
- what is old becomes new again {an “old story” possessing new management (the Mt. Kare project) can spin off positive energy}
- Madison has one shot at a “homer” (Mt. Kare) and one shot at a Grand Slam (The Lewis Property), or vice versa!
- Madison is in a win-win situation because of the resource environment, an excellent JV partner on Mt. Kare (Buffalo Gold—BUF.U), and according to their press releases, and relatively speaking, immediate plans to recommence exploration at the Lewis Property in Nevada. A property many in Nevada believe to be a “plum”.
- Funding has been raised for both projects. All the players in these equations will become winners due in large part to the synergistic effects that have been created because of skill, perseverance (of a Monastery Monk – which is you, the investor), a little luck, and propitious timing.
- There is a certain lack of understanding about the company’s projects, business relationships, and state of affairs (based upon the calls and Emails that I’ve received since my last update).
However, here’s the really good news. Based upon my observations of the resource market at large, Madison has still not participated in the upward draft and yet there is every reason to believe that eventually it will. This is one of the very few companies that has significant upside potential the general market hasn’t acknowledged. Overall, I’m certain there are other companies in this category, but since I’ve followed Madison so closely, I know chapter and verse as to why this one really hasn’t really participated until now. I think we might be close to a breakthrough.
Why is that the case? I’ll try and explain as we proceed. However, for the moment let’s just say that management of the Parent Company, Mine-Tech has been occupied on other projects and only now are the “ducks in a row” to move Madison’s projects forward. The Mt. Kare project has a new JV partner and the Lewis property will be soon be revisited. Furthermore, the share structure was revamped several years ago and I believe the company is now in a much stronger position.
Someone once said that every company—every stock will “have its day”. While I don’t generally adhere to that adage, I do believe it is applicable to Madison. However, investors have needed the patience of said Monastery Monk in order to “stick with the program”. I do believe that patience demonstrated will soon pay off given a stronger resource market, new energy into the company projects, and drilling and exploration programs soon to recommence. Again—it is the “ducks in a row scenario”.
Come July of 2006, you don’t want to be saying “woulda-coulda-shoulda”. I would suggest that the same axiom holds true for their JV partner on Mt. Kare, Buffalo Gold. Ladies and Gentlemen, there are two opportunities of a lifetime on the table here. Is that too much hyperbole? I don’t really think so and for the reasons just mentioned.
How to tell the Story?
If possible, go to the Madison Website and get caught up. Then I’d suggest going to www.GoldSeek.com and look into my archives to find my past articles on MMRSF. If time permits, review them. Then return here and read the rest of this article. I know, I know, as if we all have the time to read novels about one resource company. But if it’s a novel that could help you financially, it would be one worth reading, now wouldn’t it?
There are many facets to the Madison Story because it has a relatively long history for a junior mining company. This is both a blessing and a curse. It’s a blessing because there are many people aware of the story (brand recognition if you will) and a curse because the story has become stale to many investors. Over the past several years, it hasn’t performed the way many had hoped it would. Several years ago there was a roll back which is never a popular move with investors. And recently, people have been a bit confused about the deals that have been put on the table. I think most of those issues have been resolved and I think that we may well see a positive change within the next six to nine months. I’m sticking with this company, and I would encourage you to review the details of the story and get up to date ASAP. Events about to unfold could move the market quickly.
At the end of the day the basic elements of this story remain the same: valuable properties and an experienced management team. The major focus of Madison in the upcoming months will be on the Lewis Property in Lander County, Nevada. It is contiguous to Newmont’s Phoenix-Fortitude Complex and past drilling programs have proven up excellent results. This is all covered in past articles that I’ve written on Madison.
I think the real story has yet to be told on the Lewis Program in Nevada and I believe it will prove out to be a big story. They’ve recently raised about $1.4 million Canadian in order to recommence exploration on that property. Remember that Madison drilled out a hole that proved up 0.512 oz/t AU over 105 feet. That’s absolutely exceptional. But now it’s onward and upwards as planning is underway to continue with the exploration as soon as the weather clears. The Lewis Property is in the high country of Nevada and you don’t want your drill rigs up to their hubs in snow and mud. It wastes time and money so look to the March-April timeline before things really get rolling again. That’s not that far away. Remember too, that Nevada is red hot in so far as mining is concerned and the Lewis Property is in Lander County where big things are happening for several solid junior mining companies.
There is one more thing that I want you to take into consideration. If for some reason, an economically viable deposit of gold and silver were discovered on the Lewis Property, there is a very substantial processing facility in the near vicinity. It belongs to Newmont Mining and it is on their Phoenix–Fortitude Complex. Go to your commonsense.com and think about that. Would anyone in that vicinity be interested in such a deposit, should it be discovered? Might it be of general interest to the community? More to the point, would the infrastructure to process any potential discovery be available without having to construct it from scratch? Might that increase profitability for the “right” company? Might that not add additional interest?
Of course, the deposit has to be discovered and outlined with all the ramifications thereof. However, discovering 0.512 oz/t over 105 feet next to a known deposit is not a bad point from which to begin.
Buffalo Gold (BUF.U) JV’s with Madison Minerals (MMRSF-OTC or MMR-V)
Buffalo Gold and Madison Minerals have come to terms via a Joint Venture (JV) agreement (See Press Release at www.madisonminerals.com –July 7, 2005) revolving around Mt. Kare in Papua New Guinea (PNG). However, Mine-tech, parent company of Madison, is very busy at the moment. Now that sounds extraordinarily sophomoric in its simplicity but it is absolutely true and it has affected the situation.
The same group that is moving Madison ahead in Nevada is simultaneously moving Oromin Explorations (OLE-V) ahead in East Senegal, Africa. Oromin (www.oromin.com) is behaving like one of the hottest exploration companies in the junior mining sector today. It has risen from about $.25 to about $1.70 C in the last twelve months or so. What does this have to do with Madison?
Well, most groups only have a finite number of geologists on staff. And folks, qualified, experienced geologists are difficult to acquire in this environment. The parent company, Mine-Tech is running several large projects with a limited number of geologists. That’s not a bad thing; it simply is what it is. Of course, all the geologists from the top down might feel a bit overworked but this is a market they live for—well at least I should hope so.
So here we are with several extraordinarily dynamic properties in play simultaneously under the management of a single entity, Mine-Tech. What to do? We need to understand the big picture in order understand the smaller one. (I first recommended Oromin at around $.50 on Goldseek September 27, 2005. I don’t think it’s too late even at today’s prices in late January of 2006) The big picture is that Madison will have more flexibility to develop the Lewis Property in Nevada, while Buffalo Gold picks up the ball and runs with it in Papua New Guinea.
Buffalo Gold will benefit from eight years of hard, difficult work by Madison and the $33M Canadian that Madison expended on the project in PNG. Madison’s Team will assist Buffalo as they put their own team into play backed initially by about three and a half million dollars Canadian that Buffalo has recently raised. I see it has a win-win situation. I see it as past, present and future efforts all being funneled into a final bankable feasibility study that will benefit shareholders of both Madison Minerals and Buffalo Gold. I see the relationship as being mutually beneficial.
The Lewis Property in Nevada then comes into focus as never before in a very promising resource market that I see as running for at least several more years; if not more.
Fast forward
We will fast forward to late 2005. Madison was approached by several groups interested in Mt. Kare. Negotiations did not work out with them.
Then Longview Investments (LVI), made an offer to Joint Venture Mt. Kare. After the agreed upon time frame for due diligence had elapsed, the two parties consummated an agreement. Under the umbrella of LVI is a company called Buffalo Gold and that is where we will currently find the Mt. Kare Project—in Buffalo Gold’s capable hands. I say capable because they’ve already raised 3.5 million dollars to continue on with the exploration program that Madison began. Additionally, there is a connecting thread in the geologists; some of whom have worked for both companies. It makes for a seamless transfer of information and data.
Before I outline a few of the critical terms of the agreement, which incidentally can be found on their website: www.buffalogold.com, I want you to understand that the gentleman who first brought Mt. Kare to the attention of Chet Idziszek’s Mine-Tech group and Madison Minerals, is the same gentleman who is Chairman of the Board of Buffalo Gold. His name is Damien Reynolds.
In other words Mt Kare has come full circle. Damien brought Mt. Kare to the attention of Mine-Tech (Madison) eight years ago and now has made a deal to JV the property utilizing Buffalo Gold.
The Agreement with Buffalo Gold (BUF.U)
I am not going into detail regarding this agreement because it’s all there in black and white on Madison’s Web site. But I think there was a bit of misunderstanding regarding several key clauses. The misunderstanding really centers more upon what was not said rather than what was said. We are going to use Longview Investments and Buffalo Gold as interchangeable entities—so let’s not be confused on that point.
- “Longview (Buffalo Gold) will complete a preliminary feasibility study by January 4, 2007 and pay Madison $500,000 Canadian by October 1, 2006 on a quarterly basis to acquire a 49% interest…etc.”
- Later on the agreement speaks to a bankable final feasibility to be completed by July 4, 2008 at the latest.
I simply want to point out that for Buffalo Gold to fulfill these aspects of the agreement; they have to do a substantial amount of exploration work at Mt. Kare which includes identifying targets, drilling them out, assays and all the peripheral costs of any exploration program.
And then they have to do more exploration with all of the ramifications thereof, in order to complete a final bankable feasibility study. This is going to cost a serious amount of money—in the millions of dollars. It is not about the payments of cash from Buffalo Gold to Madison Minerals as much as it is about the extensive exploration programs that are to be implemented and paid for on an ongoing basis.
Remember also that after completing several parts of the agreement to the extent that Longview acquires a 51% interest of Madison’s Interest in Mt. Kare, Longview will have the right to acquire the balance of Madison’s interest based on an independent valuation of Madison’s remaining interest for cash or shares of Longview or a combination of both.
Madison’s Team has set the table at Mt. Kare and now Buffalo’s Team is preparing the meal. Investors are invited to a party to be put on by both companies.
Madison did not give up any part of the Lewis Property in Nevada and so remember that Mt. Kare and The Lewis Property are totally separate interests.
In my opinion, Madison has made a very favorable joint venture agreement with Buffalo Gold and reciprocally, Buffalo Gold has made a very favorable agreement with Madison. Madison is freed up to pursue Lewis and Buffalo benefits from the great amount of money and effort put into Mt. Kare. I see it as a win-win situation for both companies going forward.
Why do I like Madison in early 2006?
- Properties: Both the PNG property and the Lewis Property are full of promise; but I’ve always been intrigued by Mt Kare. Some of the world’s richest gold mines are in PNG and Mt. Kare is right there in the middle of them. A resource has been outlined in PNG, but it’s just the beginning. The Lewis Property in Lander County Nevada is contiguous to Newmont Mining’s Phoenix–Fortitude Complex. If you don’t watch your step, you’ll fall into their pit when”running around” The Lewis Property.
- Management: This group has some exceptional people on the staff including several excellent geologists
- Acquisitions: They have a history of acquiring great properties and now that we’re in a positive resource market they have a much more dynamic platform to develop those properties to the fullest. When you’re dealing with a depressed resource market your options are limited. When Madison was spear heading the Mt. Kare exploration program, it was a depressing gold market. Regardless of the environment they still made progress and came up with a resource of about 1.8 million ounces of gold and 20 million ounces of silver. (See earlier articles for more exact documentation)
- Funding: They have consistently had the ability to raise funds. They’ve recently raised approximately 1.4 million US to explore the Lewis Property. (Drilling in Nevada is infinitely less expensive then drilling in PNG.)
- Choices: Management has made some tough choices regarding Madison over the years and in retrospect most appear to be good ones.
- Deals: Most importantly, they recently made one with Buffalo Gold to JV the Mt. Kare Property. This was a good move. It frees them up to deal with Lewis. Fresh eyes on PNG are a good thing and Lewis is just ripe for the exploration in one of the hottest gold exploration areas on the planet.
- Synergy: I believe that as some of the Mine-Tech projects become more developed, there will be a synergistic effect between all of the properties. For instance, as Oromin does well Madison will benefit from the positives emanating from that project. Eventually, Lund Gold (another Mine-Tech Company) will also begin to benefit because the thinking will be that the apple doesn’t fall very far from the tree. It is an old story but experienced, ethical management is money in the bank. And of course, as Buffalo Gold does well, so will Madison.
In my Opinion: A Buy
Currently, I believe that Madison is a good value up to $.75 US in this market. There is an excellent share structure with less that 25 million outstanding on a fully diluted basis.
Always Remember
There are going to be many “newbies” to the junior mining sector as we see the precious metals complex appreciating. I want everyone to understand that junior mining companies do not normally have cash flow. They don’t operate as normal business entities. They are exploration companies utilizing exploration models both in the boardroom and in the field. Be cautious, even suspicious of all new groups coming out with “spectacular” new properties. Look for proven management and advanced stage projects. Look for management groups that have had past successes. And always evaluate these companies according to experienced management teams, solid projects, the ability to raise funds, the willingness to promote in a balanced fashion, ethics above reproach, and finally a reasonable share structure. That would be a share structure under 80 million shares on a fully diluted basis. There are cases where that number can be higher but complete your due diligence to understand the reasons why.
Conclusion
As I look out across the landscape of junior mining companies with advanced projects, Madison certainly looks undervalued. It has been unfortunate that investors have had to wait so long for this moment in time. However, I believe that the wait will be worth the effort. The Lewis Property is in very capable hands and based upon the drilling results that I’ve mentioned previously, the future would appear to be bright. The JV with Buffalo is icing on the cake.
The management team of Madison has had a very full plate for the last several years, just as the resource market has been getting red hot. It has taken six months to nail down a deal for Mt. Kare. Oromin Explorations, with their project in Africa has taken up time and manpower. Now finally, it would appear that when the weather clears in Nevada, work will begin on the Lewis property, considered by many professionals in the gold exploration industry to be a “plum. I’ve been asked many times over the years if investors should hold onto Madison. My answer continues to be yes, and if it doesn’t break the piggy bank, add more.
Again, remember that almost all junior mining companies are speculative and have a high risk-high reward potential. I am a consultant to Madison Minerals and Buffalo Gold and have substantial positions in both companies. I’ve also had the patience of a Monastery Monk. In fact, I was thinking about growing a beard but have sworn off wearing one of those cloaks with the hoods. Forget it; I don’t think I’ll be a Monk for much longer.
Until the next time,
D. Stewart Armstrong
Posted by D.Stewart Armstrong in Articles