Out of the Ashes
Mundoro was your garden variety China-gold homerun success. They did a JV on what they call the Maoling Gold Project in 2001 at the very bottom of the gold market. They promptly sunk over $20 million into the project, drilling some 45,000 meters, discovered nine million ounces of gold, did a brilliant pre-feasibility study and completed most of a bankable feasibility study.
The stock runs to $3.20 a share and everybody loves the story. Except the Chinese.
Non-thieving countries are all alike. Every thieving country steals in its own way. When Russia steals, they accept a bid of $78 million from a local company when Pan American Silver offered $303 million. When the President of Catamarca Province in Peru steals, he just fires up the locals and demands a 1.5% “Environmental” payment to go into a bank account controlled by his buddies.
The Chinese didn’t exactly steal the Maoling project. They just failed to renew the business license and exploration license of the JV in 2005 after Mundoro invested $20 million. That’s the kind of issue a mining company keeps thinking can get sorted out. Mundoro flailed with the issue for six years before selling 95% of the 9 million ounce deposit to a Chinese company in 2011 for $13.8 million. Naturally the stock price looks as if it fell off a cliff from 2005 on.
You hate to see this happen to a company. Mundoro did exactly what they set out to do. The Chinese changed the rules. Management of Mundoro was caught between a rock and a hard place. From 2005 to 2011 they owned the project, they just didn’t own the project. It took six years for them to get it. But get it they did and now the company is climbing out of the ashes.
Actually they are doing damned well. Based on their burn rate and how much cash they had at the end of last quarter, the company has about $.35-$.36 a share in cash and is selling for $.27. That’s simply nuts. That means by buying the shares at $.27, you are buying $1 bills for $.75, a 25% discount. That happened in 2001 and proved to be an ideal time to make a bundle. That happened again in 2008 and proved to be an ideal time to make a bundle. If you think about the Euro collapse, Banks stealing deposits, Bernanke buying $85 billion a month in used toilet paper, Homeland Security (What Nazi invented that name?) buying enough bullets to fight a 25 year war and 2700 armored vehicles, actually gold looks pretty good.
For the last two years, the junior market has totally ignored good news. Mundoro is sitting on a giant stack of $100 bills and just happens to be in a neighborhood in Serbia that is pretty attractive.
MUN controls ground immediately surrounding the Bor Copper/gold mine in Serbia. Their neighbor just a little further from the mine, Reservoir just drilled a 291-meter intercept of 7.17% copper. And the stock went down. Go figure. That’s $520 rock and a 291 cubic meter cube would be worth $2.5 billion dollars. That’s a lot of copper and gold and it’s 3.4 km from MUN’s ground.
Mundoro is picking drill targets for their Serbia copper/gold project right now. They will be drilling shortly, a 4000-meter program. With the quality of the data they have, I expect a successful drill program. They are drilling right next to a copper mine in production for 6500 years, if they don’t hit ore grade copper, everyone in the company should either be fired or commit hari kari. Expect drill results in 6-10 weeks.
We went from Serbia to Bulgaria to look at their other company making potential project, the Zvezda project with some 30 known poly-metallic deposits and outcrops. The company only picked up the project formally about 6 weeks ago but it’s highly prospective.
I like the idea of buying dollar bills at a 25% discount anytime. That’s always a good deal. All companies have risk and when you are buying dollars for $.75 you have derisked the company about as much as you ever can.
For Mundoro to crash and burn in China comes under the “Shit Happens” rule. Their eventual recognition of the fact they had a giant problem didn’t kill the company. Selling the project for $1.50 an ounce of gold sure beat hell out of all the alternatives. They managed to recapitalize the company and still retained 5% of the project.
If the Chinese government has any sense, they would make sure the new owner recompense Mundoro at some reasonable price and buy out their 5%. If they simply steal the project, every other mining company in the world will lump them in the same financial cesspool as Russia, Ecuador and Zimbabwe where you can only invest in money roach motels.
Based on the drill results from the Reservoir/Freeport JV, Mundoro could have company making results from the 4000 meter drill program about to start. Under any circumstances, buying cash at a discount almost always makes an investor money in a short time frame but the market is in the process of making a world-class bottom. None of the world’s financial problems have gone away in the last 5 years since the start of the GFC. Indeed, governments and central bankers have only poured fuel onto the fire.
Mundoro is going to hit something at Bor; I could pick drill targets there. There will be drill results in the near future and they could blast the shares higher. I liked Bulgaria and Mundoro is planning on spending enough money there to conduct a serious exploration program. Bulgaria also has company making potential for Mundoro.
Mundoro is weak in two areas. The website is a disaster. It’s filled with useless information and utterly lacks communication. I spent an hour looking around it and the longer I spent on the site; the less I understood just what they were trying to do. The website should be burned down and rebuilt from scratch.
Normally when I run into a website so completely lacking in any social redeeming value, I pass on writing a piece until it’s fixed. It’s a waste of my time to write articles about companies and projects where the website doesn’t support what I have to say. But the Mundoro website is so bad that you need to look at it to see what a really poor website looks like. The Zvezda project was announced in mid-March but evidently doesn’t qualify for any information to be listed under their projects section 7 weeks later.
Mundoro has some $15-$16 million in cash. They think they are an exploration junior mining company but of course, they aren’t. They are a bank. The company plans on spending $4 million this year. So 7 months or so from now, they will still have $12 million in the till.
Cyprus just proved all money; cash money, is at risk. I suggested to Teo Dechev that she at least consider investing some of that money into some ultra high quality juniors that have been beaten down by gold funds dumping at any price due to redemptions. That $15-$16 million is at far greater risk from banking risk and financial freeze up risk than any market risk from investing in juniors. I doubt the company will take me seriously but I gave the exact same advice to Miranda Gold in October of 2008 and they now wish they had listened.
Listen carefully readers. The companies with the biggest cash positions have the biggest financial market meltdown risk. A lot of that money is going to disappear into money heaven.
Mondoro is a low-risk, high-gain-potential junior. The management is excellent and managed to recover from a total disaster not of their own making. Recover they will and I shall be shocked if they don’t come up with a company making deposit near the Bor mine. I do hope they burn the website down, anything they do would be better than what they have.
Mundoro is not an advertiser and I don’t own shares even though I wish I did. I think they will be a lot higher in a fairly short order. I like the management and the technical staff. Do your own due diligence.