Medinah Minerals Inc (OTCMKTS:MDMN) Digs a Hole in the Ground
One of the first things that strike you when you start your research on Medinah Minerals Inc (OTCMKTS:MDMN) is that you’re digging into a company that has a market cap of almost $70 million and yet, the said company is working out of a building that looks like this. Not the best of starts and things don’t get much better when you check out the stock performance.
MDMN started their Altos de Lipangue drilling campaign at the beginning of last month and on October 30, they posted the results that they’ve received from the first drill hole. Eight days later, they released the figures for the second one. If the press releases are to be believed, things are looking good and yet, the stock refuses to move in the right direction.
In fact, out of the last thirteen sessions, only one ended in the green and the cumulative losses during this period amount to around 30%. Yesterday, the ticker lost 4% on a dollar volume of about $330 thousand and it closed the day under the $0.05 per share mark for the first time since April.
All in all, MDMN is not in a particularly good shape at the moment and this is somewhat strange considering the fact that the Q3 results came out last week. They don’t look too bad:
- cash: $197 thousand
- current assets: $857 thousand
- current liabilities: $8 thousand
- revenues (January 2014 – September 2014): $804 thousand
- net income (January 2014 – September 2014): $418 thousand
Indeed, especially in light of the overblown market cap, the financial statement does look a bit wobbly. We can’t, however, overlook the progress that has been made. The revenues, for example, have grown by about 22% year over year and the operating profit margin has been improved.
So, MDMN does have one or two chinks in its credibility armor, but there’s no denying the fact that it is an operating entity that might just turn out to have some potential. Which, by the way, is more than can be said about other OTC enterprises. Then why are investors reluctant to jump in?
Well, once you take a closer look at the latest report and compare it to its predecessors, you’ll see that the shareholders have been put through some dilution over the last few months. The number of issued and outstanding shares at the beginning of the year was sitting at around 949 million. By June 30, it had grown to 957 million and on September 30, it was hovering comfortably above the 1.3 billion mark.
Most of the newly issued stock came from the conversion of preferred shares into common ones and it’s pretty clear from the chart at the beginning of our article that this move has put some pressure on the ticker.
On the bright side, if everything goes according to plan, the dilution will most likely stop soon. Although MDMN is authorized to issue 3 billion shares, the management team agreed to cap the O/S count at 1.5 billion as a part of a joint venture agreement which should mean that the stock printing is about to come to an end.
Having said that, we should note that the ticker has already endured a lot and only time can tell us if it’s able to recover. That’s why, thinking through all the risks before making your final decision on MDMN is absolutely essential.
