RE:RE:Reaction to Update? Thales42,
I saw the discussion of ORV vs MND on the voy forums as follows, and IMHO the analysis is incorrect.
"Theme - no doubt MND trading of late has shown a lot of accumulation, as opposed to little or no trading in Orvana. It will take a lot of volume to keep moving MND higher however from this level with half a billion shares outstanding IMO. It does look good, but I believe, unless it is a takeover candidate, it needs to consolidate at this level, and perhaps retrace a bit of it's recent move. Unless of course the gold price suddenly reverses here, and moves higher, which currently looks doubtful."
Both companies are hugely undervalued by the market relative to their respective gold productions. Both companies have excellent geologists, and operate well run mines with good flow sheets and well designed metal recovery plants.
The key differences between ORV and MND are as follows:
- MND has 460 million share stock float and ORV has 136 million shares in the stock float
- MND has 64 percent institutional ownership, while ORV has a 52 percent majority shareholder, and 0.65 percent institutional ownership with 65 million floating shares.
- MND recently completed its mark down cycle going to a low of 3.3 cents in November 2018 as institutional investors were dumping their shares.
- ORV hit its stock price low in January 2016, and has recently completed its Wyckoff accumulation pattern, so ORV is in strong hands, and so the stock is ready for its mark up phase.
- MND is in its first move off the bottom to the AR point which IMHO is around 35 cents.
The following chart shows Orvana's Wyckoff Accumulation pattern of the 10 cent low in January 2016. In the 2016 bull run the stock traded up from 10 cents to 30 cents, then crashed on a management warning about being able to coninue as a going concern. Shortly thereafter, they signed a deal with Samsung for a dedicated gold and copper offtake agreement in exchange for prepayment. With going concern off the table, the stock hit a high of 38 cents in July 2016, then spent the next 2 years consolidating between 15 cents and 30 cents. Then in the last half of this year, there were two springs in which the bears tried to push the stock lower, but they could push it below 12.5 cents. Then ORV went up with the rest of the gold stocks in the first week of this year, and since then the stock has retraced to a TEST at 14 cents. I expect the stock to reverse on a sign of strength to 30 cents, then do a back test to the LPS, then continue on an upmove to an initial target between 71 and 81 cents.
So now let's take a look at Mandalay Resources chart, and ORV's chart on the same scale which shows the comparative price action over the past four years with annotations on the gold and gold equivalent production of both companies. Shareholders of both Mandalay Resources and Orvana Minerals should find this chart interesting because it includes both the technicals as shown in the stock price, and the underlaying fundamentals.
Back in 2015, with 3 mines operating Mandalay Resources gold equivalent production was 166,679 ounces with 109,102 oz of that production being gold.
Orvana's 2 mines produced 132,117 gold equivalent ounces, with 72,017 oz in gold and the remainder in copper and silver by product.
The ratio of mine production was MND/ORV = 1.26 and MND stock price was trading at 2.17 times ORV.
Then, in 2016, Mandalay Resources output was 145,492 gold equivalent ounces with 103,245 oz gold, while Orvana's production hit a low of 98,960 gold equivalent ounces due to the drop of the price of copper to $2 USD/lb and Orvana's gold production dropped to 67,786 ounces within 500 ounces of the same production as Mandalay Resources in 2018 at its low!
The ratio of mine production increased to MND/ORV = 1.47 and MND stock price was trading at 4.8 times ORV at the 2016 low.
In 2017, Mandalay Resources had its black swan event with the flooding of the Cerro Bayo mine in Chile which reduced Mandalay Resources to a 2 mine operator with declining metals production. 2017 output dropped to 131,186 oz gold equivalent with 99,449 oz gold. During this time period, Orvana was improving the throughput and head grades at its two mines, so gold equivalent production increased to 124,039 oz while the gold component of that production increased to 90,292 oz.
For the year, the ratio of MND/ORV output dropped to 1.05, and the stock price of Mandalay Resources went into a continuous decline which saw the price ratio go from 3.9 at the start of 2017 to near parity at the start of 2018.
In 2018, Mandalay Resources metals output continued to decline hitting a bottom in Q3. For the year gold equivalent production was 81,568 oz, with only 67,329 oz of gold. In contrast, Orvana's two mines experienced record gold production and record gold recoveries with 126,017 ounces of gold equivalent production and 103,384 ounces of gold.
Mandalay Resources output dropped to 0.65 of ORV, and Mandalay Resources traded at parity with Orvana's stock price until institutional investors panicked and bailed out of their long
positions in the last quarter of the year. This caused the MND stock price to drop to less than half of Orvana's stock price.
In the intervening 8 weeks Mandalay Resources stock price has returned to parity with Orvana being pushed up by institutional buying.
However, what impressed me about the trading action in Orvana is that there were no sellers at the November low, so ORV demonstrated relative strength. As a result, it won't take much buying to drive the stock price substantially higher.
With MND, given the involvement of institutional traders, I expect the stock price to consolidate in the range of 10 to perhaps 40 cents for the next year while Mandalay Resources completes its turn around.
Mandalay Resources 2018 gold production is exactly the same as Orvana's 2016 gold production, and in 2018 Mandalay Resources gold equivalent production
was about 65 percent of Orvana's gold equivalent production. For most of 2018 MNDJF and ORVMF were trading at parity, and then in October when the institutional investors
bailing on MND, the stock fell to less than half ORV's stock price. Since November, the dip buyers have come in and pushed MND's stock price back up to parity with Orvana.
Given that MND is doing its run to the AR point, MND could continue to outperform ORV short term, but the fundamentals favor ORV for the next two calendar years or until Cerro Bayo gets restarted.