Mako Mining (TSX-V: MKO) - In a Hurry, but what are the Fail-Safes?

Mako Mining is a gold development and exploration company. The primary focus in on developing its high-grade, flagship San Albino gold project in Nueva Segovia, Nicaragua. The company is the product of a merger between Golden Reign and Marlin Gold. Marlin Gold was an unmitigated disaster, both financially and technically, but Mako Mining has been spun out of it, in addition to Sailfish Royalty Corp. Leisman, a career financier and analyst, is the CEO of both companies.

The immediate questions are, 1. Which company is Leisman focused on? Where are his priorities and allegiances now and in the future? And how does that affect his decision-making today? 2. Given the parallels between Marlin Gold and Mako Mining and the accelerated time-frame that Leisman lays out for Mako (they wish to get in to production from a PEA), has management learnt from their past mistakes?

As per above, Leisman wants Mako Mining wants to get into production quickly to get the cash flowing while continuing exploration of other prospective targets in Nicaragua. They are using data from an updated and upgraded Preliminary Economic Assessment (PEA). It work, we've seen it work. We have also seen it ruin a company more times that not. Their main shareholder, Wexford Capital, was a large shareholder of Marlin Gold and will have had loses. We ask the question if those loses is driving their desire to get into production early to recoup their investment quicker. Wexford has also backstopped C$27M rights offering, claiming c. 72%, and committed an unsecured US$15M loan. As a consequence has ended up with a large position in Mako Mining (c.56%). Leisman worked at Wexford Capital for 9-years and was also Executive Chairman and interim CEO during the merger and spin out.

Matthew Gordon interviews Akiba Leisman, 5th June 2020

So what sets Mako Mining apart from the pack? The market cap certainly does, standing at a whopping C$263M; that's an awful lot for a gold company that isn't in production yet. The market is clearly excited about something.

Mako Mining is building what they consider to be the highest-grade, open-pit-only mine in the world in Nicaragua. The company is "65%" of the way through building what will be a 500t per day facility, with optional expansion to 1,000t. Leisman is hoping to be mining at 1,000t per day by "late 2022." Mako Mining believes it is sitting on top of an orogenic gold mining camp. Once the San Albino mine is up and running, creating cash flow, Mako Mining intends to conduct regional exploration: something that has been lacking. The company has a 200km2 land package, along with the financial capacity to search for upside potential.

Leisman is a chemical engineer by training, but his background is predominantly financial. He has plenty of experience dealing with the commercial side of precious metals companies; specifically, creating his own portfolio companies: Marlin Gold in 2012, Sailfish Royalty Corp. in 2014.

There is still some legacy management at Mako Mining from the abject failure that was Marlin Gold. In 2015, Leisman fired the then CEO of Marlin Gold and took over as interim CEO, promoting other members of the team higher up the food chain. His message is clear: he is wiping the slate clean and starting afresh, even though the market might still have some doubts surrounding his, and some of his team member's, historic involvement with Marlin. Leisman is now 9 years wiser, and he claims he will not make the same naive mistakes. I want to see him prove this before I get too excited.

The primary aim right now is to accelerate San Albino towards production. The company is currently working on an updated PEA from 2015. Leisman believes in 43-101, but he doesn't see it as the "be all, end off" of creating a mining project. What he really cares about is the data. Right now, Mako Mining Corp. doesn't have the time to spend on a feasibility study. Previous management has made promises to investors, and Leisman himself has made promises to the government of Nicaragua and the local community that San Albino will be up and running within a certain period of time. However, without an updated PEA, Leisman claims this would have been another technical failure.

The timeframe for developing San Albino is first building the 500t per day facility. 95% of the engineering is done. Some of the veins are narrow high-grade at San Albino. We ask about the extent of the mineralisation and thicknesses. This is an unknown. Over at Las Conchitas, Mako Mining gold exploration target, the grades are higher. Grade is king, when you have a lot of it. What we are keen to understand is the size of the ore body.

Mako Mining is currently operating on a 3-month delay because of COVID-19. If this all goes wrong, Leisman states that Wexford Capital does "not tolerate" failures, but it appears the company will step in with funding assistance if things go a little wrong.

Is Sailfish Royalty a distraction for Leisman? In the long-term, he says he is open to creating a separate management team for both companies, but this will not happen this year. While he claims a royalty business is growing, it is not that time consuming at only half a day a week. How do Sailfish Royalty shareholders feel about that? It is always going to be a negative mark against a company's name for investors when the CEO operates multiple companies and multiples incomes.

Mako Mining has access to cash. The US$15M was intended to be used to push Mako mining towards its first gold production in late Summer. However, now this is at least 3 months delayed, there is now going to be a small requirement for additional capital to get the project over the line. It could likely take the form of an expanded loan from Wexford. Less dilutive now, but also a good way for Wexford to do a cash sweep at a later date.

Is Mako Mining overpromoted and overpriced? It is not in production yet, but it has a market cap equal to some gold mining companies who are producing 100,000oz gold per annum! Leisman doesn't think he is setting himself up for a fall, but he does hint that the share price trajectory could be a little optimistic. As previously mentioned, Mako Mining has 3 objectives: 1. 500t per day gold mine, 2. getting enough data to mine it at 1,000t per day by the end of 2022, 3. then proving it is an orogenic gold mining camp that could contain tens of millions of ounces of gold.

If even one of these criteria isn't met, the share price may not live up to expectations. Investors must keep this in mind and must be wary of this risk profile, even if it does look very promising on paper.

What did you make of Akiba Leisman and Mako Mining? Comment your thoughts and opinions below and we will respond to all of you.

Company Website: https://makominingcorp.com/