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Company trading well below cash,
giving no credit to advancing mineral
assets
Target Price:
As of June 30, 2008 the Company had $7.0 million in cash, or $0.33 per share.
After this year’s work program, we expect that the balance sheet will still have
approximately $4.5 million in cash, or $0.21 per share. The options and
warrants outstanding are well out of the money, so there is not an impending
risk of dilution. We consider the Company to have a measure of downside
protection, as it is trading even below the forecast cash position of $0.21 per
share.
The Gold Hill Property has an at surface mineralized molybdenum target
covering an 700m by 80m magnetic geophysical anomaly, and tested to 1,000
foot depth with five successful holes in 2007. The holes confirmed finding
from a work program from the 1970s by Cities Services Minerals and Dome
Mines Ltd. MAX has completed a ten hole program for this year, assay results
are expected shortly.
If Gold Hill assay values continue to expand the potential resource, we are
looking at Moly Mines Inc.’s Spinifex Ridge mine in Western Australia as a
comparable to work towards. Spinifex has a measured and indicated resource
of 658 million tones of 0.045% molybdenum. If the mineralization under Gold
Hill’s magnetic anomaly proves consistent grade, the potential resource
approaches 450 million tons. This year’s work program is stepping outside of
that anomaly, so the upside could be even greater.
We view this Company in a similar way as we view its exposure to the Diamond
Peak property: very little downside risk, without sacrificing the upside
potential. The Company is trading below current cash value, yet there are
ongoing exploration programs across North America, looking to develop
uranium, molybdenum, base and precious metals
Management has shown to be successful in creating value through
exploration programs (shared senior management with MAG Silver, for
example), and have enough opportunities and enough cash in the bank to
make exploration progress on some relatively near-to-mid term
opportunities:
- Near the Company’s Nustar claims in the Arizona Strip, Denison
mines has been purchasing uranium deposits as they are uncovered to feed
its White Mesa Mill. MAX has 34 topographic targets which appear to be
breccia pipes on the Nustar property, and is in the process of testing each for
uranium mineralization. Recall that some of the pipes that Denison
purchased last year had as little as 18 drill holes required to prove a deposit.
- The C de Baca uranium claims have had historical workings
suggesting 1.67 million tons of 0.18% U3O8 (non 43-101 compliant), which
could be a natural fit for a larger partner with In Situ mining expertise.
- The Ravin molybdenum/tungsten project in Nevada is
approximately 50 miles away from General Moly, Inc.’s Mount Hope
molybdenum mine (scheduled for 2010 production). Again, if MAX is able to
delineate a significant resource, there may be an opportunity to partner with
Moly to increase their feedstock.
Please do your due diligence
\Cheers