Almadex (Vancouver: DEX) recently spun out its exploration and royalty assets. Its El Cobre project remained in the old company, which changed its name to Azucar Minerals (Vancouver: AMZ), explains resource sector expert Nick Hodge, editor of Early Advantage.
All the other assets went into a new company that took the Almadex name and the new ticker symbol, DEX. So when you look at the share price/market cap, you have to include the value of both before hitting the panic button.
Before the spinout happened, old Almadex was trading around C$1.45, giving it a market cap of C$120 million. Post spinout, Azucar Minerals (old Almadex) is trading with a C$76 million market cap. But if you add in the C$21.6 million market cap of new Almadex, the total is closer to C$100 million.
So Azucar hasn’t lost as much value as it appears by just looking at it alone, because you now have shares of both companies. Individually, yes, Azucar shares are much lower now, and I attribute that to the market trying to figure out what each of the new companies is worth.
Azucar is still a buy. And it also just started its largest drill program ever at El Cobre, where it will seek to define a resource at the Norte Zone. Still, of this family of companies I think Almaden Minerals (AAU) is currently the most undervalued with catalysts ahead.
Almaden’s Tuligtic Project is on its way to a feasibility study that I expect will significantly improve on past numbers. It also just hit a wide intercept of good mineralization (26 meters of 1.93 g/t gold) over one kilometer away from the current pit.
There hadn’t been much drilling in the area because the company was so focused on the PFS last year and the FS this year. But that kind of gold over a kilometer away from the main deposit shows how this thing can grow.
Almaden also just raised C$9.4 million in a non-brokered placement with long-term and strategic shareholders. I participated.
It now has a treasury near $20 million that it will use to start reducing capital expenditures for mine development that would typically occur later in the process, such as moving the mill it has already purchased from Alaska to Mexico. (I’m telling you, they are serious about mining this thing themselves if it is not sold at a premium first.)
Plus there will be more exploration drilling that could find more mineralization away from the main deposit.
The Ixtaca deposit on its own stacks up very well against other deposits that are already in production. And Almaden’s market cap is currently around C$100 million, and C$20 million of that is cash. So despite being much more advanced than El Cobre, it’s essentially trading at the same valuation.
If you’re looking to buy Azucar I wouldn’t blame you — especially if you’re looking for more copper exposure than gold/silver — and it is buy-rated. But I think Almaden is a much better buy right now, all things considered.
