MONTREAL () -- Alexis Minerals [TSXv:AMC] is one of the many junior exploration companies hit by the sell off in both global markets and gold markets. The normal reaction in this environment is both a flight to quality and a tendency to sit out the market.
AMEX's Gold BUGS Index (HUI) made up exclusively of mining stocks that do not hedge gold more than a year and a half into the future is a reasonable proxy for gold investors looking for an indication of a quality gold investment.This index is off over 9% from the high in the last 30 days, while Alexis is off more than 58% from its high in late April, and off about 23% from its high in the last 30 days.
Alexis deserves a closer look and may not go much lower, indeed offering much upside potential due to its option to earn 50% of substantially all of Falconbridge (Noranda) properties in the Rouyn-Noranda camp that includes eight former producing mines.
Falconbridge [NYSE:FAL; TSX:FAL-LV] is the operator and has access to the extensive Noranda database, when combined with the new technology of Gocad modelling, MegaTEM II and Titan 24 geophysical surveys provide excellent potential.
Alexis Minerals, under the leadership of President David Rigg, has taken advantage of Quebec's favourable incentives for issuance of flow-through shares - it has been able to issue both common shares and flow-through shares to raise $10.7 million in equity in June of 2004 and a further $13 million in April of 2005.
According to CFO Deborah Battiston, the unaudited cash balances as of Sept. 16 were $11.4 million. Using outstanding shares of 61.5 million (fully diluted of 81.6 million), the current cash valuation would be 18.5 cents per share.
It is possible the recent decline in Alexis stock price could have been attributed to sale of flow-through shares once the hold period is completed, but this cannot be confirmed.
Alexis has a clear route to 100% of 27,000 hectares in the Val d'Or region, including a joint venture with Novicourt [TSX:NOV]. The most promising Val d'Or property is the Lac Herbin project (100% Alexis) located on a land package which includes the former Ferderber and Dumont mines. Both mines had ore grades ranging from 6.0 to 6.9 grade per tonne with a combined production of 600,000oz.
Lac Herbin (100% Alexis) has an inferred resource of 1.1 million tonnes at 7.3g/t and only 1.8 kilometres distance from a fully permitted 1400 TPD Aurbel Gold Mill (Alexis has option to purchase). The underground access to Lac Herbin could be made through the Ferderber Mine. There is a potential to increase resources at depth.
Alexis also has a potential satellite operation at Lac Pelletier, 5 kilometres southeast of Rouyn-Noranda with potential resources of 122,000oz. Rough valuation of Lac Herbin with inferred resources of 250,000oz of gold at $40/oz is $10,000,000.
Current valuation would be 34.7 cents consisting of cash. Alexis is valued at 18.5 cents per share and Lac Herbin is approximately valued at 16.2 cents, equal to the current share price of 35 cents per share.
Alexis also has made a second discovery on the West Ansil property, one of the Falconbridge properties in the Rouyn-Noranda camp. Two of the best results returned a grade 14.34% copper over 6.3 metres and 3.57% copper over 52.7 metres.
The current stock price is priced at the value of cash plus an approximate value for the Lac Herbin gold project. In effect, the market is placing no value on their option to earn 50% in 80,000 hectares of Falconbridge properties in the Rouyn-Noranda camp, and about 27,000 hectares in the Val d'Or camp.
Alexis has planned a 67,500 metre drill program in 2005 and a projected 60,000 metre program in 2006. This extensive exploration program with well-located mineral properties, together with the value of the geological database and some 96 geophysical targets using latest technology, can only show some positive surprises in the future.
In a down market with its cash position, solid partnership with Falconbridge and two impressive discoveries in less than two years, an investor could have the downside somewhat protected leaving upside potential should other discoveries be made.
