Penny Stock
The SmallCap MarketWatch believes that junior mining and exploration companies are going to offer investors the greatest upside opportunities when it comes to taking advantage of bull market in gold.. The challenge is to find ideas that are not just looking for home runs. As much as shareholders love million ounce discoveries the likelihood of success is very small and the risks are enormous. Mexoro Minerals (MXOM) has a major asset in its Cieneguita Property. Maybe it was great insight or perhaps dumb luck that Mexoro COO Mario Ayub was able to acquire Cieneguita after Glamis Gold gave up on the property.
The company believes there are 350,000 ounces of gold there. Initial estimates are that the property should produce approximately 1,500 ounces per month at a total expected mining cost of $230 per ounce. Such production would give net cash flow from operations of approximately $5,000,000 per year at current gold prices.
Today, the entire company is worth just a little bit over $22.5 million dollars. Publicly traded gold companies currently sport a valuation of 17.7 times earnings. If Mexoro were to see $5,000,000 per year in net cash flow from Cieneguita that would mean future exploration of other properties could be self supported. However, let’s say for the sake of argument not one dollar is reinvested and the net cash flow is just booked as profits. At 17.7 times earnings that market cap could be $88.5 million or over $4 dollars a share.
For junior gold exploration and mining companies growth is critical, and if Mexoro were to produce that kind of cash flow we expect almost all of it to be reinvested in other projects to build shareholder value. If everything goes as planned the Cieneguita mine will be constructed very soon with production to follow quickly after the mine is established. The current retracement in Mexoro shares represent a great opportunity for those that have been watching the stock waiting for the right time.
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