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Almadex Minerals Ltd (OTCMKTS:AXDDF) A Good Reversal Play After Minor Correction

Almadex Minerals Ltd (OTCMKTS:AXDDF) A Good Reversal Play After Minor Correction
Written by
Jim Bloom
Published on
March 28, 2018
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Almadex Minerals Ltd (OTCMKTS:AXDDF) is showing signs of trading higher after coming under pressure in recent weeks. After rallying to highs of $1.40, the stock came under pressure in what appears to be a profit-taking play after an impressive run. AXDDF Daily ChartThe stock appears to have found support at the $1.05 level, from where it is trying to bounce back on its way back to the top. A close above the $1.26 handle should reaffirm the underlying long-term uptrend, paving way for the stock to make a push for the $1.40 mark.A close below the $1 a share mark, on the other hand, could see the stock plummeting to the $0.84 handle.In our view, the stock has what it takes to bounce back after the recent sell-off as trading volumes have increased and the company’s outlook has improved a great deal, after a recent reorganization.Before carrying out a detailed analysis of the factors likely to push the stock higher let’s understand what the company does, in pursuit of growth and shareholder value.Almadex Minerals is an exploration company specializing in the discovery of new mineral deposits in Canada, the U.S, and Mexico. The company’s portfolio consists of numerous exploration properties, several NSR royalties on projects managed by other companies. The portfolio is a direct result of over 35 years of prospecting, discovery and deal making.Almadex Minerals owns 100% interest in the El Cobre project located in Mexico, where it is exploring for gold and copper deposits. It also holds interests in El Chato project having entered into an option of 100% interest in the Los Venados Project in Sonora State Mexico.Recent DevelopmentsAlmadex Mineral outlook on Wall Street has received a boost on the announcement of a strategic reorganization. Pursuant to the reorganization, the company’s exploration projects, royalty interests, and other non-core assets are to be transferred to a newly incorporated company.The Spinco will consist of interests in 18 exploration projects, a 1.75% Net Smelter Return on the El Cobre property in Mexico as well as a 2% NSR royalty on the Tuligtic property in Mexico. However, the reorganization remains conditional subject to the approval of final documentation by the board of directors of Almadex Mineral.Current shareholders are to receive shares in the Spinco, in proportion to their shareholdings at Almadex Minerals. With the reorganization, the company intends to focus on the development of the El Cobre gold-copper porphyry project.The spin-out will also allow the company to raise the much-needed funding, needed to advance the El Cobre project without diluting shareholders’ interests.

“The spin-out transaction should also unlock value for a group of assets that have gone largely unrecognized by allowing the market to value the Company's El Cobre project independently of its early stage mineral exploration and royalty business. The Company is confident that having a separately funded and managed mineral exploration and royalty business will accelerate development of the exploration projects in Spinco."

$5.6 Million Capital Raise PushAlmadex has since embarked on an aggressive capital raise drive as it looks to raise additional capital to facilitate the advancement of the El Cobre project. Pursuant to the push, the company is in the process of closing a non-brokered private placement financing of 4 million units, priced at $1.40 a unit.Each unit on offer consists of one share of the company and one half of one whole non-transferable common share purchase warrant. The company expects about $5.6 million in gross proceeds from the offering.Net proceeds from the offering are to be used to advance drilling operations at El Cobre Au/Cu porphyry targets. Part of the funds is also to be used for early stage exploration of other projects and for general corporate purposes.

Morgan J. Poliquin, President and CEO of Almadex noted, “This financing will enable Almadex to continue with its active drill program at the El Cobre project while the spinout transaction progresses, and will also situate Spinco with a healthy treasury post-completion of the corporate reorganization in order that Spinco management can pursue the next discovery for the group.”

What Next For Almadex In 2018Initial drilling results have shown that the El Cobre Project holds the potential of important porphyry copper-gold deposits. Almadex has already hinted to a large drill program for 2018 an indication of its confidence about the project’s potential.The recent spike in share price is, therefore, a response to growing investor confidence about the company’s ability to bring to fruition one of its major projects. That said the stock looks set to continue powering high on the improved outlook on Wall Street.In our view, the recent sell-off is a minor correction, which paves way for the stock to resume its underlying uptrend, backed a by a string of solid fundamentals.Disclosure: We have no position in AXDDF and have not been compensated for this article.

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