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  • Writer's pictureSmallCapInvestor

Our Top Exploration Pick Just Drilled a MONSTER Hole

Atex Resources (TSXV:ATX) has been one of the best performing junior mining stocks this year. Despite the sharp rise of over 50% in just three months since our initial pick, the stock remains our TOP PICK and biggest holding moving forward.


We first mentioned the company in a breakout alert, and again shortly after when we did a more in-depth write up, and finally we included the company in our recent report on copper which emphasized not only our bullish outlook for copper but also on Atex Resources.


Last week, Atex put out more drill results from its rapidly growing Valeriano project and the results were PHENOMENAL


Here is the result from Hole 11B: 0.73% CuEq over 1342m… This is MASSIVE! This is the longest mineralized hole drilled to date on the project. Not only is the hole GIGANTIC, but if we look closer we can see that there were some very high-grade intervals within the larger intercept:

First of all, the hole (ATXD-11B) was targeting an entirely new porphyry trend (The Western Trend) on the property. So while we had high hopes, we would not have been surprised to see it come back mediocre. We were simply blown away...


Check out the chart below and you will see that Hole 11-B (highlighted in green) does not cut through the previously known higher-grade zones that 11A went through. Instead they drilled it straight down and hit higher-grade mineralization almost the entire length of the hole (shown by the purple).

Essentially what this means is that the deposit is MUCH bigger and higher-grade than initially thought — very impressive.


Just how much bigger? One analyst covering the company raised their pounds-in-the-ground estimate from 600Mt copper of resource grading 0.65% CuEq inclusive of 400Mt of high-grade core to 1,200Mt — this equates to 17.6B pounds of copper equivalent. Using a valuation of US$0.03/lb, that implies a US$515.7M valuation on the project, or $693.25M. Using a 0.75x multiple results in a final valuation of CAD$483M. To put things into perspective, the current market cap of Atex Resources is $230M. I see a double from here just based on the current results alone, not including the multiple additional assays that Atex will release by the end of this drill season (summer).


Additionally, three different analysts all increased their price targets after the drill result was released. Paradigm, Cormark, and Desjardins all have BUY ratings on the stock with price targets now ranging from $2.00 to $2.30.


ADDRESSING CONCERNS ABOUT DEPTH


Looking at chatter on message boards and MinTwit, many people seem to be caught up on the fact that ATX is too deep. This would be a valid argument if one was to only look at the numbers. But if you really dig deep enough (no pun intended), you will find that it’s really not that deep. Why? Because the deposit occurs on a hill and the mineralization occurs at the bottom of the hill. The orebody extends only a few hundred metres from bottom of the hill, so accessing it will not be difficult, especially considering that Valeriano is a block caving project.


If you don’t know anything block caving, I highly suggest taking a look at the following links:





Block caving is a relatively new method of mining that allows for extraction of very deep orebodies at relatively low costs. It is essentially the equivalent of open-pit mining, but deep underground. Block caving will allow for Valeriano to be mined at costs comparable and maybe even cheaper than many open-pit copper mines.


To conclude, while Atex is up significantly on the year, the stock still has A TON of upside and I truly believe this story is still only just getting started. The deposit continues to grow with each additional drill result and the company will be releasing multiple additional results over the next couple of months which should drive the valuation and share price even higher, if those are positive. While I have been accumulating shares since the $1.00 range, I DO NOT plan to sell any of these shares for a long time.



- SmallCapInvestor



DISCLOSURE

The author did not receive any compensation for publishing this article. The author owns shares of Atex Resources and may choose to buy or sell at any time without notice.

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