Zacks initiates coverage of Golden Phoenix Minerals - Analyst Blog

Steven Ralston, CFA

Zacks initiates coverage of Golden Phoenix Minerals

Zacks has initiated coverage of Golden Phoenix Minerals (GPXM) with an Outperform rating. Golden Phoenix is a Nevada-based junior mineral exploration company that targets and acquires mineral properties, primarily gold, silver and molybdenum. Currently, the company is focused on multiple projects in the Americas, namely in Nevada, Peru, Ontario and most recently Panama. Management is opportunistic and is actively searching for advanced stage projects with proven resources that were idled when the price of that resource was much lower than today.

Since Thomas Klein was appointed Chief Executive Officer in February 2010, the company has embarked on a multi-faceted royalty mining strategy based on a new business model that combines project acquisition and development. Management is pursuing projects in various stages of development throughout North, Central and South America, with a preference for advanced stage projects that can brought to production within two years. Mine operations are being outsourced to motivated partners, who will incur the costs of bringing each property to production in exchange for a majority interest. Golden Phoenix seeks to retain a minority ownership position, which preferably will be converted into a royalty. The time frame to commercial production has been significantly shortened by targeting advanced stage projects and by choosing mine operators with a sense of urgency. Also, project risk has been reduced through diversification; multiple projects are being pursued instead of concentrating on one mining project.

Our price target is based on an estimated share value of attributable resources. The methodology ascertains a value for each property and accounts for relevant balance sheet items such as working capital, PPE (property, plant and equipment), marketable securities and debt. The value of each individual property is determined by adjusting the value of current resources for the expected recovery rate, mining/processing costs and net smelter royalties, if any. Only the company's percentage interest is attributed to the company's value. Based on our calculation of share value of attributable resources, the target for Golden Phoenix stock is $0.42.
 

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