Buy Alexander Mining at 21.75p
Says Luke Heron of WatsHot.com

I am planning a new hot tip on WatsHot.com - it will be out soon. Meanwhile here is one from a while back which still offers great value.
The AIM resource boom has flooded the worlds most dynamic market with a great deal of dross over the past few years. Due to the sheer number of opportunistic resource ventures to trip the light fantastic onto the junior exchange; the subsequent fall out across the sector has been so great as to drag many of the quality concerns down along with them. This has been both a curse and an opportunity. One such AIM traded resource venture whose quite remarkable potential is being ignored due its sector status is Alexander Mining.

The company currently has 3 projects on the go, but for the purposes of what follows, I am ignoring one. The smaller of the two that matter is a gold project at Molinetes in Peru. This is a very early stage exploration project and Alexander has a 66% stake. Grades so far are stunning and the owner of the remainder stake is a Canadian company valued at 20 million. It has few other assets. If I was running Alexander I'd float Molinetes tomorrow. It cannot be worth less than 10 million or 7.5p a share.

Away from Molinetes, we have Leon - a copper/ silver project in Argentina. Alexander has 13 million net cash and will use 11 million of that to build a processing plant and open pit mine. It needs to raise no additional equity. That mine will from Q2 2008 produce 5,000 tonnes of copper per annum at a cost of $1500 a tonne. By 2009 production will be running at 8,000 tonnes per annum. Copper currently sells for $6,000 a tonne. There is a proven resource which can produce 41,000 tonnes giving Leon a 5 year mine life. Alexander reckons it has new discoveries which could add another 5 years to the project life. I have risk weighted any output after year 5 at 50% as these extra reserves are not proven. Using a simple DCF model I value Leon at 61 million or 45p per share.

CEO Matt Suttcliffe seems to think that half of earnings from Leon could be paid out as dividends. That implies a 2008 dividend of 2.5p rising to 4p for the four years that follow. The rest of the cash from Leon would be reinvested in other activities. Value such an income stream on an 8% yield and Leon is again worth 50p per share. Whatever way one looks at Alexander, it is unquestionably worth 50p plus per share on a sum of the parts basis. Of course there are other variables, notably management. Suttcliffe is very capable indeed and will ensure value is realised at Alexander. The shares are a buy with a one year target of 50p.

Key Data:
Price:21 - 22.5p
Market: AIM
EPIC: AXM

well it has certainly broke through the descending channel which had held since last june.....

result due soon (possibly next week) so could get a run up to them and the prospect of an operations update.....

just spoken to the company - results to be released in the next 2 weeks. (unfortunately wouldnt be more specific)....

...good buying volume again today.