5 Mining Stocks to Watch in 2012: Part 2

Geologix has made solid progress of late on their flagship Tepal project in Mexico.

3. Geologix Explorations Inc. (Stock Profile – TSX:GIX & OTC:GIXEF)

Perhaps it’s finally time for Geologix to change its name. After years of exploration and development the company is getting close to transitioning into the business of mining.

On March 27th, 2011 Geologix reported an updated gold and copper resource estimate for its Tepal project in Michoacán state, Mexico. The estimate, which incorporated the results from drilling over 40,000 metres at the North, South and Tizate zones during 2011, resulted in a 324 percent tonnage increase in the resource Measured and Indicated categories. Collectively, the M&I resource estimate at Tepal is 4.04 million gold equivalent ounces consisting of 1.8 million ounces of gold and over 800 million pounds of copper.

With the recent sell-off in gold and the uncertainty facing many junior miners, the news didn’t impact the company’s share price. Shares of the company are quietly trading in the $0.30 range.

Going forward, this quarter Geologix is set to release its long-awaited prefeasibility study which will incorporate the new resource estimate. Management stated the new resource estimate will significantly “de-risk” the project and hopes to have the study completed by the end of June.

In line with their name, Geologix is still very much focused on exploration. The company has identified 7 new targets, through airborne geophysics and fieldwork, at the Tepal project that warrant drilling. With $6.8 million in cash on hand as reported in the company’s most recent December, 2011 financial statements, the company has sufficient working capital to reach its prefeasibility milestone and then some. The company last financed at $0.66 on a straight share offering (no warrants) in March, 2011 raising gross proceeds of $23 million.

Toronto mining analysts Gary Bashuk from Raymond James and Philip Ker from Union Securities have price targets of $1.10 and $1.25 respectively on Geologix shares. After the company’s new M&I resource estimate was announced, Philip Ker stated, “With the announcement of today’s resource update, Geologix continues to demonstrate the quality of Tepal and supports our thesis that it can become a producing mine which we estimate commencing in late 2014.”

4. International Northair Mines Ltd. (Stock Profile – TSXV:INM & OTC:INNHF)

After many years of mixed results, on February 24th, 2011 the fate of International Northair Mines changed dramatically. The company proved that persistence pays off when they announced drill results from their La Cigarra silver project located in north-central Mexico. The numbers included 80.45 metres of 123.5 grams per tonne silver in hole CC-11-002 at the San Gregorio zone.

In response, the company’s shares took flight from under $0.15 to an intra-day high of $1.00 per share a few months later. Since then, International Northair has continued to release strong drill results from the project, and the company has been garnering support from the investment community, receiving coverage from brokerage firms and a significant investment from Pinetree Capital.

On February 28th, 2012, Canadian investment firm Pinetree Capital (Stock Profile – TSX:PNP) announced it acquired another 500,000 shares of International Northair. As a result of the transaction, Pinetree and its joint actor now hold 9,845,500 shares of the company.

Most recently, on March 28, 2012, mining analyst Michael Fowler at Loewen, Ondaatje, McCutheon in Toronto initiated coverage of International Northair and issued a Speculative Buy recommendation with a 12-month price target of $1.00 on the company’s stock. Fowler wrote, “We believe International Northair should be able to outline a 70 million ounce silver resource at its La Cigarra property in an upcoming 43-101 report due in Q2, 2012.” Talking to the company, management confirmed they are working diligently to have the report ready for the end of June but noted the delivery date could spill over into July.

The La Cigarra Project is located in the same mineral belt that includes Silver Standard’s (Stock Profile – TSX:SSO & NASDAQ:SSRIPitarilla and Pan American Silver’s (Stock Profile – TSX:PAA & NASDAQ:PAASLa Preciosa project. Shares of International Northair are currently trading at $0.275.

5. Uranerz Energy Corp. (Stock Profile – TSX:URZ & AMEX:URZ)

Uranerz Energy has been at it for a while now. The company was formed after its namesakes, Uranerz Exploration and Mining Ltd. and Uranerz U.S.A. Inc. (Uranerz Group), were acquired in 1998 by Cameco (Stock Profile – TSX:CCO & NYSE:CCJ). At the time, the Uranerz Group was the world’s third largest uranium producer.

Uranerz Energy has a strong team of mining personnel and advisors, many of whom are former officers, senior management and employees of the original Uranerz Group. The team came together years after Cameco’s acquisition. Experienced management has helped the company navigate a “Long and Winding Road” including inception in 2005, public listing on the NYSE Amex in 2006, and inter-listing on the TSX in 2007. The company has raised close to $100 million.

Today, seven years later, Uranerz Energy is approaching near term commercial uranium production and is currently constructing its first in-situ recovery mine in the Powder River Basin of Wyoming. Uranium production from the mine is expected to commence in the second half of 2012. Already in place, the company has two long-term uranium sales agreements for a portion of its planned production with U.S. based utilities, negotiated when long-term uranium prices were between $65 and $70 per pound. Still outstanding, Uranerz is waiting for a license on its deep disposal well from the Wyoming Department of Environmental Quality.

From the company’s most recent letter to shareholders:

“The United States is the largest market in the world for uranium; it has the largest nuclear fleet of any country with 104 reactors. U.S. uranium mines produced four million pounds of U3O8 in 2011, but annual uranium consumption far exceeded that, at over 50 million pounds.”

Dundee Securities Vice President and Senior Mining Analyst David A. Talbot has a $4.25 price target on Uranerz Energy. Talbot states, “Hopefully, (Uranerz) permitting process is coming to a close as well. It plans to build an ISR plant in Wyoming and ramp up to about 1.6 million pounds of uranium.” Uranerz shares closed today at $2.53 on the TSX Exchange.

For 5 Mining Stocks to Watch in 2012 – Part 1 – CLICK HERE.

Mike Luft

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