Pent-Up Potential for Precious Metals in 2013: Jason Hamlin

TICKERS: AMM; AAU, EGZ; ENZR, FMS, SSL, SLW

Source: Brian Sylvester of The Gold Report (12/5/12)

JH: Another business model with great merit is the prospect generator model, pioneered by Almaden Minerals Ltd. (AMM:TSX; AAU:NYSE). It has some similarities to the royalty-streaming model that has treated us so well.

Because Almaden owns its own drill rigs, it can drill at a lower cost and has more flexibility with timing. Almaden unlocks value via discovering resources, selling them and usually acquiring a royalty in the process. The company itself is not in the business of production. Its management believes the greatest shareholder value is unlocked when finding the discovery, doing the drilling and passing the project off to a larger company for production.

Almaden has 15 exploration royalties right now, a few of them nearing production. Lately Almaden has focused on the relatively unexplored region of eastern Mexico, where its Ixtaca project is located. Ixtaca has been returning impressive intercepts this year, most recently 134 meters (m) of 4.1 grams per ton (g/t) gold. Almaden expects to issue its NI 43-101 resource on Ixtaca this December. Two years and more than 70,000m of drilling will go into that NI 43-101, including lots of long intercepts over high grade. If the drill results we have already seen are any indication, it could be an absolute game changer for the company.

Producing companies have already shown a lot of interest in Ixtaca, so I think Almaden will be able to sell it rather easily and get an exceptional return on its investment. The best part of this project is that most of the property is still relatively unexplored. There are multiple blind targets and blue-sky potential for Almaden.

TGR: Those recent drill results averaged 4.1 g/t. Is that the sweet spot Almaden has been looking for to make the deposit economic?

JH: It was along the trend, but 50m northeast of the closest drill results that are going into the maiden resource. This shows the potential to significantly expand the current scope of the project. The grade was very convincing.

TGR: What do you expect to happen once the NI 43-101 comes out?

JH: I expect it will attract the attention of investors and that its market cap will increase substantially as a result. This maiden resource may convince larger companies to firm up their offers and move forward. But with the latest round of very strong drill results, it might be better for shareholders if Almaden continues expanding the resource prior to considering any bids.

TGR: Would Almaden issue a dividend to shareholders or keep the money and reinvest it in other projects?

JH: In order to maximize exploration efforts, Almaden does not pay out a dividend and I prefer this. When you can trust management to make deals that are accretive to shareholders, I would rather see the money used for more drilling on prospective projects, of which Almaden has a number in the pipeline.