TM editors' note: This article discusses a penny stock and/or microcap. Such stocks are easily manipulated; do your own careful due diligence.

The holidays are behind us and resource investors can look forward to a cornucopia of news being released in January including a lot of nice drill results from a variety of companies. I will try to keep up with the news. Meanwhile. . .

MX Gold continues to move forward. I wrote about them back in August when the stock was pretty much fully priced and I said so. The shares have corrected with the rest of the resource market and today after a 55% correction the shares seem cheap.

In late June the company announced hiring Bert McPherson as President and COO. Formerly of Goldcorp, Mr. McPherson supervised 1400 employees at the Peñasquito Mine in Mexico. He is a mining engineer and perfectly suited to getting the Max Mill back into production.

The Max Moly Mine is fully permitted and shows an indicated resource of 140 million pounds of uneconomic moly. When Roca Mines poured $80 million into the construction of the mill in 2005, moly was economic. Today it’s not but who knows someday it might be.

MX Gold came along and snapped up the mine and mill for $5.7 million in late 2013. MX Gold has a gold project called the Willa Mine located some 135 km from the mill. The idea of management was to start the mill using gold material from Willa. This summer they announced a bulk sample of 10,000 tonnes from Willa. Results from the bulk sample have not yet been announced.

One of the signs I look for when I research a company is just how committed management is. I want to see management have skin in the game. When you look at a company and the CEO is making $600,000 a year and owns $25,000 worth of shares, you may safely assume he will do everything possible to keep drawing the big bucks and he doesn’t give a damn about the shareholders.

MX Gold CEO Dan Omeniuk owns or controls 26 million shares. That’s about 15% of the company. I don’t even care what his salary is. If he does well, so do the shareholders. He has major skin in the game.

In October of 2016 the company announced signing of a binding agreement to buy into a company with an existing mill in Durango, Mexico. The agreement calls for MX Gold to pay $2.225 million for a 50% interest in a plant for reprocessing tailings. The plant was built for a cost of about $4.5 million in 2013 but technical water issues caused the operation to cease processing in 2014.

This Magistral project, as MX Gold calls it, will have the right to reprocess about 1.25 million tonnes of material with a grade of 2.06 g/t gold. That’s just over 83,000 ounces of gold. Tests show recovery of about 82%. MX Gold is providing their share of the investment over a 90-day period to meet current expenses and the modifications required to get the plant back into operation. The Mexican operator believes the operation can be working and processing gold in 4-6 months.

The latest news from MX Gold concerns a proposed acquisition of a project near Kamloops named the Bonaparte property from Westkam Gold. This property is only about 135 km from the Max Mill. It’s a high-grade sheeted vein gold system. While no 43-101 resource has been done on the project with about 7500 meters of drilling completed, a couple of bulk samples done in the past revealed a grade of 26.5 g/t gold in a 1994 test and .475 ounce per ton in a 2010 bulk sample.

I suspect the company wants the project for gold for their mill. The proposal calls for MX Gold to issue 40 million shares to Westkam Gold. While the press release is not specific, it suggests this would be an outright purchase of 100% of the project and there would be no residual NSR. The proposal infers a value of about $6 million CAD for the project. That seems a little high for a project without a known resource but if they can process the gold at the Max mill and are just printing shares, it’s pretty much a low risk deal.

The Letter of Intent (LOI) allows for a 30-day due diligence period. Meanwhile be looking out for results from the bulk sample program.