Adrian Day of Adrian Day Asset Management takes a look at four companies, noting the progress made by three and reflecting on another that is "trying to salvage what it can of its best mine."

Much Activity Leads to Optimism on Future 
Midland Exploration Inc. (MD:TSX.V, 0.87) remains my top exploration company. It is a prospect generator, with a total of 17 active projects, seven of which are in joint ventures, option agreements, or alliances. It is very active, with $8 million spent on exploration on its properties in 2017. For the coming year, an anticipated minimum exploration budget of $6 million has been set, though this is likely to increase based on results. This will be on nine different properties, with drilling on (at least) four of these.

Several of its projects, though early stage, are potentially exciting. Recent news includes the discovery of a high-grade gold zone on the wholly owned Willbob; zinc and nickel mineralization at two properties in its James Bay alliance with Altius Minerals Corp. (ALS:TSX.V); new targets at the option with IAMGOLD Corp. (IMG:TSX; IAG:NYSE) at Heva; a new option with Niobay Metals Inc. (NBY:TSX V) at La Peltrie, and drilling on the property; a new gold zone at Casault, in joint project with Soquem Inc.; and the discovery of a copper-rich boulder field in the Eleonore area, a joint-venture with Osisko Mining Corp. (OSK:TSX). Other partners include Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE) and Teck Resources Ltd. (TCK:TSX; TCK:NYSE).

It has also acquired several new properties in recent months, for which it is seeking partners. With cash-on-hand of around $14 million—following a flow-through (Canadian tax-qualified) raise at CA$1.35—the company is in a very strong position, and able to selective explore its 100%-owned projects. The drip into the 80s provides us with a buying opportunity.

Close to Agreement on Indonesian Mine, but at What Cost? 
Freeport-McMoRan Inc. (FCX:NYSE, 17.33) is close to an agreement with the Indonesian government of the share divestiture and other issues. It had hoped to have completed talks by the end of the year, but it appears they will stretch into the first quarter. A three-way deal including Rio Tinto Plc (RIO:NYSE; RIO:ASX; RIO:LSE; RTPPF:OTCPK)—which has rights to cash flow from the mine (40% above a certain level until 2021 and 40% after that date)—is likely. Such a deal would preserve a higher percentage of the cash flow for Freeport. The devil in the details, however, includes how and when Freeport will be paid for the shares it relinquishes.

Apart from the ongoing negotiation, the Grasberg mine (on Indonesia's Papua island) continues to have other problems. Renewed separatist activity, including shootings and a port fire, saw suspensions of mining and a reduction in production. This was offset by higher copper prices, which led to a good year for Freeport. Capital spending dropped to the lowest since 2010, while debt came down to its initial target of $10 billion.

The stock has responded to strong operational performance at the company and expectations of a near-term agreement with the government. But we await the details, suspecting that the government and Rio may come out winners. Hold.

Continuing to Advance a Project 
Almaden Minerals Ltd. (AMM:TSX; AAU:NYSE, US$0.96) continues to progress toward completion of its feasibility study, while also demonstrating that the resource can grow. Drilling at the Tuligtic project is focused both on holes in connection with the feasibility study, and also step-out holes in new areas on the property.

Almaden recently released assays from recent drilling, confirming a new high-grade zone within the proposed pit at the Ixtaca deposit. Separately, it released the results of an independent social impact assessment (SIA), which shows community support for the project as well as recommendations for further interactions with local communities. Mining companies are not required in Mexico to produce SIAs; Almaden's study was prepared by a well-respected Mexican consulting group. Almaden has been very proactive in community relations throughout its time in exploring and advancing the project.

The stock has bounced from a very depressed low of $0.76 earlier in the month to the current level. We think it's still undervalued here, though, given the recent bounce we could see a pullback. Buy in the low 90s.

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