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Minera Alamos shares climb after Roth analysts give thumbs up to Cerro De Oro acquisition

The firm raised its price target to C$0.85 from C$0.65

Minera Alamos project
The Cerro De Oro gold project constraints 6,500 hectares of claims and 8,200 meters of prior drilling

Minera Alamos Inc (CVE:MAI) (OTCQB:MAIFF) stock rose Wednesday after analysts at Roth Capital Markets reiterated a Buy rating and upped their price target for the company to C$0.85 from C$0.65.

The increase in optimism comes a day after Minera reached a deal to acquire the Cerro De Oro gold project in Zacatecas, Mexico. The project constraints 6,500 hectares of claims and 8,200 meters of prior drilling. 

“We view this acquisition as an ideal bolt-on acquisition as the company looks to strengthen its development portfolio,” Roth wrote in an analyst note. “We view this as an ideal acquisition for Minera Alamos as the company can move quickly to provide an initial resource estimate and then can look to advance the project towards production in the coming years.”

Shares gained nearly 3% to hit C$0.71 in Toronto and 0.8% to US$0.53 in New York.

READ: Minera Alamos on track to complete Santana gold mine construction; strengthens board with experienced mining engineer

Under the terms of the acquisition, Roth noted, Minera will pay US$400,000 and issue two million common shares. The company will also make annual option payments totalling US$2.5 million and two million shares over the next four years. 

“While this acquisition doesn't meaningfully change our valuation of MAI, we note it does demonstrate management is continuing to execute on its growth strategy without causing significant shareholder dilution,” Roth wrote. “Additionally, precious metals prices are significantly above our long-term expectations.”

For the time being, Roth expects the Cerro De Oro project to have third billing behind the company’s Santana and La Forunta projects but noted that could change with future exploration success.

Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com

Follow him on Twitter @andrew_kessel

Quick facts: Minera Alamos Inc

Price: 0.69 CAD

TSX-V:MAI
Market: TSX-V
Market Cap: $299.62 m
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