www.sohoresources.ca
Soho Resources is a Canadian-based junior resource company focused on exploring and developing the Tahuehueto gold-silver project in northwestern Durango State, Mexico.
The 9,081-hectare property covers at least 12 mineralized zones hosted within a structurally controlled epithermal system that has been traced for more than 6 km. Exploration programs have confirmed significant gold-silver mineralization with associated base metals at many of these zones.
Merriman Capital starts Soho Resources at "Buy", with at least 16 cent target price
Merriman Capital has initiated coverage on Mexico-focused resource company Soho Resources (CVE:SOH)(OTCQX:SOHFF) with a "buy" rating and a $0.16-$0.18 target price, around double the price at which the company is currently changing hands.
In a research note from financial services firm Merriman, analyst and VP Jesse Herrick said he sees near-term share price expansion as the company "aggressively develops" its Tahuehueto project in Durango State.
The primary 9,081 hectare gold and silver property has shown significant NI 43-101 compliant resources, with notable gold and silver mineralization, along with associated base metals.
In early September, Soho reported "positive" results from the first of a two-phase engineering assessment program at Tahuehueto.
Herrick calculated that taking into account recent pricing, the net present value for Tahuehueto has tripled to $353.5 million from the $109.6 million Soho published in its preliminary economic assessment in October 2010.
The analyst also said that as Soho transitions from exploration to production, it could potentially obtain much higher valuations in line with those derived from net present values on cash flows from producing mine operations.
Vancouver-headquartered Soho has also recently begun exploration on its newer Jocuinxtita silver project, which consists of eleven contiguous mining concessions covering a cumulative area of 4,103 hectares in Sinaloa, Mexico.
San Francisco-based Merriman Capital noted in the report that it believes there are positive long-term pricing trends throughout the metals that Soho is looking to mine at its two Mexican projects.
"We believe there is a certain degree of downside protection regardless of near-term market conditions as precious metals (particularly gold) are often viewed as safer investment options in time of market uncertainty," Herrick said.
According to Merriman Capital's note, in order to get through the prefeasibility study at Tahuehueto, it believes the company will need approximately six months and an additional 6 to 8 months beyond that, for the full feasibility study.
These will be associated with roughly $3 million and $6 million additional investment costs, respectively, Merriman said, which it feels is a "relatively small investment" for the stage of advancement that Soho should attain.
Mexico has a long history of mining, and current government support of mining makes the country one of the lower risk jurisdictions for mining, Merriman said.
A 2010 report from mining advisory firm Behre Dolbear ranked Mexico as the world’s fourth-best investment destination for mining and first for its fiscal regime.
Despite current headline risks regarding drug-related violence in the country, Soho’s projects are in considerably safer areas of the country, with a relatively low risk of effects from criminal activity, Herrick said.
Shares in Soho Resources were flat at $0.08 cents Tuesday afternoon.
