hunt mining corp (tsx-v: hmx) - initiating coverage; … la josefina project covers 52,800 hectares...

Investment Analysis for Intelligent Investors

Siddharth Rajeev, B.Tech, MBA, CFA Analyst

Michelle Wu, B.A.Sc (Mineral Engineering)

Research Associate-Mining

May 2, 2011

2011 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA, CFA

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

Hunt Mining Corp (TSX-V: HMX) - Initiating Coverage; Gold and Silver Project in Argentina

Expecting Updated NI43-101 Resource Estimate

Sector/Industry: Junior Exploration/Mining www.huntmining.com

Market Data (as of April 29, 2011)

Current Price C$0.33

Fair Value C$0.50

Rating* BUY

Risk* 5 (Highly Spec)

52 Week Range C$0.27 - C$0.58

Shares O/S 94.08 mm

Market Cap C$31.05 mm

Current Yield N/A

P/E (forward) N/A

P/B 4.1x

YoY Return -43.1%

YTD TSXV 35.3%

*see back of report for rating and risk definitions

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Investment Highlights

• Hunt Mining’s flagship La Josefina project in the Santa Cruz province of Argentina has an NI 43-101 compliant measured, indicated and inferred resources of 7.0 Mt containing 0.16 M oz Au and 2.7 M oz of Ag, for a total of 0.20 M oz Au equivalent.

• Our internal estimate is 5.9 Mt containing 0.35 M oz Au equivalent.

• The company started a new round of drilling in January 2011 and expects to update the resource estimate upon completing the drilling program.

• Current drilling at the Central Zone continues to intersect high grade gold and silver mineralization, confirming some of the high grade historic intercepts that were not included in the current resource estimate.

• The company recently increase its land position in Santa Cruz province by adding 24,855 hectares of new claims near established mineral projects

• Hunt raised $8.53 million in November 2010, and currently has $6 million in cash.

• We initiate coverage on HMX with a BUY rating and a fair value of $0.50 per share. Our valuation was based on a speculative resource of 0.50 mm oz Au equivalent.

Risks

• The value of the company is dependent on commodity prices.

• The company does not currently have any operating mines.

• Access to capital and share dilution.

Key Financial Data (FYE Dec 31)

($) 2009 2010

Cash, Cash Equivalents 3,165,966 6,361,897

Working Capital 554,504 6,118,121

Total Assets 5,378,317 8,291,685

Net Income (Loss) (2,138,745) (3,223,235)

EPS (0.51) (0.07) Hunt Mining Corp is a junior exploration company focusing on the acquisition, exploration and development of precious metal projects in South America. The company's flagship project, the La Josefina project in Argentina, has an NI 43-101 compliant measured, indicated and inferred resources of 7.0 Mt containing 0.16 M oz Au and 2.7 M oz of Ag. The company is committed to advancing the project towards production.

Hunt Mining Corp (TSX-V: HMX) - Initiating Coverage



Company

Overview

Corporate

History

Hunt Mining Corp is a junior exploration company focusing on the acquisition, exploration and development of precious metal projects in South America. The company aims to bring its projects to production. The company's core project is the La Josefina gold and silver project located in the Santa Cruz Province of Argentina. The La Josefina project covers 52,800 hectares of land in the Deseado Massif mineral district. Hunt Mining acquired the La Josefina project in 2007 through its wholly owned subsidiary, Cerro Cazador S.A. This project currently has an NI 43-101 compliant measured, indicated and inferred resources of 7.0 million tonnes containing 0.16 million ounces of gold and 2.7 million ounces of silver. Our internal

estimate is 5.9 Mt containing 0.35 M oz Au equivalent. In addition, to the La Josefina property, the company holds a significant land package in Santa Cruz province and is the 2nd largest land holder in the province, behind government-owned Fomicruz (Figure 1).

Figure 1 Land Holdings in Santa Cruz, Argentina The company was formed in 2006 as a capital pool company, under the name of Sinomar Capital Corp. The company’s shares started trading on the TSX Venture Exchange in August 2008 under the ticker symbol “SMM.P”. In January 2010, Hunt Mountain Resources Ltd.




La Josefina

Project

acquired the majority of Sinomar’s issued and outstanding shares. Subsequently, in

February 2010, the company changed its name to the current name, Hunt Mining Corp

and the stock symbol was changed to “HMX”.

Project Overview

The La Josefina project in Argentina is Hunt Mining’s current exploration and development focus. The property is held by Cerro Cazador S.A., a wholly owned subsidiary of Hunt Mining. The property is located 450 km northwest of the city of Rio Gallegos, in the province of Santa Cruz, in the Patagonia Region in Argentina. Figure 2 (on the next page) is a location map of the project. A considerable amount of exploration work has been performed on the project by Hunt Mining since the acquisition in 2007, leading to the newly released technical report classifying the following resources according to NI 43-101 standards.

Table 1 Mineral Resource Estimate at the La Josefina Project (0.2g/t Au Eq Cut-off)

1000s

Tonnes

Au Grade

(g/t)

Au (1000s

Ounces)

Ag Grade

(g/t)

Ag (1000s

Ounces)

Au Eq

Grade (g/t)

Au Eq (1000s

Ounces)

Measured 4998.67 0.72 115.54 16.60 2668.36 0.97 155.56

Indicated 1525.93 0.83 40.48 1.81 88.73 0.85 41.81Inferred 452.14 0.45 6.48 1.21 17.58 0.46 6.74

Total 6976.74 0.72 162.50 12.37 2774.66 0.91 204.12

Property Ownership In 2007, Cerro Cazador acquired the project from Fomicruz (Fomento Minero de Santa Cruz Sociedad del Estado), an oil and mining company owned by the Santa Cruz provincial government, through public bidding. Under the terms of the agreement, Cerro Cazador will earn mining and production rights in the joint venture with Fomicruz, as long as it spends a minimum of U$6 million in exploration and completes a feasibility study over 4 years (excluding 3 months each year for winter holidays). The company is currently in the process of renegotiating the terms of the joint venture with Fomicruz. Up to June 2010, Cerro Cazador had spent US$9 million on the project and satisfied the minimum expenditure requirement. Upon the successful completion of a feasibility study with positive results, Fomicruz and Cerro Cazador will jointly form a new company to develop the project. Fomicruz has a one-time election right to decide whether its interest in the new company will be 9%, 19%, 29%, or 49%, by reimbursing Cerro Cazador 0%, 10%, 20% or 40%, of Cerro Cazador’s total investment in this project. The project is also subject to a 6% mine-mouth royalty (MMR) and approximately $81,212 in payments per year to maintain mining rights, both payable to the province. The company has secured surface rights by purchasing the La Josefina farm which covers 9,000 hectares of land in the heart of the La Josefina project where a major part of the mineralization occurs.




Figure 2 Location Map of the La Josefina Project

History

The first metal occurrence was discovered in the La Josefina area in 1975 by the

National Ministry of Mining of Argentina. In 1994, the Institute of Mineral Resources of the National University of La Plata and the geology department of the University of




Patagonia San Juan Bosco investigated the occurrences and reported 197 to 377 g/t Cu, 972 to 2549 g/t Pb, and 308 to 569 g/t Zn, as well as previously unknown precious metal content of 1 to 3 g/t Au and 5 to 21 g/t Ag. Following the 1994 study, Fomicruz established the La Josefina claims as a Provincial Mineral Reserve and continued to explore the property with the Institute of Mineral Resources of the National University of La Plata. Surface mapping, trenching, 6,000 m of IP-resistivity and 5,750 meters of magnetic surveys were completed to further investigate the areas of interest. In 1998, Fomicruz offered the La Josefina property to public bidding. A private Argentine mining company, Minamérica S. A., won the bid and subsequently completed more trenching, surface geochemical sampling, several new IP-Resistivity geophysical survey lines and drilled 12 diamond core holes. Despite the encouraging results of the exploration work, Minamérica chose to abandon the project in 1999 due to low metal prices at the time. From 2000 to 2006, Fomicruz resumed operatorship of the project. Efforts during this period included pits dug to bedrock on 100-meter grids over some of the target areas, 3,900 meters of new trenches, soil and outcrop geochemical samples, some new IP-Resistivity surveys and 59 diamond core holes totalling 3,680 meters. US$2.8 million in exploration expenditures were reported by Fomicruz over the entire project period from 1994 to 2006.

In late 2006, the La Josefina Project was opened again for public bidding. Hunt

Mining’s wholly owned subsidiary, Cerro Cazador, was awarded the right to explore,

develop and mine the La Josefina property in 2007. Cerro has been developing the

project since then.

Accessibility and Infrastructure

The property can be accessed by gravel Provincial Route 12 that crosses the edge of the property and connects to a network of highways. The provincial gravel roads are accessible by two-wheel drive vehicles in dry weather; four-wheel drive vehicles are recommended during wet conditions. The La Josefina property is located in the north-central part of Santa Cruz Province. The region is generally sparsely-populated. The nearest town is Gobernador Gregores with a population of 2,500, about 110 kilometres to the southwest. Another town nearby is the Atlantic coastal town, Puerto San Julián, with a population of 6,800, located 190 kilometres to the southeast of the property. 240 kilometres north on Provincial Route 12, is the oil town of Pico Truncado in the north-eastern part of the province. Both Gobernador Gregores and Puerto San Julián have flight services two or three times a week connecting the city of Comodoro Rivadavia, a supply center, and port city. There are few power grids and limited telephone services away from the towns and villages in the region. Diesel or gasoline generators are commonly needed for electricity used in exploration activities and satellite phones or radios are used for communications. The Santa Cruz provincial government recently announced its plans to pave the Provincial Route 12




and may construct a power line along the highway.

Geology and Mineralization

The La Josefina project is located in the Deseado Massif, which consists mainly of felsic volcanic and volcaniclastic rocks from Jurassic time and covers an area of 6 million hectares in northern Santa Cruz. Despite the short history in mining activities, the Deseado Massif

hosts numerous gold and silver exploration projects as well as four producing mines,

the Cerro Vanguardia Mine operated by AngloGold (NYSE:AU) and Fomicruz, the

San Jose Mine by Hochschild (LSE: HOC) and Minera Andes (TSX: MAI), the Martha

Mine by Coeur d’Alene (NYSE: CDE) and the Manantial Espejo Mine by Pan

American Silver (Nasdaq: PAAS). Figure 3 below is a regional geology map showing major gold and silver occurrences and mining operations. The mineral deposit at the La Josefina project is classified as a low-sulphidation type epithermal vein deposit, which is the typical type of gold-silver deposit in the Deseado Massif. These deposits are characterized by steeply dipping to sub-vertical tabular veins and breccias of a meter or more in width, by hundreds of meters to several kilometers in length. The veins and breccias usually contain gold, electrum (a gold-silver alloy), silver sulfosalts and sulfide minerals such as pyrite, sphalerite, galena, and chalcopyrite. Mineralization is typically zoned laterally along strike and vertically along depth.




Figure 3 Geology Map of the Deseado Massif and Locations of Au-Ag Occurrences




Resource Estimates

Four mineralized areas have been identified in the La Josefina property, namely the Noreste Area, Veta Norte Area, Central Area and Piedra Labrada Area as shown in Figure 4 below.

Figure 4 4 Mineralized Zones at La Josefina Project Within these four mineralized zones, four domains were constructed to calculate resources.




1. BLA (Belen, Ailín and Latitas Veins in the central area) 2. Sinter (Noreste Area ) 3. AYC (Amanda y Cecilia targets in the Veta Norte Area) 4. VS (Veta Sur target in the Veta Norte Area)

The detailed resource classifications for different cut-off Au equivalent grades are listed in the following 3 tables. Table 2 Measured Resources for All the 4 Domains

Table 3 Indicated Resources for All the 4 Domains




Table 4 Inferred Resources for All the 4 Domains

Cut-off grades were determined based on a heap leach process with the following parameters estimated by comparing similar projects in the area: Base Mining Cost: US$ 1.75/t Processing Cost: US$ 3.75/t G&A: US$ 0.6/t Gold Price: US$ 1,000/oz Silver Price: US$ 15/oz Metal recovery: 100% Royalty: 6 % Up to the date of the resource estimate, 311 holes were drilled on the property totalling 44,398 meters with 22,476 assays. For the current resource estimate process, some historic drill holes were excluded due to the lack of proper QA/QC procedures. As a result, 240 drill holes totalling 34,499 meters with 18,645 assays were used to construct the resource model. The following tables show highlights of historic drill holes. Table 5 Historic Drill Highlights at the Sinter Target




Table 6 Historic Drill Highlights at the Veta Norte Target (Source: Company)

Table 7 Historic Drill Highlights in the Central Area (Source: Company)

We believe that the historic drill holes not included in the current resource estimate

might represent high grade portions of the deposit. The current efforts of offsetting historic drill holes is focused on validating the historic data so that these high grade portions could be included in the estimate to increase the tonnage and grade of the resources. We

performed an internal resource calculation based on available drill data and came up

with 5.9 million tonnes containing 352,300 oz of gold equivalent, compared to the

current NI 43-101 estimate of 204,000 oz Au equivalent. The following table lists our estimates of Au equivalent oz in each zone.

Table 8 FRC Estimated Au oz in Each Zone Zone Au Equiv Oz

Central 26,983

Veta Cecilia 44,783

Veta Amanda 41,304Veta Sur 69,726

Sinter 169,511

Total 352,308




Current Work

In January 2011, the company started a new round of drilling campaigns on the La Josefina property. This drill program will focus on offsetting high grade historic drill intercepts which were not used in the current resource estimate. The program will also include step-out drilling at the Veta Amanda, Veta Cecilia, Veta Sur, Veta Ailin and Sinter targets. These targets were previously identified by drilling and remain open to expansion. In addition, several new targets within 15 kilometers of the current mineralized structures have been prioritized and will be drill-tested to confirm mineralization. In March 2011, some results from this year’s drilling at the Central Area were released.

Highlights include 1.94 meters grading 135.31 g/t gold, 39.72 g/t silver and 6.51% lead

and 2.38 meters (true width) of 188.52 g/t gold, 171.88 g/t silver and 14.84% lead. The Central Area has had limited historic drilling with high grade intercepts that were not included in the current resource estimate, as we discussed in the previous section. We

believe that the current drilling results confirmed the historic high grade intercepts and

will likely increase the resource at the La Josefina significantly.

Development Timeline

The following chart shows the company’s exploration progress in the past few years and plans for 2011.

Figure 5 Development Timeline

There are several key exploration objectives in 2011. The company will conduct more drilling to offset historic drill holes to validate these drill hole data in order to include them in an updated resource estimate. Further metallurgical studies will be completed this year




Other Projects

Management &

Directors

as part of the scoping study. Step-out drilling is also planned to expand the current resource at the La Josephina project. The company is aiming to initiate a feasibility study by the

end of 2011.

Bajo Pobre

The Bajo Pobre project is a system of low sulphidation epithermal gold/silver veins, located in the north central portion of the Deseado Massif in Santa Cruz province, Argentina. This property was discovered in the 1970s and sporadically explored subsequently by several companies and government entities. Since the 1990s, a series of systematic exploration programs have been conducted on the property, including detailed geologic mapping, surface sampling, trenching, IP and resistivity geophysical surveys and drilling. Hunt Mining entered into an agreement with FK Minera S.A. in 2007, to acquire a 100% interest in the Bajo Pobre property by making bi-annual payments and incurring exploration expenditures over a 5 year period.

El Gateado and Lobuno

The El Gateado and Lobuno property covers an area of 15,700 hectares contiguously on the eastern edge of the La Josefina Project. The property exhibits the same geological characteristics as the La Josefina project. This property is 100% owned by Hunt Mining’s Argentine subsidiary, Cerro Cazador S.A. Hunt Mining discovered the gold epithermal system in the property in 2006, and subsequently started an exploration program. No prior efforts had been made to explore precious metals on this property. The company conducted channel sampling, topographic survey, geologic mapping and 1,562 meters of diamond drilling.

El Tordillo, El Alazan, and El Overo

El Tordillo, El Alazan, and El Overo concessions were established by Hunt Mining in 2006. The property is a contiguous land package covering 29,800 hectares located 60 kilometers north east of the La Josefina project. Cerro Cazador owns 100% of the property. The potential of this property was identified based on the structural setting, known mineral trends and the apparent hydrothermal alteration interpreted from the satellite imagery. In 2009, the company performed surface mapping and sampling on the property to define the nature and scale of potential deposits.

New Acquisitions in 2011

In 2011, Hunt Mining continued to increase its land holdings in Santa Cruz by staking the Monzon I, Alisios I, Pampero I, Viva La Vida, and Mi Sueno claims. These prospective claims cover a total area of 24,855 hectares. These claims are all located in the Deseado Massif district and near established mineral projects.

We believe Hunt has a strong management team and board. Management and board

hold 29.5% of the outstanding shares. Biographies of management team members, as provided by the company, follow.




Tim Hunt –Executive Chairman of the Board Tim Hunt is the founder and president of Huntwood Industries, one of the largest building products manufacturers in the Western United States. Mr. Hunt has led the development of Huntwood Industries over the past 20 years – taking the business from a start-up venture to a significant middle-market enterprise. He has significant investment experience raising capital and negotiating private equity placements for numerous companies. During a period as a licensed securities broker, Mr. Hunt also cultivated and developed lasting alliances in the mining and investment community. He has been recognized for his leadership in the financial services sector and served on the board of directors for an Inland Northwest regional bank. As an avid believer of giving back to the community, Mr. Hunt and his wife Resa, also serve on the board of directors for the Dream Center Foundation. Matthew Hughes – Chief Executive Officer, President and Director Matthew J. Hughes is a geologist with twenty years of experience in the discovery, exploration and mining of precious metal projects in the United States, Argentina, China, Brazil and Uzbekistan. Mr. Hughes has been directly responsible for the discovery of numerous precious and base metal occurrences, including the producing Mina Martha high-grade silver lode in Santa Cruz, Argentina. Mr. Hughes has held senior level positions with Mundoro Mining, Inc., Yamana Resources Inc., Platero Resources Inc and Kinross Candelaria Mining Co. Matt has also provided geological services for Silver Standard Resources, Minas Buenaventura, NERCO Exploration and Atlas Precious Metals. He received his Bachelor of Science degree in geology from the University of Oregon. Vicki Streng – Interim Chief Financial Officer Ms. Streng has over fifteen years of accounting experience in the mining industry. Previously, she held the positions of Controller for Nevoro Inc., Controller for Minera Andes Inc. and Assistant Controller for Yamana Gold Inc. (formerly Yamana Resources Inc.). Bryn Harman, CFA, Director Mr. Bryn Harman has over fifteen years of experience in corporate finance and investment roles in Canada and the United States. Mr. Harman was the Director of Research for a national investment management firm, a senior equity analyst for a small cap investment advisory firm, a Listings Officer with the Alberta Stock Exchange and a corporate finance consultant for a Calgary-based Chartered Accounting firm. Mr. Harman is a Chartered Financial Analyst and holds a Bachelor of Commerce degree from the University of Saskatchewan. Jacques Perron, P.Eng., Director Mr. Perron is President and Chief Executive Officer of St. Andrew Goldfields Ltd. (SAS on TSX), a Canadian based gold producer and mining company with an extensive land package in the Timmins mining district, Northeastern Ontario. Mr. Perron obtained his B.Sc. in mining engineering at l’École Polytechnique in 1984 and until 2000 he held engineering or management positions with Noranda Inc., J.S. Redpath and Cambior. Following the acquisition of the Cambior Quebec base metal assets by Breakwater, he was appointed General Manager of Breakwater’s Quebec Operations. Between 2001 and 2004, he managed




all business activities at the Campbell Mine for Placer Dome and subsequently the Key Lake/McArthur River operations, followed by the BPEP project (business process enhancement project) for the uranium producer, Cameco. In 2004, he returned to Cambior as Vice President, Canada and was in charge of the Canadian assets including three gold mines and one niobium operation. When IAMGOLD acquired Cambior in 2006, the South American operations were added to his responsibilities. In October 2007, Mr Perron joined St Andrew Goldfields Ltd. Scott Brunsdon, MBA, Director Mr. Brunsdon has held senior positions with a number of public and private mining companies including: Chief Financial Officer, Corporate Secretary and Treasurer for Placer Dome US Inc.; Vice President and Chief Financial Officer of Placer Dome North America Ltd.; Senior Vice President and Chief Financial Officer of Dayton Mining Corporation; Vice President Finance and Corporate Development of Hillsborough Resources Limited; and Chief Financial Officer and Corporate Secretary of Revett Minerals Inc. Mr. Brunsdon holds an MBA (Finance and Accounting) from the University of British Columbia (1983) and a Bachelor of Commerce (Economics) from the University of Saskatchewan (1979). Darrick Hunt, CPA, Director Darrick Hunt is the Chief Financial Officer of Huntwood Industries, one of the largest building products manufacturers in the Western United States. He has significant experience in financing and over the years has secured several multi-million dollar debt and equity financings. He is experienced in investment management, and is also well versed in establishing international business operations. Mr. Hunt holds a license as a Certified Public Accountant under the Board of Accountancy of Washington State and has a Bachelor’s in Business Administration from Gonzaga University. Alan Chan - Director Alan Chan is a professional engineer and an entrepreneur. He graduated from University of Saskatchewan with a Bachelor of Science Degree in 1973. Since graduation, he worked in a number of industries and held various senior technical and management positions. In 1994, he founded China Pacific Industrial Corp to pursue joint venture projects in China. Since the mid 1990s, Mr. Chan has been involved in the establishment of a number of public companies and assisted them in completing a number of financings, mergers and acquisitions. Until August, 2006, he was the President and Chief Executive Officer of IVG Enterprises , listed on the TSX Venture Exchange. He was also a director of IVG Enterprises until August 30, 2007. He is a director, Chief Financial Officer and Secretary of Grand Power Logistics Group Inc., listed on the TSX Venture Exchange, and is a director of Ginger Beef Corporation, listed on the TSX Venture Exchange. Andrew Gertler, Director Andrew M. Gertler is a principal and Vice-President of Lester Asset Management Inc., a discretionary money management and advisory firm where he engages in portfolio management, merger and acquisition activities, corporate reorganization and private equity investments. Mr. Gertler received his Bachelor of Commerce (Finance) degree from McGill University in 1982 and in 1984 received his Master of Business Administration from the




Management

Rating

University of Western Ontario. Mr. Gertler was a director of ProMetic Life Sciences Inc., a biopharmaceutical and TSX listed corporation, from May, 2003 to May, 2005. From August, 2004 to February 2009, he has been a director of Neutron Enterprises Inc., which supplies web-based stock market stimulation and training products, and was Chief Executive Officer until June, 2006. Mr. Gertler has also been, since May, 2006 until June 2008, a director of Avicena Group, a biotechnology company listed in the US; and a director, since June, 2007, of Zi Corporation, a technology company providing software products for communication devises and listed on the TSX which was acquired by Nuance in April 2009. Danilo Silva, General Manager Argentina Danilo Silva has over 20 years of experience in the natural resources industry, including over 13 years as a geologist in base and precious metal mining exploration. Mr. Silva has served as Senior Geologist and Project Manager for Yamana Resources and Compania Minera Polimet, as Senior Geologist for Buenaventura, and as General Manager for Platero Resources. While serving in these positions, he discovered numerous viable gold and silver targets. He has led successful exploration and drill programs and has managed the advancement of numerous projects, including the discovery and development of the Mina Martha high-grade silver mine in Santa Cruz Province. Mr. Silva has served as a consulting geologist for several companies, including Placer Dome and Hidefield Gold. He holds a degree in Geological Science from the National University at Bahia Blanca in Argentina. Mel Klohn – Senior Technical Advisor

Mr. Klohn, is a Licensed Professional Geologist with 44 years of experience in minerals exploration, discovery and research. He has worked on precious metal, base metal, uranium and coal projects in various countries throughout the world. After serving 25 years as a Professional Exploration Geologist and Senior Research Scientist with Exxon Corporation, Mr. Klohn spent 10 years as Argentina project manager and Exploration Vice President for Yamana Gold Inc. Most recently, Mr. Klohn served as Exploration VP for Aura Gold Inc. and Nevoro Inc. He has also acted as a senior geological consultant, director and technical advisor for numerous junior and senior mining companies. Mr. Klohn has B.Sc. and M.Sc. degrees in geology, is a member of various professional geological societies, and is a Qualified Person as defined by Canadian National Instrument 43-101. We believe that one of the most important aspects of a junior mining company is its management. Therefore, we have developed a management rating system as a quantitative way to rate management based on a number of factors, including technical experience, the ability to raise financing, and management’s time commitment to the company. Our net

rating for HMX (see below) is 4.2 out of 5.0.




Strength of

Board

Financials

Management Rating

4.20

3.50

4.25

4.50

4.25

4.50

0% 20% 40% 60% 80% 100%

Net Rating

Team's focus on the company

Experience in projects similar to the current project

Track record in raising capital/working for public companies

Experience in putting mines to production/generating

prospects

Technical Experience

We believe that the Board of Directors of a company should include independent or unrelated directors who are free of any relationships or business that could materially interfere with the director’s ability to act in the best interest of the company. We looked at the company’s annual “Management Information Circular” to ensure that the company has an independent Board of Directors, Audit Committee and Compensation Committee.

Poor Good Excellent

Six of eight directors are independent �� None of the directors have filed for personal bankruptcy �� Two of the directors hold shares in the company �� The Audit committee is composed of three board members, three of which are independent

��

The Compensation committee is composed of three board members, two of which are independent

��

At the end of FY2010, the company had $6.36 million in cash. Working capital was $6.12 million. The company posted a net loss of $3.22 million (EPS: -$0.07) in FY2010. We estimate the company had a burn rate (cash spent on operating and investing activities) of $0.32 million per month in FY2010, compared to $0.24 million per month in FY2009. The following table shows a summary of the company’s cash and liquidity position.




Valuation &

Rating

Risks

($) 2009 2010

Working Capital 554,504 6,118,121

Current Ratio 1.18 13.02

LT Debt 125,000

Burn Rate/Month (incl exploration costs) (243,345) (315,065)

Cash from financing activities 5,603,187 6,976,711 Most recent financing - In November 2010, the company raised $8.53 million by issuing 28.42 million units at a unit price of $0.30. Each unit consisted of one common share and one half share purchase warrant (exercise price - $0.35, maturity date - November 2013).

Stock Options and Warrants: We estimate the company has 14.21 million warrants (weighted average exercise price - $0.35) and 6.76 million stock options (weighted average exercise price - $0.34) outstanding. As mentioned earlier, our internal resource calculation based on available drill data on La Josefina is 352,300 oz of Au equivalent. We have valued HMX based on a speculative resource of 0.50 mm oz Au equivalent. Based on a peer average enterprise value (EV) to resource of $86/oz (as shown below), we arrived at a fair value of $0.48 per share on HMX.

EV /

Resources (Au. Eq.)

1 Sona Resources Corporation TSXV: SYS $190.0

2 Golden Band Resources Inc. TSXV: GBN $135.6

3 Midway Gold TSXV: MDW $72.2

4 Sutter Gold Mining Inc TSXV: SGM $54.8

5 Hunt Mining TSXV: HMX $54.6

6 Evolving Gold1

TSX: EVG $51.1

7 Silverado Gold Mines Ltd. OTCBB: SLGLF $41.1

Average EV / Resources ($/oz) $85.6

Fair Value of HMX ($) $0.48

* Resources include all measured and indicated, and half of inferred and historical resources

1. EVG's Resource - FRC estimate

Company SYM

* We have assumed that HMX will end up with a 91% interest in La Josefina.

Based on our review of the company's projects and our valuation, we initiate coverage

on HMX with a BUY rating and fair value of $0.50 per share (Risk 5: Highly

Speculative).

The following risks, though not exhaustive, may cause our estimates to differ from actual results:

• The value of the company is dependent on commodity prices.

• The company does not currently have any operating mines.




• Access to capital and share dilution.




Fundamental Research Corp. Equity Rating Scale:

Buy – Annual expected rate of return exceeds 12% or the expected return is commensurate with risk Hold – Annual expected rate of return is between 5% and 12% Sell – Annual expected rate of return is below 5% or the expected return is not commensurate with risk Suspended or Rating N/A— Coverage and ratings suspended until more information can be obtained from the company regarding recent events. Fundamental Research Corp. Risk Rating Scale:

1 (Low Risk) - The company operates in an industry where it has a strong position (for example a monopoly, high market share etc.) or operates in a regulated industry. The future outlook is stable or positive for the industry. The company generates positive free cash flow and has a history of profitability. The capital structure is conservative with little or no debt. 2 (Below Average Risk) - The company operates in an industry where the fundamentals and outlook are positive. The industry and company are relatively less sensitive to systematic risk than companies with a Risk Rating of 3. The company has a history of profitability and has demonstrated its ability to generate positive free cash flows (though current free cash flow may be negative due to capital investment). The company’s capital structure is conservative with little to modest use of debt. 3 (Average Risk) - The company operates in an industry that has average sensitivity to systematic risk. The industry may be cyclical. Profits and cash flow are sensitive to economic factors although the company has demonstrated its ability to generate positive earnings and cash flow. Debt use is in line with industry averages, and coverage ratios are sufficient. 4 (Speculative) - The company has little or no history of generating earnings or cash flow. Debt use is higher. These companies may be in start-up mode or in a turnaround situation. These companies should be considered speculative. 5 (Highly Speculative) - The company has no history of generating earnings or cash flow. They may operate in a new industry with new, and unproven products. Products may be at the development stage, testing, or seeking regulatory approval. These companies may run into liquidity issues, and may rely on external funding. These stocks are considered highly speculative.

Disclaimers and Disclosure

The opinions expressed in this report are the true opinions of the analyst about this company and industry. Any “forward looking statements” are our best estimates and opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness. There is no guarantee that our forecasts will materialize. Actual results will likely vary. The analyst and Fundamental Research Corp. “FRC” does not own any shares of the subject company, does not make a market or offer shares for sale of the subject company, and does not have any investment banking business with the subject company. Fees were paid by HMX to FRC. The purpose of the fee is to subsidize the high costs of research and monitoring. FRC takes steps to ensure independence including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional Conduct. Additionally, analysts may not trade in any security under coverage. Our full editorial control of all research, timing of release of the reports, and release of liability for negative reports are protected contractually. To further ensure independence, BGL has agreed to a minimum coverage term including an initial report and three updates starting with this report. Coverage can not be unilaterally terminated. Distribution procedure: our reports are distributed first to our web-based subscribers on the date shown on this report then made available to delayed access users through various other channels for a limited time. The performance of FRC’s research is ranked by Investars. Full rankings and are available at www.investars.com. The distribution of FRC’s ratings are as follows: BUY (72%), HOLD (7%), SELL (4%), SUSPEND (17%). To subscribe for real-time access to research, visit http://www.researchfrc.com/subscribe.php for subscription options. This report contains "forward looking" statements. Forward-looking statements regarding the Company and/or stock’s performance inherently involve risks and uncertainties that could cause actual results to differ from such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company's products/services in the marketplace; acceptance in the marketplace of the Company's new product lines/services; competitive factors; new product/service introductions by others; technological changes; dependence on suppliers; systematic market risks and other risks discussed in the Company's periodic report filings, including interim reports, annual reports, and annual information forms filed with the various securities regulators. By making these forward looking statements, Fundamental Research Corp. and the analyst/author of this report undertakes no obligation to update these statements for revisions or changes after the date of this report. A report initiating coverage will most often be updated quarterly while a report issuing a rating may have no further or less frequent updates because the subject company is likely to be in earlier stages where nothing material may occur quarter to quarter. Fundamental Research Corp DOES NOT MAKE ANY WARRANTIES, EXPRESSED OR IMPLIED, AS TO RESULTS TO BE OBTAINED FROM USING THIS INFORMATION AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OR FITNESS FOR A PARTICULAR USE. ANYONE USING THIS REPORT ASSUMES FULL RESPONSIBILITY FOR WHATEVER RESULTS THEY OBTAIN FROM WHATEVER USE THE INFORMATION WAS PUT TO. ALWAYS TALK TO YOUR FINANCIAL ADVISOR BEFORE YOU INVEST. WHETHER A STOCK SHOULD BE INCLUDED IN A PORTFOLIO DEPENDS ON ONE’S RISK TOLERANCE, OBJECTIVES, SITUATION, RETURN ON OTHER ASSETS, ETC. ONLY YOUR INVESTMENT ADVISOR WHO KNOWS YOUR UNIQUE CIRCUMSTANCES CAN MAKE A PROPER RECOMMENDATION AS TO THE MERIT OF ANY PARTICULAR SECURITY FOR INCLUSION IN YOUR PORTFOLIO. This REPORT is solely for informative purposes and is not a solicitation or an offer to buy or sell any security. It is not intended as being a complete description of the company, industry, securities or developments referred to in the material. Any forecasts contained in this report were independently prepared unless otherwise stated, and HAVE NOT BEEN endorsed by the Management of the company which is the subject of this report. Additional information is available upon request. THIS REPORT IS COPYRIGHT. YOU MAY NOT REDISTRIBUTE THIS REPORT WITHOUT OUR PERMISSION. Please give proper credit, including citing Fundamental Research Corp and/or the analyst, when quoting information from this report. The information contained in this report is intended to be viewed only in jurisdictions where it may be legally viewed and is not intended for use by any person or entity in any jurisdiction where such use would be contrary to local regulations or which would require any registration requirement within such jurisdiction.

hunt mining corp (tsx-v: hmx) - initiating coverage; … la josefina project covers 52,800 hectares...

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