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February 14, 2012

XMET Inc. (XMTTF): A Potential Takeover Target

XMET Inc. (OTCQX: XMTTF, TSX-V:XME), a gold exploration company focused on advanced projects in Canada, similar to companies like Seabridge Gold Inc. (TSE: SEA, AMEX:SA) and Rubicon Minerals Corp (TSE: RMX, AMEX:RBY), appears to be significantly undervalued at its current share price and could become a takeover target over the next year. Meanwhile, the firm differs from many others in the space with its efficient management and solid financing.

Well-Funded with Promising Properties

XMET is a rare well-funded mineral exploration company. During the quarter ended September 31, 2011, XMET reported current assets of nearly $5 million, including over $2 million in cash, compared to less than $120,000 in total liabilities. Unlike many early stage mineral exploration companies, the company appears to manage its financing and dilution very prudently.

The company also has very promising properties in its portfolio and has been quickly and efficiently adding ounces. After going public in June of 2010, the firm published a NI 43-101 report in September showing 525,000 ounces of gold resources and in November of 2011 Xmet updated its NI 43-101 resource calculation to 853,000 ounces of gold. The company has nearly completed its 13,000 metre Phase 2 drill program which is aimed at bringing the resource beyond the million ounce mark including a minimum of 100,000 indicated ounces. Xmet expects the Phase 2 drill campaign to be completed in early spring of 2012 and plans on working on some metallurgy studies to assist the project moving forward towards production. After this work is complete, the firm plans to finalize its preliminary economic analysis that could open the door to both a higher valuation and a potential takeover by larger players in the industry.

Undervalued Potential Takeover Target

Currently, XMET is trading near its 52-week low with a valuation of less than $6 per ounce of gold in its potential reserves. This compares to other industry players that are trading anywhere between $20 and $50 per ounce. And the company’s diligent management, prudent financing, and efficient drilling should certainly command a premium in the market.

The company’s Phase 1 drilling program added 25 ounces of gold per meter drilled with costs that averaged less than $100 per meter. These are some of the lowest costs in the country and resulted in discovery costs averaging less than $4.00 per ounce of gold. Management also has ample “skin in the game” with an ownership stake greater than 20%.

Ultimately, all of these factors help make the company a strong takeover target, particularly when its preliminary economic analysis is completed in six months or so.

A Great Investment Opportunity

XMET Inc. (OTCQX: XMTTF, TSX-V:XME), is a mineral exploration company with strong potential upside given its diverse set of properties, significant undervaluation and many near-term catalysts. These factors combine to make it a potential takeover target over the coming year, which makes it definitively worth a look for investors.

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