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Stroud Resources Ltd.(SRD:TSX-V) review and analysis

Contributed by eResearch

By eResearch

THE COMPANY

Stroud Resources Ltd. is a Canadian mineral exploration and development company with properties in two mining-friendly jurisdictions: northern Ontario (gold), and Mexico (silver/gold). Stroud also has an interest (3.75%) in six natural gas and natural gas condensate wells in Alberta, which provide the company with cash flow to go towards operating expenses.

The Company owns a 100% interest in the Santo Domingo epi-thermal silver-gold project in central Mexico, and has an option to acquire a 100% interest in the Santa Cruz silver project, also in Mexico. Stroud’s assets also include 100% interests in the following Ontario properties; (1) the Hislop gold property, near Timmins; and (2) the Leckie gold property near Temagami (close to North Bay).

STRATEGY

Mining

Like so many junior mining exploration companies, Stroud requires continual financing. The Company is considering two strategies: (1) Return to the capital markets for fresh funds; and/or (2) Find a suitable joint-venture partner to provide funds in return for an ownership interest.

Oil & Gas

Stroud intends to stand pat for now with respect to its oil & gas activities.

TARGET PRICE

We have derived the following intrinsic values for Stroud using various valuation methodologies, as set out fully in our Valuation section beginning on page 5.

- Peer Comparison - Market Cap/Resource: $0.16 per share

- Peer Comparison - Property Valuation: $0.16 per share

- Per Attributable Resource Ounce Valuation: $0.25 per share

- Oil & Gas Cash Flow Multiple Valuation: $0.01 per share

From these intrinsic value calculations, we have chosen a 12-month Target Price for the shares of Stroud Resources Ltd. of $0.20.

VALUATION

We provide the following valuation methods to determine an appropriate value for Stroud’s shares:

1. Market Capitalization Per Silver Equivalency Resource Valuation;

2. Mining Property Ratio Valuation;

3. Per Attributable Resource Ounce Valuation; and

4. Oil & Gas Cash Flow Multiple.

RECOMMENDATION

We stated in our March 2, 2010 Initiating Report that we considered Stroud to be an undiscovered stock with the retail investor. There are, however, three influential institutional shareholders of Stroud, namely Sprott, Dundee, and Pinetree, which recognize the inherent potential poised within this Company. If management can unlock that potential, the shares could easily surpass our 12-month Target Price of $0.20.

We continue to recommend Stroud as a Speculative Buy for risk-tolerant investors.

eResearch Analyst:

Bob Weir, B.Sc., B.Comm, CFA