0

Arizona Silver Exploration Stock (TSXV:AZS) – Investment Analysis

Common Stock: Arizona Silver Exploration (TSXV: AZS)

Current Market Price: $ 0.265 CAD

Market Capitalization: $ 15.3 million CAD

**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.

Arizona Silver Exploration (TSXV:AZS) - Stock Chart
Arizona Silver Exploration (TSXV:AZS) – Stock Chart

Arizona Silver Exploration Stock – Summary of the Company

Arizona Silver Exploration is a precious metals exploration company focused on the acquisition, exploration, and development of Silver properties. The company has an interest in four exploration stage properties in Arizona and Nevada in The United States.Arizona Silver Exploration was founded in 2011 and is headquartered in Vancouver, Canada.

Arizona Silver Exploration - Property Map
Arizona Silver Exploration – Property Map

Revenue and Cost Analysis

Arizona Silver Exploration does not have any properties that are currently producing and therefore does not have any revenue. The company consistently runs a net loss and is likely to continue to do so for the foreseeable future.

For the fiscal year end August 2020 Arizona Silver Exploration had a net loss of $ 1.2 million, a significant increase compared to a loss of $ 461 thousand the precious year. The company’s largest expenses were compensation related expenses, including share based compensation. Exploration expenses were negligible in both years.

Arizona Silver Exploration – Royalty and Streaming Agreements

The Sycamore Canyon property is subject to a 2% net smelter royalty.

Balance Sheet Analysis

Arizona Silver Exploration has a simple but sound balance sheet. They have no long term liabilities and sufficient liquidity in the near term.

Arizona Silver Exploration – Debt Analysis

As of the fiscal year end August 2020 the company does not have any debt outstanding.

Arizona Silver Exploration Stock – Share Dynamics and Capital Structure

As of January 2021 the company has 57.8 million common shares outstanding. In addition they have 5.3 million options and 6 million warrants outstanding. Fully diluted shares outstanding is around 69.1 million shares.

Arizona Silver Exploration Stock – Dividends

The company does not pay a dividend and is unlikely to do so for the foreseeable future.

Management – Skin in the game

Insiders at Arizona Silver Exploration have been net buyers of the company’s stock in the recent past. This is generally viewed as a bullish signal by investors.

Arizona Silver Exploration Stock (TSXV:AZS) - Insider Activity
Arizona Silver Exploration Stock (TSXV:AZS) – Insider Activity

Arizona Silver Exploration Stock – 3 Metrics to Consider

Debt to Equity Ratio

Total Liabilities/Total Share Holder Equity

$ 140 thousand / $ 4.3 million = .03

A debt to equity ratio of .03 indicates that Arizona Silver Exploration uses almost no debt in its capital structure and relies entirely on equity financing to fund itself.

Working Capital Ratio

Current Assets/Current Liabilities

$877 thousand / $ 140 thousand = 6.3

A working capital ratio of 6.3 indicates a strong liquidity position. Arizona Silver Exploration should not have problems meeting its near term obligations.

Price to Book Ratio

Current Share Price/Book Value per Share.

$0.265 / $0.06 = 4.3

Based on fully diluted shares outstanding Arizona Silver Exploration has a book value per share of $ 0.06. At the current market price this implies a price to book ratio of 4.3, meaning the company’s stock currently trades at a premium to the book value of the company.

Silver Market – Economic Factors and Competitive Landscape

Silver mining is a highly competitive, capital intensive business. The company will need to compete fiercely for both new projects and capital. However, given the current economic environment of global money printing and zero or negative interest rates, it would appear silver companies are poised to benefit from a strong economic tailwind.

Arizona Silver Exploration Stock – Summary and Conclusions

Arizona Silver Exploration stock is not investable in my opinion. The company has significant dilutive instruments outstanding and will certainty need to raise addition capital, further diluting existing shareholders. Most importantly it is an exploration company with no exploration expense. It is hard to make a discovery if you are not exploring.

Investors should consider other exploration stage projects in the region, such as CanaGold Resources (formerly Canarc).

Disclaimer

This is not investment advice. Nothing in this analysis should be construed as a recommendation to buy, sell, or otherwise take action related to the security discussed. If I own a position in the security discussed, I will clearly state it.

This is not intended to be a comprehensive analysis and you should not make an investment decision based solely on the information in this analysis. I hope this serves as a useful starting point for a more comprehensive analysis, and hopefully draws attention to aspects of the company that were overlooked or merit further investigation. This is by no means intended to be a complete analysis. Again, this is not investment advice, do your own research.

Patrick Flood, CFA

Leave a Reply

Your email address will not be published. Required fields are marked *