Common Stock: Calibre Mining (TSX: CXB)
Current Market Price: $1.375 USD
Market Capitalization: $ 451.5 million USD
**Note: All values in this article are expressed in United States Dollars (USD) unless otherwise noted. Due to the nature of the company’s operations the financial figures discussed in this article are based on the company’s unaudited Q2 financials as the fiscal year 2019 is not reflective of the company’s current position.
Calibre Mining Stock – Summary of the Company
Calibre Mining is a gold mining and exploration company focused on Nicaragua. At the end of 2019 the company purchased 2 mines from B2Gold, The El Limon Mine and The La Libertad Mine. They also own several exploration stage properties in Nicaragua. Calibre was founded in 2007 and is headquartered in Vancouver Canada. As of year-end 2019 the company had 1,135 employees and over 1,700 contractors.
Revenue and Cost Analysis
Total revenue for the first half of 2020 was $77.2 million. Net operating income was $29.1 million for the period and the company earned net income of $7.2 million.
Calibre Mining – Royalty and Streaming Agreements
Some of the claims on the company’s exploration stage Borosi property are subject to a 2% net smelter royalty.
Calibre Mining – Mineral Resources
Calibre has indicated resources totaling 1.35 million ounces of gold.
Balance Sheet Analysis
Calibre has a sound balance sheet with sufficient short term liquidity and manageable liability levels. Their most notable liability is a deferred payment to B2Gold valued at $14.6 million. Although this payment significant in the short term, it is not concerning from a long term perspective.
Calibre Mining – Debt Analysis
As of June 30, 2020, the company has no interest bearing debt outstanding.
Calibre Mining Stock – Share Dynamics and Capital Structure
Calibre has 328 million common shares outstanding. They also have a significant amount of warrants, options, and restricted share units outstanding. Fully diluted shares outstanding is around 377.3 million shares.
Calibre has a dilutive capital structure. Investors should carefully consider the effects of dilution before investing.
B2Gold owns a 34% interest in Calibre Mining.
Calibre Mining Stock – Dividends
The company does not currently pay a divided and management has stated that they plan to retain any earnings for the foreseeable future.
Management – Skin in the game
Insiders at Calibre Mining have been net buyers of the company’s stock in the recent past. This is generally viewed as a bullish signal for the stock.
Calibre Mining Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$113 million/$164.2 million = .69
A debt to equity ratio of .69 indicates that Calibre uses both debt and equity in its capital structure and is not overly reliant on any one form of financing.
Working Capital Ratio
Current Assets/Current Liabilities
$68.3 million/$32.4 million = 2.1
A working capital ratio of 2.1 indicates sufficient short term liquidity. Calibre should not have a problem meeting its obligations in the near term.
Price to Book Ratio
Current Share Price/Book Value per Share.
$1.38/$.44 = 3.15
Based on fully diluted shares outstanding Calibre Mining has a book value per share of $.44. At the current market price this implies a price to book ratio of 3.15, meaning Calibre’s stock currently trades at a premium to the book value of the company.
Gold Market – Economic Factors and Competitive Landscape
Gold 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 gold companies are poised to benefit from a strong economic tailwind.
Calibre Mining Stock – Summary and Conclusions
Calibre Mining owns 2 operating mines in a historic gold producing region. The company appears to be profitable and has significant exploration upside. The company is in a sound financial position with sufficient liquidity and manageable liabilities.
However, Calibre has a dilutive capital structure that is not share holder friendly. Jurisdictional risk is a major concern for investors in Calibre. In 2018 mining operations were shut down temporarily due to social unrest. In addition, sanctions have been imposed on certain Nicaraguan officials by the United Stated due to human rights violations.
Although Calibre’s assets are appealing, I am not comfortable with the company’s capital structure and jurisdiction. For now, I would prefer to allocate to comparable projects in jurisdictions where I have more experience investing, such as Jaguar Mining in Brazil. However, I will continue to monitor the company and learn more about investing in Nicaragua. If I become more comfortable with the jurisdiction and if potential dilution is reduced, I will reconsider investing.
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.
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