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Candente Copper Stock (TSX:DNT) – Investment Analysis

Common Stock: Candente Copper (TSX:DNT)

Current Market Price: $0.19 USD

Market Capitalization: $47.7 million USD

**Note: All values in this article are expressed in United States Dollars (USD) unless otherwise noted.

Candente Copper (TSX:DNT) - Stock Chart
Candente Copper (TSX:DNT) – Stock Chart

Candente Copper Stock – Summary of the Company

Candente Copper is a mineral exploration company focused on the acquisition, exploration, and development of mineral properties. The company is currently focused on the Cañariaco project located in northern Peru. The project is in the feasibility stage. The current mineral resource estimate shows significant amounts of copper in addition to gold and silver. Candente Copper was founded in 1997 and is headquartered in Vancouver, Canada.

Revenue and Cost Analysis

Candente Copper 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 year end 2019 Candente had a net loss of $794 thousand, an increase compared to $337 thousand in 2018.

Candente Copper – Royalty and Streaming Agreements

The company’s most recent audited financials do not mention any royalty or streaming agreements.

Candente Copper – Mineral Resources

The current mineral resource estimate shows the Cañariaco project having 7.5 billion pounds of copper, 1.6 million ounces of gold and 45.2 million ounces of silver.

Candente Copper - Cañariaco Project - Resource Estimate
Candente Copper – Cañariaco Project – Resource Estimate

Balance Sheet Analysis

Candente has a weak balance sheet. Their long term exploration asset is unproven. The company has a very weak liquidity position and will need to raise additional capital, potentially impairing their balance sheet further.

Candente Copper – Debt Analysis

As of year-end 2019 the company does not have any debt outstanding.

Candente Copper Stock – Share Dynamics and Capital Structure

As of February 2021 the company has 251.1 million common shares outstanding. In addition they have 13.4 million options and 10 million warrants outstanding. Fully diluted shares outstanding is around 274.5 million shares.

Candente Copper 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 Candente Copper have not made any direct purchases or sales of the company’s stock recently, providing no signal to investors. However they have exercised options and warrants.

Candente Copper Stock (TSX:DNT) - Insider Activity
Candente Copper Stock (TSX:DNT) – Insider Activity

Candente Copper Stock – 3 Metrics to Consider

Debt to Equity Ratio

Total Liabilities/Total Share Holder Equity

$1.4 million / $62.6 million = .02

A debt to equity ratio of .02 indicates that Candente uses almost no debt in its capital structure and relies almost entirely on equity financing to fund itself.

Working Capital Ratio

Current Assets/Current Liabilities

$108 thousand / $1.4 million =.08

A working capital ratio of .08 indicates an extremely weak liquidity position. Candente will need to raise additional capital in order to continue as a going concern.

Price to Book Ratio

Current Share Price/Book Value per Share.

$0.19 / $0.23 = .83

Based on fully diluted shares outstanding Candente Copper has a book value per share of $0.23 cents per share. At the current market price this implies a price to book ratio of .83, meaning Candente Copper stock currently trades at a discount 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.

Candente Copper Stock – Summary and Conclusions

Candente Copper is a high potential exploration stage project, if its current mineral resource estimate is to be believed. The Cañariaco project in Peru could hold a huge deposit of copper in addition to significant amounts of gold and silver.

However the company is in very poor financial health. Their liquidity position is extremely weak and they will need to raise additional capital in order to survive. Furthermore exploration expenditure is very low and the company has not made any significant advancements in years.

Although Candente Copper has a lot of potential, I have no reason to believe that potential will be realized, since the project appears to be stalled. I would prefer to invest in better funded and more active exploration companies, such as O3 Mining.

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

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