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Gungnir Resources Stock (TSXV:GUG) – Investment Analysis

Common Stock: Gungnir Resources (TSXV:GUG)

Current Market Price: $0.07 CAD

Market Capitalization: $5.1 million CAD

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

Gungnir Resources (TSXV:GUG) - Stock Chart
Gungnir Resources (TSXV:GUG) – Stock Chart

Gungnir Resources Stock – Summary of the Company

Gungnir Resources is a precious metals exploration company focused on the acquisition, exploration, and development of precious metals properties. The company’s main focus is Sweden, where they have 3 exploration stage properties. They also own 1 property in Canada. Gungnir Resources was founded in 1966 and is headquartered in British Columbia, Canada.

Revenue and Cost Analysis

Gungnir Resources 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 9 month period ending September 30, 2020 Gungnir had a net loss of $346 thousand.

Gungnir Resources – Royalty and Streaming Agreements

The company’s Kenville property in British Columbia is subject to a 4% gross metals royalty. Their Knaften-Nordanas property in Sweden is subject to a 2.4% net smelter royalty. The company’s other two properties in Sweden are not subject to any royalty agreements.

Balance Sheet Analysis

Gungnir Resources has a strong balance sheet. They have a long term exploration asset and a strong liquidity position. The company has no long term liabilities.

Gungnir Resources – Debt Analysis

As of September 2020 the company does not have any debt outstanding

Gungnir Resources Stock – Share Dynamics and Capital Structure

As of September 2020 the company has 72.7 million common shares outstanding. In addition the have 5.2 million options and 22 million warrants outstanding. Fully diluted shares outstanding is around 99.9 million shares.

Gungnir Resources has a dilutive capital structure. Investors should consider the effects of dilution before investing.

Gungnir Resources 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 Gungnir Resources have not made any relevant purchases or sales of the company’s stock in the recent past, providing no signal for investors.

Gungnir Resources Stock – 3 Metrics to Consider

Debt to Equity Ratio

Total Liabilities/Total Share Holder Equity

$39 thousand / $3.3 million = .01

A debt to equity ratio of .01 indicates that Gungnir Resources uses basically no debt in its capital structure and is reliant entirely on equity financing for funding.

Working Capital Ratio

Current Assets/Current Liabilities

$1.2 million / $39 thousand = 30

A working capital ratio of 30 indicates a very strong liquidity position. Gungnir should not have problems meeting its near term obligations.

Price to Book Ratio

Current Share Price/Book Value per Share.

$0.07 /  $0.032 = 2.1

Based on fully diluted shares outstanding Gungnir Resources has a book value per share of $0.032. At the current market price this implies a price to book ratio of 2.1, meaning the company’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.

Gungnir Resources Stock – Summary and Conclusions

Gungnir is a decent exploration play for highly risk tolerant investors looking to diversify geographically, as there are not many projects focused on Sweden. However other than geographical diversification, I don’t see anything about the company compelling enough to make me want to invest.

They have a dilutive capital structure and very little exploration expense. Investors can compare Gungnir Resources stock to other projects in the region, such as FireFox Gold.

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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