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Hannan Metals Stock (TSXV:HAN) – Investment Analysis

Common Stock: Hannan Metals (TSXV:HAN)  

Current Market Price: $0.47 CAD

Market Capitalization: $38.2 million CAD

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

Hannan Metals (TSXV:HAN) - Stock Chart
Hannan Metals (TSXV:HAN) – Stock Chart

Hannan Metals Stock – Summary of the Company

Hannan Metals is a mineral exploration company focused on the acquisition, exploration, and development of precious metals properties. They have two main exploration stage projects; The San Martin Silver-Copper project in Peru and the Clare Silver project in Ireland. Hannan Metals was founded in 2017 and is headquartered in Vancouver, Canada.

Revenue and Cost Analysis

Hannan Metals 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 May 2020 Hannan had a net loss of $1.2 million, an increase compared to $1 million the previous year.

Hannan Metals Royalty and Streaming Agreements

The company’s Clare project in Ireland is subject to a 2% net smelter royalty, payable to Lundin Mining.

Balance Sheet Analysis

Hannan Metals has a sound balance sheet. They have no long term liabilities and sufficient liquidity in the near term.

Hannan Metals Debt Analysis

As of the fiscal year end May 2020 Hannan has a promissory note payable valued at $215 thousand.

Hannan Metals - Debt Table
Hannan Metals – Debt Table

Hannan Metals StockShare Dynamics and Capital Structure

As of January 2021 the company has 81.4 million common shares outstanding. In addition they have 5.6 million options and 24.2 million warrants outstanding. Fully diluted shares outstanding is around 111.2 million shares.

Hannan has a dilutive capital structure. Investors should carefully consider the effects of dilution before investing.

Hannan Metals StockDividends

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

Management – Skin in the game

Insiders at Hannan Metals have been net sellers of the company’s stock in the recent past. This is generally viewed as a bearish signal by investors.

Hannan Metals Stock (TSXV:HAN) - Insider Activity
Hannan Metals Stock (TSXV:HAN) – Insider Activity

Hannan Metals Stock3 Metrics to Consider

Debt to Equity Ratio

Total Liabilities/Total Share Holder Equity

$ 469 thousand / $ 6 million = .08

A debt to equity ratio of .08 indicate that Hanna uses very little debt in its capital structure and relies almost entirely on equity financing for funding.

Working Capital Ratio

Current Assets/Current Liabilities

$ 1.8 million / $469 thousand = 3.8

A working capital ratio of 3.8 indicates a strong liquidity position. Hannan Metals should not have a problem meeting its near term obligations.

Price to Book Ratio

Current Share Price/Book Value per Share.

$0.47 / $0.05 = 8.7

Based on fully diluted shares outstanding Hannan Metals has a book value per share of $0.05 per share. At the current market price this implies a price to book ratio of 8.7, meaning Hannan Metals stock currently trades at a significant premium to the book value of the company.

Gold and Silver Market – Economic Factors and Competitive Landscape

Gold and 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 gold and silver companies are poised to benefit from a strong economic tailwind.

Hannan Metals StockSummary and Conclusions

Hannan Metals is an interesting exploration stage opportunity. They have two properties, both of which potentially have silver. The company is actively exploring and is financially healthy in the near term.

Hannan Metals stock may be an acceptable allocation for highly risk tolerant investors, within a well-diversified precious metals portfolio. The projects are very early stage and likely to fail. However given the lack of silver exploration and mining investment opportunities, the optionality of one company with two different silver prospects is intriguing. Investors can also consider other silver explorers, such as Dolly Varden.

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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