Common Stock: New Pacific Metals (TSXV: NUAG)
Current Market Price: $6.35 CAD
Market Capitalization: $967 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
New Pacific Metals Stock – Summary of the Company
New Pacific Metals is a precious metals exploration company focused on the acquisition, exploration, and development of precious metals properties in Bolivia, Canada, and China. Their flagship project is the Silver Sand project in Bolivia. In April 2020, they released a NI 43 resource estimate and continue to actively advance the project. New Pacific Metals was founded in 1972 and is headquartered in Vancouver Canada.
Revenue and Cost Analysis
New pacific does not own 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 2020, total operating expenses were $4.4 million. The company’s largest expenses were compensation related, including share based compensation.
New Pacific Metals – Royalty and Streaming Agreements
The company’s most recent audited annual report makes no mention of any royalty or streaming agreements.
New Pacific Metals – Mineral Resources
The Silver Sand deposit has measured and indicated resources of 155.8 million ounces of silver.
Balance Sheet Analysis
New Pacific has a strong balance sheet. The have a very strong liquidity position and no long-term liabilities.
New Pacific Metals – Debt Analysis
As of the fiscal year end 2020, New Pacific does not have any debt outstanding.
New Pacific Metals Stock – Share Dynamics and Capital Structure
New Pacific has 152.3 million common shares outstanding. They also have options and restricted share units outstanding totaling 5.6 million. Fully diluted shares outstanding is around 157.9 million shares.
New Pacific does not have an overly dilutive capital structure, making it acceptable for common shareholders.
New Pacific Metals 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 New Pacific Metals have been net sellers of the company’s stock in the recent past. This is generally viewed as a bearish signal.
New Pacific Metals Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$2 million/$176 million = .01
A debt to equity ratio of .01 indicates that New Pacific uses an irrelevant amount of debt in its capital structure and relies entirely on equity financing to fund itself.
Working Capital Ratio
Current Assets/Current Liabilities
$73.7 million/$2million = 36
A working capital ratio of 36 indicates a very strong liquidity position. New Pacific should not have problems meeting its near-term obligations.
Price to Book Ratio
Current Share Price/Book Value per Share.
$6.35/$1.12 = 5.6
Based on fully diluted shares outstanding New Pacific has a book value per share of $1.12. At the current market price this implies a price to book ratio of 5.6, meaning New Pacific 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.
New Pacific Metals Stock – Summary and Conclusions
New Pacific Metals owns a significant silver deposit in Bolivia. The Silver Sands project is one of the largest silver discoveries in the past several decades. The company is very healthy financially. They have a strong liquidity position and no debt or long term liabilities. The capital structure is favorable for common shareholders, with a relatively small amount of options outstanding and no warrants.
The company’s stock appears to be trading at a very fair valuation. The price has increased around 1,000% since the beginning of 2017. Although I like the project, I would prefer to invest in silver producers with a similar market cap, such as Fortuna Silver. New Pacific expects to release a PEA in early 2021. After the PEA is released I will reconsider my investment decision.
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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