Common Stock: NuLegacy Gold (TSXV:NUG)
Current Market Price: $ 0.12 CAD
Market Capitalization: $ 58.6 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
NuLegacy Gold Stock – Summary of the Company
NuLegacy Gold is a precious metals exploration company focused on the acquisition, exploration, and development of gold properties in Nevada. They currently own several exploration stage properties in Eureka county Nevada, within Nevada’s famous Cortez gold complex. NuLegacy Gold was founded in 2009 and is headquartered in Vancouver, Canada.
Revenue and Cost Analysis
NuLegacy Gold 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 March 30, 2020 NuLegacy had a net loss of $ 1.8 million, a significant decrease compared to $ 3.5 million the previous year. The company invested $ 2.5 million in exploration in 2020, a decline from $ 5.2 million the previous year. These were classified as investing expenses.
NuLegacy Gold – Royalty and Streaming Agreements
The Iceberg property in Nevada is subject to a 2% net profits royalty payable to Barrick Gold. The Wilson property in Nevada is subject to a 3% royalty.
Balance Sheet Analysis
NuLegacy Gold has a sound balance sheet. They have almost no liabilities as of the fiscal year end March 2020 and have sufficient liquidity in the near term to carry out their operations.
NuLegacy Gold – Debt Analysis
As of the fiscal year end March 2020 the company does not have any debt outstanding.
NuLegacy Gold Stock – Share Dynamics and Capital Structure
As of December 2020 NuLegacy has 488.8 million common shares outstanding. In addition they have 35.6 million options and 90.6 million warrants outstanding. Fully diluted shares outstanding is around 615 million shares.
NuLegacy has a dilutive capital structure. Investors should carefully consider the effects of dilution before investing.
NuLegacy Gold Stock – Dividends
The company does not currently pay a dividend and is unlikely to do so for the foreseeable future.
Management – Skin in the game
Insiders at NuLegacy Gold have been net buyers of the company’s stock in the recent past. However in my opinion the amounts have been too small to provide any signal to investors.
NuLegacy Gold Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$153 thousand / $ 34.5 million = .01
A debt to equity ratio of .01 indicates that NuLegacy uses almost no debt in its capital structure and relies entirely on equity financing to fund itself.
Working Capital Ratio
Current Assets/Current Liabilities
$5.4 million / $153 thousand = 36
A working capital ratio of 36 indicates an extremely strong liquidity position. NuLegacy should not have problems meeting its near term obligations.
Price to Book Ratio
Current Share Price/Book Value per Share.
$ 0.12/ $ 0.06 = 2.1
Based on fully diluted shares outstanding NuLegacy Gold has a book value per share of $0.06. 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.
NuLegacy Gold Stock – Summary and Conclusions
NuLegacy is a solid opportunity for very early stage exploration investors. The project still does not have any resource estimates, but the company is actively exploring its properties. NuLegacy is sound financially, with a strong liquidity position and almost no liabilities.
However their capital structure is dilutive, and they will eventually need to raise additional capital to continue advancing their project. I am not willing to invest in NuLegacy Gold stock yet. It is simply too early stage and there is too much potential dilution too early. I will reconsider investing should the project make positive advancements, such as a mineral resource estimate and should the potential dilution be resolved. Investors can compare NuLegacy Gold stock to other Nevada gold exploration companies such as Canarc Resources (now Canagold Resources).
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.
