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Pucara Gold Stock (TSXV:TORO) – Investment Analysis

Common Stock: Pucara Gold (TSXV:TORO)

Current Market Price: $0.265 CAD

Market Capitalization: $16.6 million CAD

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

Pucara Gold (TSXV:TORO) - Stock Chart
Pucara Gold (TSXV:TORO) – Stock Chart

Pucara Gold Stock – Summary of the Company

Pucara Gold is a mineral exploration company focused on the acquisition, exploration, and development of gold properties. The company Is entirely focused on Peru, where they own a portfolio of nine exploration stage properties. Pucara Gold was founded in 2011 and is headquartered in Vancouver, Canada.

Pucara Gold - Property Map
Pucara Gold – Property Map

Revenue and Cost Analysis

Pucara 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 6 months ending September 30, 2020, the company had a net loss of $2.3 million, an increase compared to $1.2 million for the same period in 2019. Their largest expenses in both years were exploration related, which totaled $522 thousand and $621 thousand for the 6 months periods in 2020 and 2019 respectively.

Pucara Gold – Royalty and Streaming Agreements

Most of the company’s properties are subject to net smelter royalty’s ranging from 0.5% to 2.5%.

Balance Sheet Analysis

Pucara has a simple and sound balance sheet. They have a strong liquidity position and very low liability levels.

Pucara Gold – Debt Analysis

As of September 30, 2020 the company does not have any debt outstanding.

Pucara Gold Stock – Share Dynamics and Capital Structure

As of February 2021 the company has 62.6 million common shares outstanding. In addition they have 6 million warrants and 4.9 million options outstanding. Fully diluted shares outstanding is around 73.5 million shares.

Pucara Gold Stock – Dividends

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

Pucara Gold Stock – 3 Metrics to Consider

Debt to Equity Ratio

Total Liabilities/Total Share Holder Equity

$460 thousand / $8.5 million = .05

A debt to equity ratio of .05 indicates that Pucara uses very little debt in its capital structure and relies almost entirely on equity financing for funding.

Working Capital Ratio

Current Assets/Current Liabilities

$8.6 million / $453 thousand = 19

A working capital ratio of 19 indicates a very strong liquidity position. Pucara should not have problems meeting its near term obligations.

Price to Book Ratio

Current Share Price/Book Value per Share.

$0.265 / $0.115 = 2.3

Based on fully diluted shares outstanding, Pucara Gold has a book value per share of $0.115. At the current market price this implies a price to book ratio of 2.3, meaning Pucara Gold 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.

Pucara Gold Stock – Summary and Conclusions

Pucara Gold is an interesting gold exploration play. They own a portfolio of assets in a proven gold region in Peru, and their combined portfolio makes for a sizeable total land package. The company recently IPO’ed and has cash to fund exploration. In addition to exploration risks, risks for investors are dilution and royalty’s attached to the company’s properties.

Pucara is a very high risk, early stage exploration company. I would prefer to allocate my exploration portfolio to more advanced stage exploration projects, such as Marathon Gold. But extremely risk tolerant investors can consider a position in Pucara Gold stock.

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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