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Regulus Resources Stock – Investment Analysis

Common Stock: Regulus Resources (TSXV:REG)

Current Market Price: $1.28 CAD

Market Capitalization: $130.4 Million CAD

Regulus Resources  (TSXV:REG) - Stock Chart
Regulus Resources (TSXV:REG) – Stock Chart

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

Regulus Resources Stock – Summary of the Company

Regulus Resources is a mineral exploration company focused on the acquisition, exploration, and development of mineral properties.  The company owns interests in exploration stage properties in Peru, Chile, and Nevada. Their main focus is the AntaKori copper-gold project in Peru. Regulus Resources was founded in 2010 and is headquarters in Calgary, Canada.

Revenue and Cost Analysis

Regulus 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 continues to do so for the foreseeable future.

For the fiscal year end September 2020, the company had a net loss of $5.2 million. Their largest expenses were compensation related, including share based compensation.

Regulus Resources – Royalty and Streaming Agreements

The AntaKori property is subject to net smelter royalties ranging from 1.5% to 3%.

Regulus Resources – Mineral Resources

The AntaKori property has indicated and inferred resources totaling 5 billion pounds of copper and 4.5 million ounces of gold.

Regulus Resources - Mineral Resource Estimate
Regulus Resources – Mineral Resource Estimate

Balance Sheet Analysis

Regulus has a sound balance sheet. They have sufficient liquidity and low liability levels, including no long term liabilities.

Regulus Resources – Debt Analysis

As of the fiscal year end September 2020, the company does not have any debt outstanding.

Regulus Resources Stock – Share Dynamics and Capital Structure

As of February 2021 the company has 101.8 million common shares outstanding. In addition they have 25.2 million options and warrants outstanding. Fully diluted shares outstanding is around 127 million shares.

Insiders and institutional investors own around 27% of the company.

Regulus Resources Stock (TSXV:REG) - Ownership Structure
Regulus Resources Stock (TSXV:REG) – Ownership Structure

Regulus 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 Regulus Resources have been net buyers of the company’s stock in the recent past. This is generally viewed as a bullish signal by investors.

Regulus Resources Stock (TSXV:REG) - Insider Activity
Regulus Resources Stock (TSXV:REG) – Insider Activity

Regulus Resources Stock – 3 Metrics to Consider

Debt to Equity Ratio

Total Liabilities/Total Share Holder Equity

$1.1 million / $55.1 million = .02

A debt to equity ratio of .02 indicates that Regulus uses almost no debt in its capital structure and relies entirely on equity financing to fund itself.

Working Capital Ratio

Current Assets/Current Liabilities

$3.4 million / $1.1 million = 2.9

A working capital ratio of 2.9 indicates a sound liquidity position. Regulus should not have problems meeting its near term obligations.

Price to Book Ratio

Current Share Price/Book Value per Share.

$1.28 / $0.43 = 2.95

Based on fully diluted shares outstanding Regulus Resources has a book value per share of $0.43. At the current market price this implies a price to book ratio of 2.95, 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.

Regulus Resources Stock – Summary and Conclusions

Regulus Resources owns a high potential copper-gold property in a proven mining region in Peru. The company has explored the property and believes it hold a significant deposit. Regulus is in decent financial health and appears well positioned to continue advancing the project.

However Regulus does not own a 100% interest in the property and the property is subject to net smelter royalties, limiting upside for common stock investors. Although Regulus has potential, I would prefer to allocate to more active exploration companies, such as O3 Mining.

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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