Common Stock: Silver Dollar Resources (CSE:SLV)
Current Market Price: $ 1.70 CAD
Market Capitalization: $ 62.6 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Silver Dollar Resources Stock – Summary of the Company
Silver Dollar Resources is a mineral exploration company focused on the acquisition, exploration, and development of precious metals properties. The company currently owns properties in Canada’s Red Lake district and Durango, Mexico. Silver Dollar Resources was founded in 2018 and is headquartered in British Columbia, Canada. The company had its initial public offering (IPO) on the Canadian Securities Exchange in May 2020.
Revenue and Cost Analysis
Silver Dollar 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 continue to do so for the foreseeable future.
For the fiscal year end August 2020, Silver Dollar had a net loss of $ 726 thousand, a significant increase compared to $ 127 thousand the previous year. The company’s largest expenses were compensation related expenses, including share based compensation.
Silver Dollar Resources – Royalty and Streaming Agreements
Both of the company’s properties in Ontario are subject to a 1.5% net smelter royalty.
Balance Sheet Analysis
Silver Dollar has a simple and sound balance sheet. The have a long term exploration asset, no long term liabilities, and sufficient liquidity in the near term.
Silver Dollar Resources – Debt Analysis
As of year-end August 31, 2020 the company does not have any debt outstanding.
Silver Dollar Resources Stock – Share Dynamics and Capital Structure
As of January 2021 the company has 36.8 million common shares outstanding. In addition the have 5.6 million warrants and 3.4 million options outstanding. Fully diluted shares outstanding is around 45.8 million shares.
Silver Dollar has a dilutive capital structure. Investors should carefully consider the effects of dilution before investing.
Silver Dollar 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 Silver Dollar Resources have been net buyers of the company’s stock in the recent past. This is generally viewed as a bullish signal by investors.
Silver Dollar Resources Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$ 101 thousand / $ 6.3 million = .02
A debt to equity ratio of .02 indicates that Silver Dollar Resources uses almost no debt in its capital structure and relies almost entirely on equity financing for funding.
Working Capital Ratio
Current Assets/Current Liabilities
$ 779 thousand / $ 101 thousand = 7.7
A working capital ratio of 7.7 indicates a strong liquidity position. Silver Dollar Resources should not have a problem meeting its near term obligations.
Price to Book Ratio
Current Share Price/Book Value per Share.
$ 1.70 / $ 0.14 = 12.4
Based on fully diluted shares outstanding Silver Dollar Resources has a book value per share of $ 0.14 cents. At the current market price this implies a price to book ratio of 12.4, meaning Silver Dollar Resources 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.
Silver Dollar Resources Stock – Summary and Conclusions
Silver Dollar Resources looks like a decent early stage exploration play. The company is financially healthy and insiders have been buying since the company’s IPO. However exploration expenditure is low, and the company will need to raise more capital to continue exploration. This will likely further dilute existing shareholders in what is already a dilutive capital structure.
I would prefer to allocate to other, better funded Canadian exploration companies, such as O3 Mining.
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.