Common Stock: Winston Gold Corp. (CSE:WGC)
Current Market Price: $.17 CAD
Market Capitalization: $173 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Winston Gold Stock – Summary of the Company
Winston Gold is a gold exploration company that owns options of two prospective gold properties in The US and Canada. The company was founded in 2014 and is headquartered in Manitoba Canada.
Revenue and Cost Analysis
Winston 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.
In 2019 Winston had a net loss of $3.5 million, an increase from 2018’s net loss of $1.7 million. Their largest expenses in both years were exploration related. Exploration expenses were $2 million and $742 thousand in 2019 and 2018 respectively.
Winston Gold – Royalty and Streaming Agreements
The Holmes property is subject to a 2% net smelter royalty. The Winston property is subject to a 3% to 4% net smelter royalty.
Balance Sheet Analysis
Winston has a weak balance sheet. Their liquidity position is poor and their liability levels are concerning, particularly the debt considering they have no revenue.
Winston Gold – Debt Analysis
As of year-end 2019 the company had $1.5 million in debt outstanding carrying an annual interest rate of 10%.
Winston Gold Stock – Share Dynamics and Capital Structure
As of year-end 2019 the company had 173.2 million common shares outstanding. In addition, they had 10.3 million options and 94.4 million warrants outstanding. Fully diluted shares outstanding is around 278 million.
Winston has a highly dilutive capital structure. Investors should carefully consider the effects of dilution before investing.
Winston Gold 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 Winston have purchased shares in the recent past and have been willing to lend to the company.
Winston Gold Stock – 2 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$2.7 million / -1.7 = -1.6
A debt to equity ratio of -1.6 indicates that Winston has accumulated losses and has significantly more liabilities than shareholder equity. The company faces the possibility of insolvency and investors should carefully analyze the company’s liabilities before investing.
Working Capital Ratio
Current Assets/Current Liabilities
$ 1 million/ $2.3 million = .45
A working capital ratio of .45 indicates a weak liquidity position. Winston may have problems meeting its near-term obligation and will likely need to raise capital to continue as a going concern.
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.
Winston Gold Stock – Summary and Conclusions
The only positive I see is that Winston actively drilled its property in 2019. Other than that there is nothing about the company I like. They are in poor financial health with low liquidity and debt. They only own 2 properties and the land packages are small. Most concerning is their highly dilutive capital structure.
I would not invest in Winston Gold stock and I wont bother to add them to my watchlist. If I were going to allocate to drill stories, I would much prefer to allocate to company’s such as O3 mining or Orefinders.
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.
