Common Stock: Caldas Gold (TSXV:CGC)
Current Market Price: $1.47 USD
Market Capitalization: $20.5 million USD
Caldas Gold Stock – Summary of the Company
Caldas Gold is a gold mining company focused on the acquisition, exploration, development, and operation of gold mining properties in Colombia. Their main focus is the Marmato Mine in Colombia. Caldas is a subsidiary of Gran Colombia, and was spun out via a reverse takeover in February of 2020. Gran Colombia owns 75% of Caldas Gold. Caldas is headquartered in Toronto Canada.
Revenue and Cost Analysis
In 2019, Caldas produced 25,750 ounces of gold at the Marmato mine. Revenue in 2019 was $35.6 million, an increase from 2018 revenue of $30.4 million. The increase in revenue is attributable to a 3% increase in production and a higher gold price.
Operating income was $5.5 million in 2019 and the company had net income of $3.6 million.
Caldas Gold – Royalty and Streaming Agreements
The Company pays a royalty of 4% on gold and silver revenue to an associated company in respect to production sourced from the neighboring Echandia mining title. During the years ended December 31, 2019 and 2018, the royalty amounted to $99,000 and $96,000, respectively.
Caldas Gold – Mineral Resources
The Marmato mine has “measured and indicated” resources of 2 million ounces of gold and 7.2 million ounces of silver.
Balance Sheet Analysis
Caldas has a solid balance sheet with sufficient liquidity and reasonable liability levels.
Caldas Gold – Debt Analysis
As of year-end 2019, the company does not have any debt outstanding.
Caldas Gold Stock – Share Dynamics and Capital Structure
As of May 2020, the company had 50.5 million common shares outstanding. In addition, they have 10.9 million warrants and 4.9 million options outstanding. Fully diluted shares outstanding is around 66.3 million shares.
Caldas has a dilutive capital structure. Investors should carefully consider their place in the capital structure before investing.
Caldas Gold Stock – Dividends
The company does not currently pay a dividend.
Management – Skin in the game
Insiders at Caldas Gold have been net buyers of the stock in the recent past. This is generally viewed as a bullish signal for the stock.
Caldas Gold Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$16.3 million/$29.5 million = .55
A debt to equity ratio of .55 indicates that Caldas uses a mix of debt and equity in its capital structure, but relies more on equity financing to fund itself.
Price to Book Ratio
Current Share Price/Book Value per Share.
$1.48/$.45 = 3.3
Based on fully diluted shares outstanding, Caldas has a book value per share of $.45. At the current market price, this implies a price to book ratio of 3.3, meaning Caldas stock currently trades at a premium to the book value of the company.
Working Capital Ratio
Current Assets/Current Liabilities
$15 million/$11.8 million = 1.3
A working capital ratio of 1.3 indicates a sufficient short term liquidity position.
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.
Caldas Gold Stock – Summary and Conclusions
The Marmato mine is a solid project that is funded and producing. However, given that Gran Colombia owns 75% of Caldas Gold stock, I would prefer to own Gran Colombia instead of Caldas. Therefore, I will not be investing in Caldas Gold stock directly. But I will continue to monitor the stock to better understand the tradeoffs between owning the parent versus the subsidiary.
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.
