Common Stock: Golden Predator Mining (TSXV:GPY)
Current Market Price: $.28 CAD
Market Capitalization: $46.2 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Golden Predator Mining Stock – Summary of the Company
Golden Predator Mining is a gold exploration and mining company focused on the acquisition, exploration, and development of gold properties in Canada. Their main focus is to bring the Brewery Creek mine back into production. This mine has been shut down since 2002. Golden Predator owns the Brewery Creek mine 100%, they also own several other exploration stage properties in the Yukon region. The company was founded in 2008 and is headquartered in Vancouver, Canada.
Revenue and Cost Analysis
Golden Predator does not have any properties that are currently operational 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.
It is worth noting that the company did have some revenue from the sale of gold it recovered from its bulk samples, but this is non-reoccurring and not relevant to the long-term investor. Revenue from gold sales in 2019 was $198 thousand.
The Company had a net loss and comprehensive loss of $9,235,501 for the year ended December 31, 2019, a decrease from the net loss and comprehensive loss of $16,678,005 for the year ended December 31, 2018.
The company is actively drilling and exploration expenses are its largest expenses. Exploration expenses were $7,755,448 for the year ended December 31, 2019 compared to $11,794,409 for the year ended December 31, 2018. This decrease is the reason the company had a smaller net loss in 2019 compared to 2018.
Golden Predator Mining – Royalty and Streaming Agreements
The company’s flagship property, the Brewery Creek property, is subject to the following royalty’s:
- 2% NSR royalty to Alexco Resources Corp. on the first 600,000 ounces of gold produced, increasing to
- 2.75% thereafter. The Company can purchase 0.625% of the increased NSR royalty for $2,000,000;
- 5% net profits royalty (“NPR”) over a portion of the property; and
- 2.5% NPR to the Tr’ondek Hwech’in First Nation (“THFN”) on areas outside the existing mining permits.
Golden Predator owns a .5% net smelter royalty on the 3 Aces property in Yukon, Canada, which it sold to Seabridge Gold in March 2020.
Golden Predator Mining – Mineral Resources
The Brewery Creek property has indicated and inferred resources totaling 1.2 million ounces of gold.
Balance Sheet Analysis
Golden Predator has an OK balance sheet. On the one hand, they have a weak liquidity position with relatively high current liabilities. They will need to raise capital in order to continue to operate and meet obligations.
On the other hand, they have low long term lability levels and a strong long term asset base. So, if they are able to make it through this short-term liquidity crunch, their balance sheet should improve in the medium term.
Golden Predator Mining – Debt Analysis
As of year-end 2019 the company does not have any debt outstanding.
Golden Predator Mining Stock – Share Dynamics and Capital Structure
As of April 2020, the company had 156.9 million common shares outstanding. They also have 7.5 million options and 1.3 million warrants outstanding. Fully diluted shares outstanding is around 165.7 million shares.
The company does have some dilutive instruments outstanding, but these do not seem excessive. The capital structure appears acceptable for common shareholders.
Golden Predator Mining Stock – Dividends
The company does not currently pay a dividend and is unlikely to do so for the foreseeable future.
Management – Skin in the game
There has not been any relevant insider activity related to golden predator Mining stock recently, providing not signal to investors.
Golden Predator Mining Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$3 million/$9.7 million = .32
A debt to equity ratio of .32 indicates that Golden Predator does use some debt in its capital structure, but relies mostly on equity financing to fund itself.
Price to Book Ratio
Current Share Price/Book Value per Share.
$.28/$.06 = 4.6
Based on fully diluted shares outstanding, Golden predator has a book value per share of $.06. At the current market price this implies a price to book ratio of 4.6, meaning the company’s stock currently trades at a premium to the book value of the company.
Working Capital Ratio
Current Assets/Current Liabilities
$2.6 million/$3 million = .87
A working capital ratio of .87 indicates a weak liquidity position. Golden Predator will likely need to raise additional capital to meet its obligations.
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.
Golden Predator Mining Stock – Summary and Conclusions
The Brewery Creek property is a solid asset that has a history of production and significant indicated and inferred resources. Golden Predator has continued to explore the property and advance the project.
However, a significant amount of upside has been given away in the form of royalty’s. Although not excessive, they have dilutive instruments outstanding. Also concerning is the company’s poor liquidity position and high burn rate.
Due to the significant royalty obligations and poor liquidity, I am not willing to invest in Golden Predator stock at this time. I will continue to monitor the project and reconsider investing if and when the Brewery Creek mine comes closer to production.
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.
