Common Stock: Aztec Minerals (TSXV:AZT)
Current Market Price: $.39 CAD
Market Capitalization: $15.7 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Aztec Minerals Stock – Summary of the Company
Aztec Minerals is a mineral exploration company focused on the acquisition, exploration, and development of mineral properties in Mexico and The United States. They only own early stage properties and have not yet determined if any of their properties have mineral reserves. Aztec Minerals was founded in 2007 and is headquartered in Vancouver, Canada.
Revenue and Cost Analysis
Aztec does not have any property’s 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 Aztec had a net loss of $557 thousand, down from a net loss of $1 million in 2018. Their largest expenses are compensation based expenses, including share based compensation. The company had no drilling expenses in 2019.
Aztec Minerals – Royalty and Streaming Agreements
The Cervantes property in Mexico is subject to a 2.5% net smelter royalty.
Balance Sheet Analysis
Aztec has a sound balance sheet with sufficient liquidity and very low liability levels. However, they will need to raise additional capital in the medium term.
Aztec Minerals – Debt Analysis
As of year-end 2019, the company does not have any debt outstanding.
Aztec Minerals Stock – Share Dynamics and Capital Structure
As of April 2020, the company had 41 million common shares outstanding. In addition, they have 3.2 million options outstanding and 6.4 million warrants outstanding. Fully diluted shares outstanding is around 50.6 million shares.
Aztec has a dilutive capital structure. Investors should carefully consider their place in the capital structure before investing.
Aztec Minerals 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 Aztec Minerals have been net sellers of the company’s stock in the recent past. This is generally viewed as a bearish signal, however the absolute amount sold was relatively small, so I view this as a weak to irrelevant signal.
Aztec Minerals Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$97 thousand/$2.9 million = .03
A debt to equity ratio of .03 indicates that Aztec relies almost entirely on equity financing to fund itself.
Price to Book Ratio
Current Share Price/Book Value per Share.
$.39/ $.06 = 6.6
Based on fully diluted shares outstanding, Aztec has a book value per share of $.06. At the current market price, this implies a price to book ratio of 6.6, meaning the company’s stock currently trades at a premium to the book value of the company.
Working Capital Ratio
Current Assets/Current Liabilities
$165 thousand/$97 thousand = 1.7
A working capital ratio of 1.7 indicates sufficient short term liquidity, Aztec should not have problems meeting short term 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.
Aztec Minerals Stock – Summary and Conclusions
Aztec has owned a stake in the Cervantes property in Mexico since 2016. To date exploration of the property has been minimal. They have a dilutive capital structure and will need to raise additional capital. The project is still too early and management has delivered too little for me to invest in Aztec Minerals stock. If I were to allocate additional funds to projects in Mexico, I would prefer to invest in more established exploration companies like Minera Alamos.
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.
