Common Stock: GoldSource Mines (TSXV:GXS)
Current Market Price: $.15 CAD
Market Capitalization: $47.3 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Goldsource Mines Stock – Summary of the Company
Goldsource Mines is a mineral resource exploration company focused on the acquisition, exploration, and development of mineral resource properties. Their main focus is the Eagle Mountain property located in Guyana, South America. Goldsource was founded in 1983 and is headquartered in Vancouver, Canada.
Revenue and Cost Analysis
Goldsource 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, the company had a net loss of $6.7 million, significantly higher than 2018’s net loss of $3.7 million. This increase is due to increased exploration expenses, which were the company’s largest expenses in both year. Exploration expenses totaled $4.7 million and $2.9 million in 2019 and 2018 respectively.
Goldsource Mines – Royalty and Streaming Agreements
The Eagle Mountain property is subject to a 2% net smelter royalty.
Goldsource Mines – Mineral Resources
The Eagle mountain property has indicated and inferred resources totaling 980,000 ounces of gold.
Balance Sheet Analysis
Goldsource has a sound balance sheet with sufficient liquidity and low liability levels. However, they will need to raise additional capital in the medium term to continue exploration.
Goldsource Mines – Debt Analysis
As of year-end 2019, the company had no debt outstanding.
Goldsource Mines Stock – Share Dynamics and Capital Structure
As of April 2020, the company had 374.8 million common shares outstanding. In addition, they have 103 million warrants and 14.4 million options outstanding. Fully diluted shares outstanding is 492.2 million shares.
Goldsource has a dilutive capital structure, investors should carefully consider their place in the capital structure before investing.
Goldsource Mines 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
Insiders a Goldsource Mines have been net buyers of the company’s stock in the recent past. This is generally viewed as a bullish signal for the stock.
Goldsource Mines Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$1 million/$12.2 million = .08
A debt to equity ratio of .08 indicates that Goldsource uses very little debt in its capital structure and relies mostly on equity financing to fund itself.
Price to Book Ratio
Current Share Price/Book Value per Share.
$.15/$.02 = 6
Based on fully diluted shares outstanding, Goldsource has a book value per share of $.02. At the current market price, this implies a price to book ratio of 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
$3.3 million/$531 thousand = 6.2
A working capital ratio of 6.2 indicates sufficient short term liquidity. Goldsource should not have problems meeting its near-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.
Goldsource Mines Stock – Summary and Conclusions
Goldsource has a promising asset in a risky jurisdiction. The company is in solid position financially, with good liquidity and few liabilities. Their capital structure is dilutive and they will need to raise additional capital in the future, likely further diluting shareholders.
Due to the risks associated with a single asset exploration company in a risky jurisdiction, coupled with heavy dilution, I am not willing to invest in Goldsource stock presently. I will continue to monitor the project, and reconsider my investment decision if there are positive developments.
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.
