Common Stock: AbraPlata Resources (TRXV: ABRA)
Current Market Price: $0.33 CAD
Market Capitalization: $131 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
AbraPlata Resources Stock – Summary of the Company
AbraPlata Resources is a mineral exploration company focused on the acquisition, exploration, and development of precious metals properties. They are focused on properties in Argentina and Chile, with their main focus being their flagship Diablillos project in Salta, Argentina. The company released a PEA for the project in 2018 and continues to advance the project. AbraPlata Resources was founded in 1993 and is headquartered in Toronto Canada.
Revenue and Cost Analysis
AbraPlata 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 AbraPlata had a net loss of $1.4 million, a significant decrease for a loss of $4.5 million in 2018. This decrease is due to a one time mineral property write off in 2018 and a significant decrease in share based compensation.
The company’s largest expense in both years was exploration expense. Exploration and evaluation expenses were $702 thousand and $817 thousand in 2019 and 2018 respectively.
AbraPlata Resources – Royalty and Streaming Agreements
Several of the company’s projects in Argentina, including the Diablillos projects, are subject to a 1% net smelter royalty.
AbraPlata Resources – Mineral Resources
The Diablillos property has indicated and inferred resources totaling 82.6 million ounces of silver and 761 thousand ounces of gold.
Balance Sheet Analysis
AbraPlata has a solid balance sheet. Liquidity is sufficient and liability levels are reasonable.
AbraPlata Resources – Debt Analysis
As of year-end 2019 the company does not have any debt outstanding.
AbraPlata Resources Stock – Share Dynamics and Capital Structure
As of October 2020 AbraPlata has 397 million common shares outstanding. In addition they have 21 million options and 197 million warrants outstanding. Fully diluted shares outstanding is around 615 million shares.
AbraPlata has a highly dilutive capital structure. Investors should consider the effects of dilution before investing.
Several key shareholders, including SSR Mining, own around 40% of the company.
AbraPlata Resources 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 at AbraPlata have been net sellers of the company’s stock in the recent past. This is generally viewed as a bearish signal by investors.
AbraPlata Resources Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$1.3 million / $ 11.3 million = .11
A debt to equity ratio of .11 indicates that AbraPlata uses a small amount of debt in its capital structure but relies mostly on equity financing to fund itself.
Working Capital Ratio
Current Assets/Current Liabilities
$2.2 million / $1.2 million = 1.7
A working capital ratio of 1.7 indicates a sufficient but not strong liquidity position. AbraPlata should not have problems meeting its near term obligations.
Price to Book Ratio
Current Share Price/Book Value per Share.
$0.33 / $0.02 = 17.9
Based on fully diluted shares outstanding AbraPlata has a book value per share of $0.02. At the current market price this implies a price to book ratio of 17.9, meaning the company’s stock currently trades at a significant premium to the book value of the company.
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.
AbraPlata Resources Stock – Summary and Conclusions
AbraPlata has a solid portfolio of assets in Argentina and Chile. Their flagship Diablillos property potentially holds a large silver resource and the stock currently trades well below the projects NPV based on the 2018 PEA. The company is sound financially with sufficient liquidity and manageable liability levels. Additionally the company is backed by a strong base of strategic investors. My biggest concern is dilution, AbraPlata has a highly dilutive capital structure.
I already have significant exposure to the Salta region of Argentina via the Lindero mine owned by Fortuna Silver, which recently had its first gold pour. I am not willing to invest in AbraPlata resources stock at this time due to its highly dilutive capital structure. I would prefer to continue to allocate to Fortuna Silver stock and wait to see how AbraPlata advances its projects and how the warrant/option overhang is resolved.
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.
