Common Stock: Almaden Minerals (TSX:AMM)
Current Market Price: $.67 CAD
Market Capitalization: $78.5 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Almaden Minerals Stock – Summary of the Company
Almaden Minerals is a mineral exploration and development company focused on bringing their 100% owned Ixtaca property in Mexico into production. The property has significant gold and silver deposits and is currently in the permitting phase. Almaden was founded in 2002 and is headquartered in Vancouver Canada.
Revenue and Cost Analysis
The company’s only property is not currently producing and therefore the company does not have any revenue. Almaden consistently runs a net loss and is likely to continue to do so for the foreseeable future.
Almaden had a net loss of $2.7 million in 2019, on par with 2018’s net loss of $3.5 million. Their largest expenses are compensation related, including share based compensation.
Almaden Minerals – Royalty and Streaming Agreements
The Ixtaca property is subject to a 2% net smelter royalty.
Almaden Minerals – Mineral Resources
The Ixtaca has “proven and probable” mineral reserves totaling 1.39 million ounces of gold and 85.2 million ounces of silver.
Balance Sheet Analysis
Almaden has a decent balance sheet with sufficient short term liquidity and manageable liability levels. However, given the company’s burn rate they will likely need additional financing in the medium term.
Almaden Minerals – Debt Analysis
The company has a gold loan payable valued at $2,790,858 as of May 2019. The loan matures in 2024.
Almaden Minerals Stock – Share Dynamics and Capital Structure
As of March 2020, the company had 111.7 million common shares outstanding. In addition, they had 11.1 million options and 10.3 million warrants outstanding. Fully diluted shares outstanding is around 133.2 million.
Almaden has a dilutive capital structure. Investors should carefully consider their place in the capital structure before investing.
Almaden 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 have not made any relevant transactions of Almaden stock recently, so insider activity provides no signal for investors.
Almaden Minerals Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$5.5 million/$68.5 million = .08
A debt to equity ratio of .08 indicates that the company uses very little debt in its capital structure and relies mostly on equity financing.
Price to Book Ratio
Current Share Price/Book Value per Share.
$.67/$.51 = 1.3
Based on fully diluted shares outstanding Almaden has a book value per share of $.51. At the current market price this implies a price to book ratio of 1.3, meaning the company’s stock trades at a slight premium to the book value of the company.
Working Capital Ratio
Current Assets/Current Liabilities
$2.6 million / $900 thousand = 2.9
A working capital ratio of 2.9 indicates sufficient short term liquidity.
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.
Almaden Minerals Stock – Summary and Conclusions
The company owns a single asset with what appears to be large deposits of gold and silver. However, it is highly uncertain if the property will ever be brought into production. The company’s title claim is currently the subject of an active law suit and the company will require additional financing in the future.
Although the Ixtaca property is promising, I don’t believe the upside is sufficient to compensate for the risks of a single asset stock in a risky jurisdiction. I will not be investing in Almaden stock.
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.
