Common Stock: Amex Exploration (TSXV:AMX)
Current Market Price: $3.41 CAD
Market Capitalization: $260.8 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Amex Exploration Stock – Summary of the Company
Amex Exploration is a precious metals exploration company focused on the acquisition, exploration, and development of precious metals properties in Canada. The own several exploration stage properties in Quebec and Ontario, which they are actively exploring. Amex was founded in 2001 and is headquartered in Montreal Quebec.
Revenue and Cost Analysis
Amex Exploration 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 Amex had a net loss of $3.9 million. This represents a significant increase from 2018’s net loss of $2 million. The company’s largest expenses in both years were compensation related, including share based compensation.
Amex Exploration – Royalty and Streaming Agreements
The Perron property in Quebec, the company’s flagship property, is subject to royalties ranging from 1% to 3.5%.
Balance Sheet Analysis
Amex has a sound balance sheet. They have a strong liquidity position and liability levels are low.
Amex Exploration – Debt Analysis
As of year-end 2019 the company does not have any debt outstanding.
Amex Exploration Stock – Share Dynamics and Capital Structure
Amex has 76.5 million common shares outstanding. In addition, they have 12.1 million warrants and 5.4 million options outstanding. Fully diluted shares outstanding is around 94 million shares.
The company has a dilutive capital structure. Investors should carefully consider the effects of dilution before investing.
Amex Exploration 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 Amex Exploration have been net buyers of the company’s stock in the recent past, however the amounts purchased are too small to provide investors with a relevant signal.
Amex Exploration Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$3.2 million/$20.8 million = .15
A debt to equity ratio of .15 indicates that Amex uses some debt in its capital structure but relies more heavily on equity financing to fund itself.
Working Capital Ratio
Current Assets/Current Liabilities
$15 million/ $1.1 million = 13.7
A working capital ratio of 13.7 indicates a strong liquidity position. Amex should not have problems meeting its short-term obligations.
Price to Book Ratio
Current Share Price/Book Value per Share.
$3.41/$.22 = 15.4
Based on fully diluted shares outstanding Amex Exploration has a book value per share of $.22. At the current market price this implies a price to book ratio of 15.4, meaning the company’s stock 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.
Amex Exploration Stock – Summary and Conclusions
Amex owns several promising exploration stage properties in Canada. They are in a sound financial position and able to actively explore their properties. In November 2019, they announced a 100,000-meter drill program for 2020.
Although there is significant potential for dilution and the fact that the company is by no means undervalued, Amex stock seems to be an acceptable drill play for investors looks for exposure to early exploration companies. Personally, I would prefer to allocate to more advanced exploration projects that currently trade at a more reasonable valuation, such as O3 Mining. But I will continue to monitor Amex Exploration stock and reconsider my decision as the project advances.
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.
