Common Stock: Aurcana Silver Corporation (TSXV: AUN)
Current Market Price: $.58 USD
Market Capitalization: $90 million USD
**Note: All values in this article are expressed in United States Dollars (USD) unless otherwise noted.
Aurcana Silver Stock – Summary of the Company
Aurcana Silver Corporation is a mineral exploration company focused on the acquisition, exploration, and development of mineral properties in The United States. They own properties in Colorado and Texas. Aurcana is headquartered in Vancouver Canada.
Revenue and Cost Analysis
Aurcana 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 Aurcana had a net loss of $7.2 million. Their largest expenses were general and administrative expenses, which totaled $3.2 million.
Aurcana Silver – Royalty and Streaming Agreements
The company’s most recent annual report does not mention any royalty or streaming agreements.
Aurcana Silver – Mineral Resources
Aurcana has proven and probable resources of 24.7 million ounces of silver.
Balance Sheet Analysis
Aurcana has an OK balance sheet. They have low liability levels and sufficient short term liquidity.
Aurcana Silver – Debt Analysis
As of year-end 2019 Aurcana does not have any debt outstanding.
Aurcana Silver Stock – Share Dynamics and Capital Structure
As of year-end 2019 Aurcana had 152 million common shares outstanding. In addition, they had 1 million options and 48.7 million warrants outstanding. Fully diluted share outstanding is around 201.8 million shares.
Aurcana has a highly dilutive capital structure. Investors should carefully consider the effects of dilution before investing.
Aurcana Silver 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 Aurcana Silver have been net buyers of the company’s stock in the recent past. This is generally viewed as a bullish signal.
Aurcana Silver Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$2 million/ $66.7 million =.03
A debt to equity ratio of .03 implies that Aurcana uses very little debt in its capital structure and is almost entirely reliant on equity financing to fund itself.
Working Capital Ratio
Current Assets/Current Liabilities
$4.5 million/ $791 thousand = 5.7
A working capital ratio of 5.7 indicates sufficient short term liquidity. Aurcana should not have a problem meeting its obligations in the near term.
Price to Book Ratio
Current Share Price/Book Value per Share.
$.58/$.33 = 1.75
Based on fully diluted shares outstanding Aurcana has a book value per share of $.33. At the current market price this implies a price to book ratio of 1.75, meaning Aurcana stock currently trades at a slight 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.
Aurcana Silver Stock – Summary and Conclusions
Aurcana owns a 100% interest in two previously producing silver mines. They are currently seeking funding to bring these mines back into production. Although the company is in a descent financial position, based on the after tax NPV’s of their two projects, the company appears to be fairly valued. In addition, they have a large amount of dilutive instruments outstanding.
Although Aurcana stock is intriguing, there are a lot of risks between where the project currently stands and a producing silver mine. Rather than invest in Aurcana common stock, I would prefer to allocate to silver companies that are already producing, that also have exploration potential, such as Fortuna Silver.
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.
