Common Stock: Aurion Resources (TSXV:AU)
Current Market Price: $1.14 CAD
Market Capitalization: $95.1 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Aurion Resources Stock – Summary of the Company
Aurion Resources is a mineral exploration company focused on the acquisition and exploration of early stage mineral properties. The company has properties in Canada, Mexico, The United States, Finland, and Sweden, with their main focus being on Finland. The company was founded in 2006 and is headquartered in Saint Johns, Canada.
Revenue and Cost Analysis
Aurion does not have any properties which 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 total expenses were $7.5 million, a significant increase from $3.3 million in 2018. This increase is due mostly to the write down of an evaluation asset. The company’s major expenses are all compensation related, including share based compensation. In 2019 exploration expenses were only $8 thousand.
Aurion Resources – Royalty and Streaming Agreements
Several of the company’s exploration stage properties have net smelter royalties attached.
Balance Sheet Analysis
Aurion has a strong balance sheet with good liquidity and low liability levels. At the end of 2019 current assets totaled $17.3 million, including $8.7 million in cash. Current liabilities were $1.2 million.
The company has a significant long term exploration and evaluation asset valued at $21.8 million and no significant long term liabilities.
Aurion Resources – Debt Analysis
As of year-end 2019 the company does not have any debt outstanding. They do have a lease liability of $101 thousand.
Aurion Resources Stock – Share Dynamics and Capital Structure
As of March 2020, the company had 83.4 million common shares outstanding. In addition, they have options and warrants outstanding. Fully diluted shares outstanding is around 92.5 million shares.
Aurion has a dilutive capital structure. Investors should carefully consider their place in the capital structure before investing.
Aurion Resources 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 Aurion Resources have been net buyers of Aurion stock recently. However, the amounts have been small so this is not very useful information for investors.
Aurion Resources Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$1.8 million/$37.8 million = .04
A debt to equity ratio of .04 indicates that the company uses very little debt in its capital structure and relies almost entirely on equity financing to fund itself.
Price to Book Ratio
Current Share Price/Book Value per Share.
$1.14/$.40 = 2.8
Based on fully diluted shares outstanding, Aurion has a book value per share of $.40. At the current market price this implies a price to book ratio of 2.8, meaning Aurion stock trades at a premium to the book value of the company.
Working Capital Ratio
Current Assets/Current Liabilities
$17.3 million/$1.2 million = 13
A working capital ratio of 13 indicates a strong liquidity position, meaning Aurion 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.
Aurion Resources Stock – Summary and Conclusions
Aurion has several high potential properties in Finland, evidenced by the fact that the company has joint venture agreements in place with B2Gold and Kinross. They have a strong balance sheet with very low liability levels and good liquidity. The company’s assets are well diversified and although they are mostly in Finland, they do have some properties in North America also.
Most concerning is the company’s expenses. The have high compensation related expenses and almost no exploration expenses. Their capital structure is dilutive and they rely on equity financing, so shareholders are likely to be diluted further in the future.
Although I am intrigued by the company’s asset portfolio and partnerships, I am concerned about how the company is run. It is hard to imagine they will find gold spending only $8 thousand per year looking for it. I will continue to monitor the company’s progress, but I am not willing to invest at this time.
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.
