Common Stock: Cabral Gold (TSXV:CBR)
Current Market Price: $0.77 CAD
Market Capitalization: $ 78.2 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Cabral Gold Stock – Summary of the Company
Cabral Gold is a mineral exploration company focused on the acquisition, exploration, and development of gold projects in the state of Para in Northern Brazil. Their flagship property is called the Cuiú Cuiú property which is around 36,000 hectares in size. Cabral Gold was founded in 2014 and is headquartered in Vancouver Canada.
Revenue and Cost Analysis
Cabral Gold 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 Cabral had a net loss of $ 4.3 million, an increase from $ 3.2 million in 2018. The company’s largest expenses were exploration related in both years. Exploration expenses totaled $ 2.8 million and $ 2.5 million in 2019 and 2018 respectively.
Cabral Gold – Royalty and Streaming Agreements
The Cuiú Cuiú property is subject to two net smelter royalties. A 1% net smelter royalty is held by Sandstorm Gold and a subordinate 0.5% net smelter royalty is held by Equinox Gold.
Cabral Gold – Mineral Resources
The Cuiú Cuiú property has indicated and inferred resources totaling 776,000 ounces of gold.
Balance Sheet Analysis
Cabral Gold has a sound balance sheet. The have a base of long term assets , sufficient near term liquidity, a low liability levels.
Cabral Gold – Debt Analysis
As of year-end 2019 the company does not have any debt outstanding.
Cabral Gold Stock – Share Dynamics and Capital Structure
As of September 2020 Cabral has 106 million common shares outstanding. In addition they have 8 million options and 13.7 million warrants outstanding. Fully diluted shares outstanding is around 128.7 million shares.
Cabral Gold has a dilutive capital structure. Investors should carefully consider the effects of dilution before investing.
Cabral Gold 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 Cabral Gold have not made any relevant transactions in the company’s stock recently, providing no signal for investors.
Cabral Gold Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$262 thousand / $3.1 million = .08
A debt to equity ratio of .08 indicates that Cabral uses very little debt in its capital structure and relies almost entirely on equity financing to fund itself.
Working Capital Ratio
Current Assets/Current Liabilities
$896 thousand/ $262 thousand = 3.4
A working capital ratio of 3.4 indicates a sound liquidity position. Cabral should not have problems meeting its near term obligations.
Price to Book Ratio
Current Share Price/Book Value per Share.
$.77/ $.02 = 35
Based on fully diluted shares outstanding Cabral Gold has a book value per share of $.02. At the current market price this implies a price to book ratio of 35, 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.
Cabral Gold Stock – Summary and Conclusions
Cabral Gold is a decent exploration play. The company is 100% focused on Brazil and owns a promising property with a 776,000 ounce resource. The company is in a decent position financially although shareholders are subject to relevant dilution.
I don’t see any reason to invest in Cabral Gold stock at this moment. For now I am content to gain exposure via Sandstorm Gold stock and Equinox Gold stock. I will wait for the results of the company’s environmental impact study and permitting, as well as additional drill results, before reconsidering my decision.
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.
