Common Stock: Condor Gold (LSE:CNR)
Current Market Price: 0.38 GBP
Market Capitalization: 45 million GBP
**Note: All values in this article are expressed in British Pound Sterling (GBP) unless otherwise noted.
Condor Gold Stock – Summary of the Company
Condor Gold is a mineral exploration company focused on the acquisition, exploration, and development of mineral properties. The company focuses on its 100% owned properties in the La India mining district of Nicaragua. The company received its environmental permit in 2018, and the project is continuing to be developed. Condor was founded in 2005 and is headquartered in The United Kingdom. The company has around 50 employees.
Revenue and Cost Analysis
Condor does not have any producing properties 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, the company had a net loss of 1.5 million GBP, slightly less than a loss of 2.2 million GBP in 2018. Their largest expenses are compensation related, including share based compensation.
Condor Gold – Royalty and Streaming Agreements
The government of Nicaragua will receive a net smelter royalty of 3% in addition to a tax on net profits of 30%.
Condor Gold – Mineral Reserves
The La India project has “probable” reserves totaling 675,000 ounces of gold and 1.18 million ounces of silver.
Balance Sheet Analysis
Condor has a solid balance sheet with sufficient liquidity to cover its short-term obligations, low liability levels, and a solid long term asset base.
Condor Gold – Debt Analysis
As of year-end 2019 the company does not have any debt outstanding.
Condor Gold Stock – Share Dynamics and Capital Structure
The company has 117 million common shares outstanding. In addition, they have 13.1 million options and warrants outstanding. Fully diluted shares outstanding is around 130.1 million shares.
Condor 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 have been net buyers of Condor stock. In addition, insiders own a significant portion of Condor shares. One director alone owns over 15% of the outstanding shares.
This is generally thought of as a bullish signal for the stock, as it implies interests between management and shareholders are aligned.
Condor Gold Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$757 thousand/$23.7 million = .03
A debt to equity ratio of .03 indicates that the company uses almost no debt in its capital structure and relies on equity financing to fund itself.
Price to Book Ratio
Current Share Price/Book Value per Share.
0.38/0.18 =2
Based on fully diluted shares outstanding, Condor has a book value per share of .18 GBP. At the current market price this implies a price to book ratio of 2. This means Condor stock currently trades at a premium to the book value of its assets.
Working Capital Ratio
Current Assets/Current Liabilities
$3 million/ $757 thousand = 4
A working capital ratio of 4 indicates strong short term liquidity. Condor should not have a problem 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.
Condor Gold Stock – Summary and Conclusions
Condor Gold has a very high potential property in Nicaragua, which is in a mining region that has produced historically. The project appears to be advancing at a reasonable pace, with the company having received permits in 2018.
Condor is in good financial health, with sufficient liquidity. Liability levels are low and the company has no debt.
The major risks for investors are asset concentration risk from a single property stock, jurisdictional risk arising from the company’s asset being located in an unstable country, and dilution risk related to outstanding options/warrants and the eventual need to raise additional capital.
However, despite these risks I believe Condor is undervalued given the potential upside of the project. I would only consider a small allocation, given the early stage and high risk of the project, but for high risk tolerant investors, Condor stock is interesting within a well-diversified gold stock portfolio
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.
