Common Stock: Conquest Resources (TSXV: CQR)
Current Market Price: $.065 CAD
Market Capitalization: $8.25 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Conquest Resources Stock – Summary of the Company
Conquest Resources is a precious metals exploration company focused on Ontario Canada. They own 3 exploration and evaluation properties and have not yet determined if these properties hold viable mineral resources. The company is headquartered in Toronto Canada.
Revenue and Cost Analysis
Conquest Resources 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, the company had a net loss of $214 thousand. Exploration expense was $74 thousand. In 2018, the company had a larger net loss of $473 thousand, due to a larger exploration expense of $276 thousand.
Conquest Resources – Royalty and Streaming Agreements
The Alexander Property in Red Lake Ontario is subject to a 2% net smelter royalty. Certain Claims at the Golden Rose Property are subject to net smelter royalties ranging from 1.5% to 2%.
Balance Sheet Analysis
Conquest has an acceptable balance sheet with low liability levels and sufficient short term liquidity.
Conquest Resources – Debt Analysis
As of year-end 2019 the company does not have any debt outstanding.
Conquest Resources Stock – Share Dynamics and Capital Structure
As of year-end 2019 the company had 124 million common shares outstanding. They also had 2.5 million warrants and 6 million options outstanding. Fully diluted shares outstanding is around 132.5 million shares.
Although Conquest has some dilutive instruments outstanding, these instruments are not excessive. In addition, they have not debt outstanding, making the capital structure acceptable for common shareholders.
Conquest 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 Conquest Resources have been net buyers of the company’s stock in the recent past. This is generally viewed as a bullish signal. In addition, insider ownership is relatively high, around 20%, which is also generally viewed as a positive signal for the stock.
Conquest Resources Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$330 thousand/ $556 thousand = .6
A debt to equity ratio of .6 indicates that Conquest uses both debt and equity in its capital structure, but relies more on equity to finance itself.
Working Capital Ratio
Current Assets/Current Liabilities
$258 thousand/$251 thousand = 1.02
A working capital ratio of 1.02 indicates a sufficient, but not strong liquidity position. Conquest should not have a problem meeting its short-term obligations, but will likely need to raise additional capital in the medium term.
Price to Book Ratio
Current Share Price/Book Value per Share.
$.065/$.004 = 15
Based on fully diluted shares outstanding Conquest Resources has a book value per share of $.004. At the current market price this implies a price to book ratio of 15, 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.
Conquest Resources Stock – Summary and Conclusions
Conquest Resources owns several promising properties in a well-established gold region within a first-class jurisdiction. The company’s capital structure is acceptable for common shareholders. Liability and expense levels are reasonable.
Although the company has actively explored their properties and has further drilling planned, their drill program is by no means large. Although Conquest Resources has the potential to make a significant discovery, I would prefer to allocate to Canadian companies with a more robust drilling programs and a more diversified (regionally and land package) asset base, such as O3 Mining.
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.
