Common Stock: Eagle Plains Resources (TSXV: EPL)
Current Market Price: $0.16 CAD
Market Capitalization: $15.7 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Eagle Plains Resources Stock – Summary of the Company
Eagle Plains Resources is a mineral exploration company and project generator focused on the acquisition and exploration of precious metals and mineral properties in Canada. The company currently owns over 50 mineral properties, 5 of which are optioned to third parties. They also provide geological services for their properties which are optioned to third parties. Eagles Plains Resources was founded in 1994 and is headquartered in British Columbia, Canada.
Revenue and Cost Analysis
Eagles Plains Resources does not have any properties that are currently producing and therefore does not have any revenue from mining operations. They do earn income by providing geological services and could potentially earn in the future from royalties they own on properties they have optioned or sold to third parties.
In 2019 Eagle Plains had revenue of $4.9 million, a significant increase from $3 million in 2018. Since the company does not have any reoccurring revenue from mining, they consistently run a net loss. In 2019 the company had a net loss of $482 thousand, on par with their loss of $437 thousand in 2018.
Exploration related expenses were $157 thousand and $684 thousand in 2019 and 2018 respectively.
Eagle Plains Resources – Royalty and Streaming Agreements
Eagle Plains retains net smelter royalties on many of the properties it has optioned to third parties. These royalties range from 2% to 2.5%. Some of these agreements provide the third party the option to repurchase 1% of the royalty.
Balance Sheet Analysis
Eagle Plains has a sound balance sheet. Their liquidity position is strong and they have very low liabilities.
Eagle Plains Resources – Debt Analysis
As of year-end 2019 the company does not have any debt outstanding.
Eagle Plains Resources Stock – Share Dynamics and Capital Structure
As of September 2020 Eagle Plains has 98.3 million common shares outstanding. In addition they have 8.8 million options and 6 million warrants outstanding. Fully diluted shares outstanding is around 113.1 million shares.
Eagle Plains has a dilutive capital structure. Investors should consider the effects of dilution before investing.
Eagle Plains Resources Stock – Dividends
The company does not currently pay a dividend. Investors could potentially receive a spin out from one of the company’s optioned properties but the timing and value of this are unknown.
Management – Skin in the game
Insiders at Eagle Plains Resources have been net buyers of the company’s stock in the recent past. This is generally viewed as a bullish signal by investors.
Eagle Plains Resources Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$429 thousand / $7.1 million = .06
A debt to equity ratio of .06 indicates that Eagle Plains 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
$5.7 million / $429 thousand = 13.2
A working capital ratio of 13.2 indicates a strong liquidity position. Eagle Plains should not have a problem meeting its near term obligation.
Price to Book Ratio
Current Share Price/Book Value per Share.
$0.16 / $0.06 = 2.5
Based on fully diluted shares outstanding Eagle Plains Resources has a book value per share of $0.06. At the current market price this implies a price to book ratio of 2.5, meaning the company’s stock currently trades at a 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.
Eagle Plains Resources Stock – Summary and Conclusions
Eagle Plains owns a large portfolio of potential mineral properties in Canada, covering a wide range of precious and base metals. The company is sound financially. They have strong liquidity, very low liabilities, and some revenue from geological services. Their capital structure is dilutive, but not overly dilutive when compared to other exploration companies.
I have never invested in a project generator and I am not sure how I feel about the business model when compared to other precious metals business models, such as royalty and streaming companies. Before investing in Eagle Plains Resources stock, I need to analyze the companies that have optioned properties from them, to get an idea of the potential value of their royalty portfolio. For now I am content to allocate to other precious metals focused exploration companies, such as Orefinders.
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.
