Common Stock: Finlay Minerals (TSXV: FYL)
Current Market Price: $0.125 CAD
Market Capitalization: $11.6 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Finlay Minerals Stock – Summary of the Company
Finlay Minerals is a precious metals exploration company focused on the acquisition, exploration, and development of mineral properties in Northwestern Canada. The company currently owns two properties which it is actively exploring. Finlay Minerals was founded in 1999 and is headquartered in Vancouver Canada.
Revenue and Cost Analysis
Finlay 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 Finlay Minerals had a net loss of $84 thousand, a decrease from $163 thousand in 2018. The company’s largest expenses in both years were general and administrative expenses.
Finlay Minerals – Royalty and Streaming Agreements
8 of the claims on the company’s Silver Hope property are subject to a 1.5% net smelter royalty. 23 of the claims on the company’s ATTY and PIL property are subject to a 3% net smelter royalty.
Balance Sheet Analysis
Finlay has a sound balance sheet. Its liquidity position is solid and its liability levels are reasonable.
Finlay Minerals – Debt Analysis
As of year-end 2019 the company does not have any debt outstanding.
Finlay Minerals Stock – Share Dynamics and Capital Structure
As of April 2020 Finlay has 93.3 million common shares outstanding. In addition they have 3.7 million options and 16.2 million warrants outstanding. Fully diluted shares outstanding is around 113.2 million shares.
Finlay has a dilutive capital structure and investors should carefully consider the effects of dilution before investing.
Finlay Minerals 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 Finlay Minerals have been net buyers of the company’s stock in the recent past. In addition insiders own around 21% of the company’s outstanding shares. This is generally viewed as a bullish signal by investors.
Finlay Minerals Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$1.7 million / $7.5 million = .23
A debt to equity ratio of .23 indicates that Finlay uses some debt in its capital structure but relies more heavily on equity financing to fund itself.
Working Capital Ratio
Current Assets/Current Liabilities
$1.1 million / $225 thousand = 4.9
A working capital ratio of 4.9 indicates a sound liquidity position. Finlay should not have problems meeting its near term obligations.
Price to Book Ratio
Current Share Price/Book Value per Share.
$0.125/ $0.067 =1.8
Based on fully diluted shares outstanding Finlay Minerals has a book value per share of $0.067. At the current market price this implies a price to book ratio of 1.8, 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.
Finlay Minerals Stock – Summary and Conclusions
Finlay Minerals is a fairly typical Canadian exploration company. They own two properties in Northwestern Canada which they are currently exploring. The company is sound financially with a strong liquidity position and reasonable liability levels. Their stock currently trades at a relatively low price to book ratio below 2, although potential dilution is a concern.
There is nothing wrong with Finlay Mineral stock, there is also nothing exceptional about it. I would prefer to allocate to other Canadian explorers with higher potential properties and much larger drill programs, such as O3 Mining or 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.
