Common Stock: Golden Arrow Resources (TSXV:GRG)
Current Market Price: $.15 CAD
Market Capitalization: $19.7 million CAD
** Note: All values are expressed in Canadian Dollars (CAD) unless otherwise noted.
Golden Arrow Resources – Summary of the Company
Golden Arrow Resources is a natural resource company focused on the acquisition, exploration, and development of resource properties in South America. The company’s principal projects are located in Chile and Argentina. Golden Arrow was founded in 2015 and is headquartered in Vancouver, Canada.
Revenue and Cost Analysis
Golden Arrow does not have any producing properties and therefore has no revenue. The company has significant losses, totaling $19.8 million in 2019, including a $7.3 million loss from operations. In 2018, the net loss was $17.8 million, $7.9 millions of which was an operating loss.
Golden Arrow Resources – Reserves
The company currently has no proven or probable reserves.
Balance Sheet Analysis
The company’s major asset is SSRM mining shares acquired via the sale of one of their Chilean properties in 2019. As of year-end 2019 Golden Arrow owned 1,045,580 SSRM common shares. Total assets were valued at $29.9 million, with $2.75 million in cash. Liabilities are low, totaling $639 thousand.
Debt Analysis
As of year-end 2019 the company did not have any loans payable.
Golden Arrow Resources Stock- Share Dynamics and Capital Structure
Golden Arrow has a highly dilutive capital structure. At year end 2019, they had 119.5 million common shares outstanding. Additionally, they have 8 million options outstanding and 22.2 million warrants. Fully diluted shares outstanding is around 149.7 million.
Golden Arrow Resources Stock – Dividends
The company does not pay a dividend and is unlikely to do so in the near to medium term.
Management – Skin in the game
Insiders at Golden Arrow have been net buyers of the stock over the last 12-18 months.
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.
Golden Arrow Resources – Summary and Conclusions
At a glance, Golden Arrow shares appear attractive a current valuation levels. The value of the company’s SSRM common stock currently exceeds the market capitalization of Golden Arrow. However due to the company’s high burn rate and dilutive capital structure, common stock investors are unlikely to realize this value. Furthermore, the future prospects of the company are highly uncertain with no proven or probable reserves at any of their properties.
It is likely Golden Arrow will continue to sell its SSRM shares to fund itself, and once the shares run out, will likely need additional funding in the medium term. This capital will be raised to the detriment of existing shareholders. Although the company appears undervalued, I don’t see any catalyst for the stock to break out of its down trend. And if it does, dilutive instruments will be exercised, significantly limiting its up move. I am not willing to risk my capital on Golden Arrow Stock, if I wanted SSRM stock exposure, I would prefer to buy their equity directly.
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.
