Common Stock: GoldQuest Mining (TSXV:GQC)
Current Market Price: $.17 CAD
Market Capitalization: $42.4 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
GoldQuest Mining Stock – Summary of the Company
GoldQuest Mining is a mineral exploration company focused on the acquisition, exploration, and development of gold and copper properties in the Dominican Republic. The company holds 19 exploration permits located mostly within the Tiero formation in the Western part of The Dominican Republic. GoldQuest was founded in 1989 and is headquartered in Vancouver, Canada.
Revenue and Cost Analysis
GoldQuest 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 do so for the foreseeable future.
In 2019, the company had a net loss of $2 million, significantly less than their net loss of $6.1 million in 2018. The company does have relevant exploration expenditure; however, their largest expenses are compensation related, including share based compensation.
GoldQuest Mining – Royalty and Streaming Agreements
The company’s claims in The Dominican Republic are subject to a 1.25% net smelter royalty.
GoldQuest Mining – Mineral Resources
The company estimates that their Romero project has “probable” mineral resources totaling 840,000 ounces of gold and 980,000 ounces of silver.
Balance Sheet Analysis
The company has an OK balance sheet. They have a strong liquidity position and low liability levels. However, the value of their long-term assets is highly uncertain due to licensing issues in The Dominican Republic.
Current assets totaled $17 million at the end of 2019, which was mostly cash. The company does not carry any long-term assets and values its exploration asset at $1. Current liabilities were only $468 thousand, made up of accounts payable. They do not have any long-term liabilities.
GoldQuest Mining – Debt Analysis
As of year-end 2019, the company does not have any debt outstanding.
GoldQuest Mining Stock – Share Dynamics and Capital Structure
As of year-end 2019, the company had 257 million common shares outstanding. In addition, they have 19 million options outstanding. Fully diluted shares outstanding is 276 million.
GoldQuest Mining Stock – Dividends
The company does not currently pay and dividend and is highly unlikely to do so for the foreseeable future.
Management – Skin in the game
There has not been any relevant insider activity related to GoldQuest stock in the recent past, providing no signal for investors.
GoldQuest Mining Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$468 thousand/$16.6 million = .02
A debt to equity ratio of .02 indicates that GoldQuest relies almost entirely on equity financing to fund itself.
Price to Book Ratio
Current Share Price/Book Value per Share.
$.17/$.06 = 2.75
Based on fully diluted shares outstanding, GoldQuest has a book value per share of $.06. At the current market price, this implies a price to book ratio of 2.75, meaning the company currently trades at a premium to the book value of the company.
Working Capital Ratio
Current Assets/Current Liabilities
$17 million/ $468 thousand = 36
A working capital ratio of 36 indicates a strong liquidity position. GoldQuest should not have a problem meeting its obligations in the short term.
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.
GoldQuest Mining Stock – Summary and Conclusions
The company has been delayed in receiving presidential permission to develop properties in The Dominican Republic and has begun to explorer properties in other countries. It is highly uncertain if or when the company will be able to advance its project in The Dominican Republic.
Due to the regulatory uncertainty surrounding the company, I will not invest in GoldQuest stock. I will maintain the company on my watch list and continue to monitor any developments. Should permission be granted and the projects advance, I will reconsider investing.
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.
