Common Stock: Great Bear Resources (TRXV:GBR)
Current Market Price: $11.68 CAD
Market Capitalization: $585 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted
Great Bear Resources Stock – Summary of the Company
Great Bear Resources is a mineral exploration company focused on the acquisition and exploration of mineral properties, primarily in Canada. Their most promising property is the Dixie property in the Red Lake district of Canada, which has the potential to be a significant gold mine. The company was founded in 2001 and is headquartered in Vancouver Canada
Revenue and Cost Analysis
Great Bear does not have any producing properties, only exploration stage projects. Therefore, they do not have any revenue.
Total expenses in 2019 were $5.6 million, a significant increase over total expenses of $3.8 million in 2018. Their largest expenses are compensation related expenses, including share based compensation.
Great Bear Resources – Royalty and Streaming Agreements
On January 31, 2020, Great Bear announces that is has entered into a 2.0% net smelter return royalty agreement with a newly incorporated wholly owned subsidiary named Great Bear Royalties Corp. Great Bear plans to transfer the NSR Royalty, approximately $1 million in marketable securities currently owned by the Company, and $0.5 million in cash into Great Bear Royalties, which together will be the initial assets for a new royalty company. Once the assets are transferred it is intended that the shares of Great Bear Royalties will be distributed to Great Bear shareholders via a plan of arrangement. The transaction was approved at a meeting of the shareholders on April 23, 2020.
Balance Sheet Analysis
Great Bear has a strong balance sheet with good liquidity and low liability levels. At the end of 2019 current assets totaled $30.4 million, including $28.5 million in cash. Current Liabilities were $6.1 million
The company had $49 million in total assets at the end of 2019. Its major long term assets is a $19 million exploration and evaluation asset.
Great Bear Resources – Debt Analysis
The company does not currently have any debt.
Great Bear Resources Stock – Share Dynamics and Capital Structure
As of December 2019, Great Bear had 46.8 million common shares outstanding. In addition, they have 4.5 million options and 3.1 million warrants outstanding. Fully diluted shares outstanding is around 54.5 million.
Great Bear does not have any senior debt in its capital structure, and although it does have some dilutive instruments outstanding, these are not excessive. I believe the company’s capital structure is acceptable for common stock holders.
Great Bear 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
Over the past 2 year insiders at Great Bear have been net sellers of the common stock. However, the amounts sold have been small and I do not consider this selling relevant.
Great Bear Resources Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$6.1 million/$43.4 million = .14
A debt to equity ratio of .14 means Great Bear has very little debt in its capital structure. The company relies mostly on equity financing to fund itself.
Price to Book Ratio
Current Share Price/Book Value per Share.
$11.68/$.79 = 14.7
Based on the company’s fully diluted shares outstanding, they have a book value per share of $.79. At the current market price this implies a price to book ratio of 14.7, meaning Great Bear stock trades at a significant premium to the company’s book value.
Working Capital Ratio
Current Assets/Current Liabilities
$30.4 million/$6.1million = 4.9
A working capital ratio of 4.9 indicates strong liquidity. Great Bear should not have a problem meeting its near-term obligations.
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.
Great Bear Resources Stock – Summary and Conclusions
The company owns 100% of a very promising property in Canada’s Red Lake district. The property appears to have large high grade gold deposits.
Great Bear is a good position financially. Liquidity is strong and liability levels are low. They should not have a problem funding their operations in the short to medium term.
The company has no debt and a capital structure that is not excessively dilutive, so they appear to be friendly to common shareholders.
However, the valuation appears high and the stock has increased over 2000% since 2018. I am personally not comfortable investing is such an early stage project at such a high valuation. But I will continue to monitor the stock and reconsider investing as the project progresses.
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.
