Common Stock: Great Panther Mining (GPL)
Current Market Price: $.48
Market Capitalization: $149 million
Great Panther Mining – Summary of the Company
Great Panther Mining is a precious metals mining and exploration company. They have 3 wholly owned properties, 1 in Brazil, and 2 in Mexico. They also have several other exploration stage properties. The company was originally founded in 1965 under a different name. They are headquartered in Vancouver, Canada. Great Panther Mining currently employees over 800 people.
Revenue and Cost Analysis
Total production for 2019 was 147,000 gold equivalent ounces. In 2019 gold accounted for 85% of the company’s revenues, and silver accounted for 11%. The remaining 4% of the Company’s revenues are from the production of lead and zinc. 5 customers accounted for 100% of revenue in 2019.
Total revenue in 2019 was $198 million, more than triple 2018 revenue of $59 million. This increase is due to the acquisition of the Tucano mine in Brazil, which accounted for $153 million in revenue in 2019.
The company has a net loss of $91 million in 2019, significantly more than the 2018 net loss of $10 million.
Balance Sheet Analysis
Great Panther does not have a very strong balance sheet. Short term liquidity is sufficient with $105 million in current assets and $92.5 million in current liabilities.
However, the company has high debt level and will likely need to raise additional capital to fund itself if operating results do not improve.
Debt Analysis
At year end 2019, the company had a total of $42.7 million in debt, all of which is due by 2021.
In April 2019, all convertible debt related to the Tucano mine acquisition was repurchased for $10.5 million plus accrued interest.
Great Panther Mining – Dividends
The company does not pay any dividends and intends to retain future earnings, so it will not pay a dividend for the foreseeable future.
Great Panther Mining – Share Dynamics and Capital Structure
Great Panther Mining has 311 million common shares outstanding. They also have 9.7 million warrants outstanding related to the Beadell acquisition, with an exercise price of $1.3 per share. In addition, they have options and share based compensation outstanding. Fully diluted shares outstanding is around 330 million.
Great Panther has a dilutive capital structure that is not ideal for common stock holders. Investors should carefully consider their place in the company’s capital structure.
Management – Skin in the game
Insider ownership is low, totaling .61% of the issued and outstanding common shares. Over the last 12 months insiders have been net buyers of Great Panther stock.
Great Panther Mining – 3 Metrics to Consider
Working Capital Ratio
Current Assets/Current Liabilities
$105 million/$92.5 million = 1.14
A working capital ratio of 1.14 indicates that the company has sufficient short term assets to meet its short-term liabilities, meaning the company has sufficient short term liquidity.
Price to Book Ratio
Current price of the common stock/ Book Value per Share
$.48/$.30= 1.6
Using my estimate of fully diluted shares outstanding, Great Panther has a book value per share of $.30. At the current market price, this implies a price to boo ratio of 1.6, meaning GPL stock trades at a reasonable premium to the book value of its assets.
Debt to Equity Ratio
Total Liabilities/Total Shareholder Equity
$170 million/$100.5 million = 1.7
A debt to equity ratio of 1.7 means Great panther has a significant amount of debt in its capital structure and may be reliant on debt financing in the future.
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 Panther Mining – Summary and Conclusions
Great Panther Mining owns 3 producing mines in 2 risky, but relatively stable jurisdictions. Operating results have been poor and the company has high levels of debt. Additionally, Great Panther has a relevant amount of dilutive instruments outstanding.
Although the company owns several descent properties that are producing, the current valuation does not offer a significant margin of safety to compensate for the risks associated with poor operating results, the jurisdictions, and the capital structure.
It may be worth reconsidering GPL stock at a lower price, but at its current level I am not willing to invest.
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.
