Common Stock: Impact Silver (TSXV: IPT)
Current Market Price: $.96 CAD
Market Capitalization: $112.3 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Impact Silver – Summary of the Company
Impact Silver is a silver mining company focused on the exploration, development, and operation of silver properties in Mexico. The company has a land package totaling 210 square kilometers that currently has 4 producing mines. Impact has been in continuous production for over 14 years and continues to actively explore its properties. The company was founded in 1987 and is headquartered in Vancouver Canada.
Impact Silver – Revenue and Cost Analysis
In 2019 Impact had total revenues of $13.3 million, roughly equal to 2018 revenue of $13.1 million. Around 90% of the company’s revenues comes from silver production, the remainder comes from gold, lead, and zinc.
The company had operating and net losses in both years. Their largest administrative expenses coming from wage and promotion related expenses.
Impact Silver – Mineral Resources
The company has estimated that its inferred mineral resources are around 4.5 million ounces of silver.
Balance Sheet Analysis
The company has a sound balance sheet. They have low long term liabilities, sufficient liquidity, and strong long term assets.
Impact Silver Stock – Debt Analysis
As of year-end 2019 the company has no long-term debt
Impact Silver Stock – Share Dynamics and Capital Structure
As of year-end 2019, the company had 110.3 million shares outstanding. In addition, they have 5.2 million options and 23.9 million warrants outstanding. Fully diluted shares outstanding is around 139.4 million shares.
Impact silver has a dilutive capital structures and common stock investors should consider the impacts of dilution before investing.
Impact Silver Stock – Dividends
The company does not currently pay a dividend.
Management – Skin in the game
Insiders at Impact Silver have been net sellers of the company’s stock in the recent past. However, the sales have been for small amounts, providing little signal for investors.
Impact Silver Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$7.5 million/$42.5 million =.18
A debt to equity ratio of .18 indicates that Impact uses some debt in its capital structure, but relies mostly on equity financing to fund itself.
Price to Book Ratio
Current Share Price/Book Value per Share.
$.96/$.30 = 3.15
Based on fully diluted shares outstanding, Impact Silver has a book value per share of $.30. At the current market price this implies a price to book ratio of 3.15, meaning the company currently trades at a premium to the book value of its assets.
Working Capital Ratio
Current Assets/Current Liabilities
$6.1 million/$2.5 million = 2.4
A working capital ratio of 2.4 indicates sufficient short term liquidity. Impact should not have a problem meeting its short-term obligations.
Silver Market – Economic Factors and Competitive Landscape
Silver 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 silver companies are poised to benefit from a strong economic tailwind.
Impact Silver Stock – Summary and Conclusions
Impact Silver has a solid balance sheet. They have a large land package that has historically produced silver for hundreds of years. They currently have 4 producing mines on the property and continue to explore their asset.
Major risks for investors to consider are a dilutive capital structure, asset concentration risk coming from a single property in a riskier jurisdiction, and operating risk, as the company has consistently run operating and net losses.
Given that the company derives 90% of its revenue from silver production, Impact Silver may be an acceptable investment for highly risk tolerant investors looking for a pure silver play. Personally, I would prefer to allocate to more diversified producers who have more revenue from other metals, for example Fortuna Silver. For that reason I will not be investing in Impact Silver, but I will continue to monitor the company.
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.
