Common Stock: Inca One Gold (TSXV:IO)
Current Market Price: $ .456 USD
Market Capitalization: $15.6 million USD
**Note: All values in this article are expressed in United States Dollars (USD) unless otherwise noted.
Inca One Gold Stock – Summary of the Company
Inca One Gold is a gold processing company focused on Peru. The company owns two gold milling facilities with a total capacity of 450 tons per day. They purchase gold mill feed from small scale Peruvian miners and process the material for the export and sale of gold dore and refined gold. The company is fully permitted. Inca One was founded in 2005 and is headquartered in Vancouver, Canada.
Revenue and Cost Analysis
Inca One had total revenue of $31.4 million for the fiscal year ending April 2020. This represents a decrease from $34.5 million in the previous period. The company had a net loss in both years of $4.2 million and $85 thousand in 2019 and 2018 respectively. This increase in the company’s net loss can be attributed mostly to declining revenues and increased financing expenses.
Inca One Gold – Royalty and Streaming Agreements
Based on the company’s most recent audited annual report, they do not have any royalty or streaming agreements.
Balance Sheet Analysis
Inca One has a weak balance sheet. Their liquidity position is poor and their liability levels are high, including a contractual obligation from the acquisition of Anthem United and debt.
Inca One Gold – Debt Analysis
As of the fiscal year end April 2020, the company has $2 million in total debt outstanding.
Inca One Gold Stock – Share Dynamics and Capital Structure
As of September 2020, the company has 34.3 million common shares outstanding. They also have 1.2 million warrants and 2 million options outstanding. Fully diluted shares outstanding is around 37.5 million shares.
Inca One does not have an overly dilutive capital structure and appears acceptable for common stock investors.
Based on Equinox Gold’s most recent annual report, they own roughly 20% on Inca One’s outstanding shares.
Inca One Gold Stock – Dividends
The company does not currently pay a dividend.
Management – Skin in the game
Insiders at Inca One have been net sellers of the company’s stock in the recent past. This is generally viewed as a bearish signal for the stock.
Inca One Gold Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$17 million/ $4.3 million = 3.95
A debt to equity ratio of 3.95 indicates that Inca One uses a lot of debt in its capital structure and may be reliant on debt financing in the future.
Working Capital Ratio
Current Assets/Current Liabilities
$10.9 million / $11.6 million = .93
A working capital ratio of .93 indicates a weak liquidity position. Inca One may have problems meeting its near-term obligations.
Price to Book Ratio
Current Share Price/Book Value per Share.
$.456/$.15 = 3
Based on fully diluted shares outstanding Inca One has a book value per share of $.15. At the current market price this implies a price to book ratio of 3, meaning Inca One’s stock currently trades at a premium to the book value of the company.
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.
Inca One Gold Stock – Summary and Conclusions
Inca One is an interesting gold paly. They own two mills in Peru, which is a growing, high potential mining jurisdiction. However, the company is in a poor position financially. They have low liquidity and high liability levels. Additionally, they were negatively affected by the coronavirus shutdowns in Peru.
I would not invest in Inca One Gold Stock on its own. However, I am happy to have exposure via Equinox Gold Stock. By gaining exposure via Equinox, I limit my downside risk but can also potentially benefit to the upside, should Inca One perform well.
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.
