Common Stock: MedGold Resources (TSXV: MED)
Current Market Price: $.07 CAD
Market Capitalization: $9.4 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
MedGold Resources Stock – Summary of the Company
MedGold Resources is a mineral exploration company focused on the acquisition, exploration and development of mineral properties in the Balkan region, mainly Serbia and Bulgaria. The company was founded in 1966 and is headquartered in Vancouver Canada.
Revenue and Cost Analysis
MedGold 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 continue to do so for the foreseeable future.
In 2019 MedGold had a net loss of $1.2 million, on par with their net loss of $1.3 million in 2018. Their largest expenses in both years were compensation related, including share based compensation and exploration expenses.
MedGold Resources – Royalty and Streaming Agreements
The company’s most recent audited annual report does not mention any royalty or streaming agreements.
MedGold Resources – Mineral Resources
In January 2020, the company released a maiden resource estimate for its Tlamino project in southern Serbia. Inferred resources are estimated to be 8.6 million ounces of silver and 570,000 ounces of gold.
Balance Sheet Analysis
MedGold has a sound balance sheet. Liquidity is sufficient I the near term and liability levels are very low.
MedGold Resources – Debt Analysis
As of year-end 2019 the company does not have any debt outstanding.
MedGold Resources Stock – Share Dynamics and Capital Structure
As of August 2020, the company has 134.8 million common share outstanding. In addition, they have 6.2 million options and 45.7 million warrants outstanding. Fully diluted shares outstanding is around 186.7 million shares.
MedGold has a dilutive capital structure. Investors should consider the effects of dilution carefully before investing.
MedGold 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
Insiders at MedGold Resources have been net sellers of the company’s stock in the recent past. However, the amounts have been too small to provide investors with a signal.
MedGold Resources Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$182 thousand/$830 thousand = .22
A debt to equity ratio of .22 indicates that MedGold uses a small amount of debt in its capital structure, but relies mostly on equity financing to fund itself.
Working Capital Ratio
Current Assets/Current Liabilities
$800 thousand/$182 thousand = 4.3
A working capital ratio of 4.3 indicates sufficient short term liquidity. MedGold should not have problems meeting its obligations in the near term.
Price to Book Ratio
Current Share Price/Book Value per Share.
$.07/$.004 = 16
Based on fully diluted shares outstanding MedGold has a book value per share of $.004. At the current market price this implies a price to book ratio of 16, meaning MedGold stock currently trades at a significant 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.
MedGold Resources Stock – Summary and Conclusions
MedGold Resources is an interesting exploration play on its own. They have several exploration stage properties in Serbia and Bulgaria, and released a maiden resource estimate in early 2020. The company is sound financially, with no long-term liabilities. They have a dilutive capital structure, but some of their outstanding warrants will expire by year end 2020.
Although I don’t find MedGold stock compelling enough to invest in on its own, I do like the optionality it provides as a portfolio asset of Radius Gold. I already have some exposure to MedGold via Fortuna Silver, so if I wanted additional exposure, I would prefer to gain that exposure via Radius Gold stock, rather than a direct allocation to MedGold Stock.
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.
