Common Stock: Minaurum Gold (TSXV: MGG)
Current Market Price: $.71 CAD
Market Capitalization: $241 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Minaurum Gold Stock – Summary of the Company
Minaurum Gold is a mineral exploration company focused on the acquisition, exploration, and development of precious metals properties in Mexico. The company was founded in 2007 and is headquartered in Vancouver Canada.
Revenue and Cost Analysis
Minaurum does not own any properties that currently produce 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 the fiscal year 2019, the company had a net loss of $5.5 million, similar to its net loss of $5.6 million in 2018. The company’s largest expenses in both years were exploration related. Exploration expenses were $3.7 million and $4.3 million in 2019 and 2018 respectively.
Minaurum Gold – Royalty and Streaming Agreements
Several of the company’s properties are subject to net smelter royalties ranging from 1.5% to 3%.
Balance Sheet Analysis
Minaurum has an OK balance sheet. Liability levels are low and liquidity is sufficient in the short term.
Minaurum Gold – Debt Analysis
As of the fiscal year end 2019 the company does not have any debt outstanding.
Minaurum Gold Stock – Share Dynamics and Capital Structure
As of August 2020, Minaurum has 337.3 million common shares outstanding. In addition, they have 12.6 million warrants and 7.9 million options outstanding. Fully diluted shares outstanding is around 357.8 million shares.
Minaurum does have some potential for dilution that investors need to consider before making an investment.
Minaurum Gold 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 Minaurum Gold have been net sellers of the company’s stock in the recent past. However, the amounts sold are too small to provide investors with a signal.
Minaurum Gold Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$357 thousand/ $42 million = .01
A debt to equity ratio of .01 indicates that Minaurum uses an irrelevant amount of debt in its capital structure and is completely reliant of equity financing to fund itself.
Working Capital Ratio
Current Assets/Current Liabilities
$9.4 million/$357 thousand = 7.3
A working capital ratio of 7.3 indicates a sound liquidity position. Minaurum should not have a problem meeting its obligations in the near term.
Price to Book Ratio
Current Share Price/Book Value per Share.
$.71/$.03 = 28
Based on fully diluted shares outstanding Minaurum has a book value per share of $.03. At the current market price this implies a price to book ratio of 28, meaning the company’s stock 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.
Minaurum Gold Stock – Summary and Conclusions
Minaurum has a solid portfolio of exploration assets in Mexico. They are actively exploring their properties and the company is in a sound financial position in the short term. The company has some potential for dilution, but it is not excessive in my opinion.
However, given the jurisdictional risks associated with southern Mexico, and the fact that most of the company’s properties are subject to a net smelter royalty, the current market valuation of the company appears rich. I would prefer to allocate to similar market cap companies in Mexico with a more reasonable valuation given their stage in the mining lifecycle, such as Minera Alamos.
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.
