Common Stock: Minera Alamos (TSXV: MAI)
Current Market Price: $.44 CAD
Market Capitalization: $178 million AD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Minera Alamos Stock – Summary of the Company
Minera Alamos is a precious metals company focused on the acquisition, exploration, and development of precious metals properties in Mexico. The company has several exploration stage properties, the most advanced of which it the Santana Mine followed by the La Fortuna property in Durango Mexico. Minera Alamos was founded in 1934 and reorganized into its current form in 2014. The company is headquartered in Toronto Canada.
Revenue and Cost Analysis
The company does not have any producing properties and therefore does not have any revenue. Minera Alamos consistently runs a net loss and is likely to continue to do so for the foreseeable future.
In 2019, they had a net loss of $3.8 million, compared to a net loss of $25 million in 2018. The company’s largest expense is exploration followed by compensation costs.
The reason exploration expense decreased significantly in 2019 is because the expense was offset by production on 1,100 ounces of gold and 225 ounces of silver during an exploration test at the Santana property.
Minera Alamos – Royalty and Streaming Agreements
The la Fortuna property has a 2.5% net smelter royalty. The Santana property has 5% in net smelter royalty’s. Most of the company’s other properties also have royalties attached.
Minera Alamos – Mineral Resources
The La Fortuna property has “measured and indicated” mineral resources totaling 309,800 ounces of gold and 1.8 million ounces of silver.
The Guadalupe dos Reyes property has 535,300 ounces of “measured and indicated” gold.
Balance Sheet Analysis
The company has a descent balance sheet with sufficient liquidity and manageable liability levels.
The company has a significant deferred tax asset, valued at $63 million at year end 2019.
Minera Alamos – Debt Analysis
The company has $4.2 million in debt obligations, almost all of which are due in less than one year.
Minera Alamos Stock – Share Dynamics and Capital Structure
Minera Alamos has 406.3 million common shares outstanding. They also have a significant amount of options and warrants outstanding. Fully diluted shares outstanding is 436.2 million shares.
Minera Alamos has a dilutive capital structure. Common stock investors should carefully consider their place in the capital structure before investing.
Minera Alamos Stock – Dividends
The company does not currently pay a dividend and is unlikely to do so in the near future.
Management – Skin in the game
There has not been any relevant insider activity recently in Minera Alamos stock. However historically insiders have been net buyers of Minera Alamos stock.
Minera Alamos Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$4.2 million/ $3 million = 1.4
A debt to equity ratio of 1.4 indicated the company is financed with both debt and equity, but has slightly more debt in its capital structure. The company should not be overly reliant on any one form of financing moving forward.
Price to Book Ratio
Current Share Price/Book Value per Share.
$.01/$.43 = 43
Based on my estimate of fully diluted shares outstanding, Minera Alamos has a book value per share of $0.01. At the current market price this implies a price to boo ration of 43. A price to book ratio of 43 means the company currently trades at a significant premium to the book value of its assets.
Working Capital Ratio
Current Assets/Current Liabilities
$5.3 million/$4.1 million = 1.3
A working capital ratio of 1.3 indicates sufficient short term liquidity.
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.
Minera Alamos Stock – Summary and Conclusions
Minera Alamos has several very promising properties in Mexico with high “measured and indicated” gold and silver deposits. Should any one of these properties play out in a best-case scenario, then current valuations, although relatively high, could be justified.
The company’s current financial situation is stable, with adequate liquidity. Although the will need to raise additional capital in the future to continue exploration.
The major risks are jurisdictional risk and dilution risk. However, I believe the company has several assets that have enough potential to compensate for these risks. I would consider a small allocation to Minera Alamos stock, for highly risk tolerant investors, within a well-diversified gold stock portfolio.
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.
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