Common Stock: NightHawk Gold Corporation (TSX:NHK”
Current Market Price: $1.83 CAD
Market Capitalization: $82.1 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise stated.
Nighthawk Gold Stock – Summary of the Company
Nighthawk Gold Corporation is a resources company focused on the acquisition, exploration, and development of gold properties in Canada. Their major project is the Indin Lake Gold Property in Canada. Nighthawk was founded in 2004 and is headquartered in Toronto, Canada.
Revenue and Cost Analysis
Nighthawk does not have any producing properties; therefore, they do not have any revenue and consistently run a net loss. They are likely to continue to run a loss for the foreseeable future.
In 2019, they had total expenses of $2.4 million and a comprehensive net loss of $4.6 million. In 2018, total expenses were $2.7 million and the comprehensive net loss was $1.8 million.
Most of the company’s expenses are compensation related, including share based compensation.
Nighthawk Gold – Royalty and Streaming Agreements
The Damoti Lake Property has a 2% net smelter royalty.
Nighthawk Gold – Mineral Resources
The Colmac project on the Indin Lake Property has inferred resources totaling 2.6 million ounces of gold.
Balance Sheet Analysis
Nighthawk has solid balance sheet with sufficient liquidity, low liability levels and a strong long term exploration asset. However, they will require additional capital in the future.
At the end of 2019 current assets totaled $10.5 million, including $9.6 million in cash. Current liabilities were $469 thousand.
The company has one major long term asset, an exploration and evaluation asset valued at $82.2 million. They also have $4.6 million in restricted cash. Total assets were $97.4 million at year end 2019, compared to total liabilities of $13.2 million.
Nighthawk Gold – Debt Analysis
The company does not have any debt, but has a significant deferred tax liability of $9.3 million.
Nighthawk Gold Stock – Share Dynamics and Capital Structure
In January 2020, the company completed a share consolidation, reducing common shares outstanding from 223 million to 44.6 million. In addition, they have 2.8 million options outstanding. Fully diluted shares outstanding is 47.5 million.
The company has no senior debt and low dilution. The capital structure appears acceptable for common stock holders.
Nighthawk 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 have been net buyers of a significant amount of Nighthawk stock over the past two years. This is generally viewed as a bullish signal for the stock.
Nighthawk Gold Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$13.2 million/$84.1 million = .15
A debt to equity ratio of .15 indicates the company uses mostly equity in its capital structure and should not be overly reliant on debt financing in the future.
Price to Book Ratio
Current Share Price/Book Value per Share.
$1.83/$1.77 = 1.03
Based on fully diluted shares outstanding Nighthawk has a book value per share of $1.77. At the current market price this implies a price to book ratio of 1.03. A price to book ratio of 1.03 means Nighthawk stock currently trades at the value of its net assets.
Working Capital Ratio
Current Assets/Current Liabilities
$10.4 million/$469 thousand = 22
A working capital ratio of 22 indicates a strong short term liquidity position. Nighthawk should not have problems meeting its near-term obligations.
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.
Nighthawk Gold Stock – Summary and Conclusions
Nighthawk has a single property in The Northwest Territories. The Colmac project has significant inferred mineral resources and other parts of the property have the potential to be explored.
They have sufficient liquidity and low liability levels, including no debt. The capital structure is not overly dilutive.
Nighthawk stock currently trades at its book value. Given the high potential for the property, a small allocation to nighthawk at the current valuation may be reasonable for highly risk tolerant investors, within a well-diversified portfolio of exploration stage gold stocks.
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.
