Common Stock: Probe Metals (TSXV: PRB)
Current Market Price: $1.14 CAD
Market Capitalization: $146.7 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Probe Metals Stock – Summary of the Company
Probe Metals is a precious metals exploration company focused on the acquisition and exploration of precious metals properties in Canada. Their property portfolio consists of 15, 100% owned properties in Ontario and Quebec. The company is headquartered in Toronto, Canada.
Revenue and Cost Analysis
Probe 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.
The company had a net loss of $5 million in 2019, significantly less than 2018’s net loss of $20.4 million. This decrease was due to a reduction in the company’s exploration expenditures, which were the company’s largest expenses in both years.
Probe Metals – Royalty and Streaming Agreements
Many of the company’s properties have royalties attached, either net smelter royalty’s or gross metals royalty’s.
Balance Sheet Analysis
Probe has a solid balance sheet with high liquidity levels and low long term liabilities. Most of the company’s assets are cash to be used for exploration.
Probe Metals- Debt Analysis
As of year-end 2019 the company goes not have any debt outstanding.
Probe Metals Stock – Share Dynamics and Capital Structure
As of April 2020, the company had 124.8 million common shares outstanding. In addition, they had 2.1 million restricted share units, 9.6 million options, and 13.7 million warrants outstanding. Fully diluted shares outstanding is around 150.3 million shares.
Newmont Goldcorp owns about 12.5% of the company’s outstanding shares.
Probe Metals Stock – Dividends
The company does not currently pay a dividend and is unlikely to do so for the foreseeable future.
Management – Skin in the game
Insiders at Probe Metals have not made any relevant purchases or sales of the company’s stock recently, providing no signal for investors.
Probe Metals Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$7.4 million/$34.2 million = .21
A debt to equity ratio of .21 means Probe has some debt in its capital structure but relies mostly on equity financing to fund itself.
Price to Book Ratio
Current Share Price/Book Value per Share.
$1.14/$.23 = 5
Based on fully diluted shares outstanding, Probe has a book value per share of $.23. At the current market price, this implies a price to book ratio of 5, meaning the company’s stock trades at a premium to the book value of the company.
Working Capital Ratio
Current Assets/Current Liabilities
$41 million/$7.3 million = 5.6
A working capital ratio of 5.6 indicates a strong liquidity position. Probe 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.
Probe Metals Stock – Summary and Conclusions
Probe has an interesting portfolio of exploration properties in Canada. They have plenty of cash to explore and are financially healthy. Their capital structure is fairly dilutive.
Although Probe has a descent exploration portfolio, If I am going to invest in Canadian explorers, I would prefer to invest in company’s where I have higher conviction, such as O3 Mining.
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.
