Common Stock: QMX Gold (TSXV:QMX)
Current Market Price: $0.175 CAD
Market Capitalization: $66.5 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
QMX Gold Stock – Summary of the Company
QMX Gold is a precious metals exploration company focused on the acquisition, exploration, and development of gold properties. The company is entirely focused on properties in Quebec, Canada. They own a significant portfolio of properties covering nearly 200 square kilometers of the Val d’Or Mining Camp in the Abitibi District of Québec, Canada. They also own the Aurbel Mill. QMX was founded in 1988 and is headquartered in Toronto Canada.
Revenue and Cost Analysis
QMX 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 QMX had a net loss of $1.5 million, a decrease from their net loss of $2.4 million in 2018. This decrease is due mostly to a significant decrease in “professional, consulting, and management” expenses.
QMX Gold – Royalty and Streaming Agreements
The Aurbel property in Quebec is subject to a 4.5% net smelter royalty. The VMS properties in Quebec are subject to net smelter royalties ranging from 1% to 2.5%.
QMX Gold – Mineral Resources
The company’s initial resource estimate includes 258,700 ounces of gold in the indicated category and 145,100 ounces of gold in the inferred category.
Balance Sheet Analysis
QMX has a decent, but not strong balance sheet. They have a solid portfolio of assets and sufficient liquidity in the near term. But liability levels, including debt are high for a company with no revenue.
QMX Gold – Debt Analysis
As of year-end 2019 the company has total debt outstanding of $2.5 million, all of which is classified as long term. The debt carries an interest rate of 8% and matures on January 2022.
QMX Gold Stock – Share Dynamics and Capital Structure
As of October 2020 QMX has 380 million common shares outstanding. In addition they have 22.9 million options and 56.8 million warrants outstanding. Fully diluted shares outstanding is around 459.7 million shares.
QMX has a dilutive capital structure. Investors should consider the effects of dilution before investing.
QMX 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 QMX Gold have bought and sold relatively equal amount of the company’s stock recently, providing no signal to investors.
QMX Gold Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$9.4 million / $31.4 million = .3
A debt to equity ratio of .3 indicates the QMX uses some debt in its capital structure but relies mostly on equity financing to fund itself.
Working Capital Ratio
Current Assets/Current Liabilities
$9.5 million / $3.7 million =2.5
A working capital ratio of 2.5 indicates sufficient liquidity. QMX should not have problems meeting its near term obligations.
Price to Book Ratio
Current Share Price/Book Value per Share.
$.175 / $0.07 = 2.5
Based on fully diluted shares outstanding QMX has a book value per share of $0.07. At the current market price this implies a price to book ratio of 2.5, meaning the company’s stock trades at a 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.
QMX Gold Stock – Summary and Conclusions
There is a lot to like about QMX Gold stock. They own a huge land package in one of the premier mining districts in the world. A small resource is already defined, but the property is actively being explored (35,000 meters drill program in 2020) so there is the real potential to add resources. QMX is OK financially with sufficient liquidity in the near term, however debt for a company with no revenue is concerning. Although QMX has a list of solid strategic investors, such as Eldorado Gold, their capital structure is dilutive and not particularly shareholder friendly.
I already have exposure to QMX Gold stock via my ownership of O3 Mining stock. I am not going to allocate to QMX stock directly right now. I will continue to monitor the company and if I decide I want to increase my exposure, I will have to choose whether I want to do so via more O3 Mining stock or via a direct allocation to QMX Gold stock. I will make this decision based on the company’s 2020 financial performance and the progress/results of their drill program.
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.
