Common Stock: QuestEx Gold and Copper (TSXV:QEX)
Current Market Price: $ 0.62 CAD
Market Capitalization: $ 15.2 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
QuestEx Gold and Copper Stock – Summary of the Company
QuestEx Gold and Copper is a mineral resource exploration company focused on the acquisition, exploration, and development of mineral properties. The company is focused on properties located in British Columbia, Canada, where they own a portfolio of exploration stage gold and copper properties. QuestEx was founded in 2009 and is headquartered in Vancouver, Canada.
Revenue and Cost Analysis
QuestEx Gold and Copper 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.
For the fiscal year end March 31, 2020 QuestEx had a net loss of $ 1.3 million, a decrease compared to $ 2.3 million in the previous year. The company had exploration expenses, which were capitalized, of $ 1.5 million and $ 3.7 million in 2020 and 2019 respectively.
QuestEx Gold and Copper – Royalty and Streaming Agreements
All of the companies material properties are subject to net smelter royalties ranging from 1% to 2%.
Balance Sheet Analysis
QuestEx has a decent balance sheet. They have reasonable liability levels and a sound near term liquidity position.
QuestEx Gold and Copper – Debt Analysis
As of the fiscal year end March 2020 the company does not have any debt outstanding.
QuestEx Gold and Copper Stock – Share Dynamics and Capital Structure
As of September 2020 QuestEx has 24.6 million common shares outstanding. In addition they have 1.9 million options and 4.1 million warrants outstanding. Fully diluted shares outstanding is around 30.6 million shares.
QuestEx has a dilutive capital structure. Investors should carefully consider the effects of dilution before investing.
QuestEx Gold and Copper 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 QuestEx Gold and Copper have been net buyers of the company’s stock in the recent past. This is generally viewed as a bullish signal by investors.
QuestEx Gold and Copper Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$ 1.1 million / $ 28 million = .04
A debt to equity ratio of .04 indicates that QuestEx uses almost no debt in its capital structure and relies almost entirely on equity financing to fund itself.
Working Capital Ratio
Current Assets/Current Liabilities
$ 2.4 million / $ 414 thousand = 5.8
A working capital ratio of 5.8 indicates a sound liquidity position. QuestEx should not have a problem meeting its near term obligations.
Price to Book Ratio
Current Share Price/Book Value per Share.
$ 0.62 / $ 0.92 = .68
Based on fully diluted shares outstanding QuestEx has a book value per share of $ 0.92. At the current market price this implies a price to book ratio of .68, meaning QuestEx stock currently trades at a discount 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.
QuestEx Gold and Copper Stock – Summary and Conclusions
QuestEx Gold and Copper stock is a decent exploration stage investment opportunity. They own a portfolio of properties in a high quality jurisdiction, which they are actively exploring. However I don’t see anything exceptional about QuestEx stock that would compel me to invest. Their exploration expenditure is small and all of their properties have royalties attached. In addition they have a significant amount of dilutive instruments outstanding.
I would prefer to allocate to more promising projects in the region, such as Dolly Varden, or to explorers with much larger drill programs, 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.
