Common Stock: Red Pine Exploration (TSXV:RPX)
Current Market Price: $.05 CAD
Market Capitalization: $23.8 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Red Pine Exploration – Summary of the Company
Red Pine Exploration is a precious metals exploration company focused on the acquisition, exploration, and development of gold properties in Ontario, Canada. Their principal project it the Wawa Gold project located in Northern Ontario, which they own a 64.5% stake in. They also own several other exploration stage properties. As of October 2019, the company had 19 employees. Red Pine was founded in 1936 and is headquartered in Toronto, Canada.
Revenue and Cost Analysis
Red Pine 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’s largest expenses are exploration related followed by compensation expenses.
Red Pine Exploration – Royalty and Streaming Agreements
Red Pine owns a 1.5% net smelter royalty on a 75-square kilometer property package that is owned by Probe Mines.
Several of the company’s claims are subject to net smelter royalty’s ranging from .2% to 3%.
Red Pine Exploration – Mineral Resources
The company has indicated and inferred resources totaling 701,000 ounces of gold.
Balance Sheet Analysis
Red Pine has a sound balance sheet with sufficient liquidity and low liability levels.
Debt Analysis
As of January 2020, Red Pine does not have any debt outstanding.
Red Pine Exploration Stock – Share Dynamics and Capital Structure
The company has 477.2 million common shares outstanding. In addition, they have 191.5 million warrants and 13.2 million options outstanding. Fully diluted shares outstanding is around 681.9 million shares.
Red Pine has a highly dilutive capital structure. Investors should carefully consider the effects of dilution before investing.
Red Pine Exploration 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 Red Pine have been net purchasers of the company’s common stock in the recent past. However, the amounts a too small to be relevant and provide no signal for investors.
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.
Red Pine Exploration Stock – Summary and Conclusions
Red Pine owns a high potential property in the Wawa gold property. They continue to actively explore the property with an additional 16,000 meters of drilling planned for 2020. The company is financially healthy, and compensation and promotional expenses are reasonable.
However, Red Pine has a highly dilutive capital structure. Given the large number of warrants outstanding, and the signal this sends about managements willingness to dilute existing shareholders, I am not willing to invest in Red Pine common stock.
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.
