Common Stock: Rupert Resources (TSXV:RUP)
Current Market Price: $1.88 CAD
Market Capitalization: $254 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Rupert Resources Stock – Summary of the Company
Rupert Resources is a mineral exploration company focused on the acquisition and exploration of gold properties. Their main focus is Finland, where they have 3 exploration stage projects, but they also have 2 exploration stage projects in Canada. The company was founded in 1981 and is headquartered in Toronto, Canada.
Revenue and Cost Analysis
Rupert does not have any producing properties 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 $4.8 million for the fiscal year ending February 2020, slightly less that a new loss of $5.5 million the year prior.
Rupert Resources – Royalty and Streaming Agreements
The Pahtavaara property has a 1.5% production royalty, capped at USD $2 million payable on go-forward revenues generated when gold production resumes.
Balance Sheet Analysis
Rupert has a strong balance sheet with low liability levels and good liquidity. Current assets were $14.6 million for the fiscal year end February 2020, including $14.3 million in cash. Current liabilities were $2.3 million, comprised mostly of accounts payable.
The company has a significant long term exploration and evaluation assets valued at $32.8 million. The company only carries one long term liability which is an asset retirement obligation valued at $1.2 million.
Rupert Resources – Debt Analysis
During 2019, the company paid off its convertible debt liability by issuing shares and now has no outstanding debt obligation.
Rupert Resources Stock – Share Dynamics and Capital Structure
As of February 2020, the company had 155.5 million common shares outstanding. In addition, they had 10.5 million options and 11.5 million warrants outstanding. Fully diluted shares outstanding is around 177.5 million.
Rupert has a dilutive capital structure and given the company’s reliance on equity they will likely further dilute existing shareholders
Rupert Resources Stock – Dividends
The company does not pay a dividend and is unlikely to do so for the foreseeable future.
Management – Skin in the game
Rupert insiders have bought and sold roughly equal amounts of the company’s stock in the recent past. This does not provide investors with any useful information.
Rupert Resources Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$3.5 million/ $48 million =.07
A debt to equity ratio of .07 indicates that Rupert uses very little debt in its capital structure and relies almost entirely on equity financing to fund itself.
Price to Book Ratio
Current Share Price/Book Value per Share.
$1.88/$.27 = 7
Based on fully diluted shares outstanding Rupert has a book value per share of $.27. At the current market price this implies a price to book ratio of 7, meaning the stock currently trades at a significant premium to the book value of the company.
Working Capital Ratio
Current Assets/Current Liabilities
$14.6 million/ $2.3 million = 6.1
A working capital ratio of 6.1 indicates a strong liquidity position. Rupert should not have issues 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.
Rupert Resources Stock – Summary and Conclusions
Rupert has several high potential properties in under explored areas of Finland. The company is healthy financially and carries no debt.
The major risks come from significant dilutive instruments outstanding, in addition to normal exploration related risks. The stock price has increased significantly recently, more than doubling in under a year.
I think Rupert has significant upside potential to compensate for the risks associated with its exploration projects. Given the recent price spike, I will be waiting for a pullback before looking to invest. A small allocation to Rupert stock appears acceptable for highly risk tolerant investors, within a well-diversified gold stock portfolio.
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.
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