Common Stock: Silver One Resources (TSXV: SVE)
Current Market Price: $.82 CAD
Market Capitalization: $129.5 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Silver One Resources – Summary of the Company
Silver One Resources is a precious metals exploration company focused on the acquisition, exploration, and development of silver properties in The United States and Mexico. They own properties in Nevada, as well as 3 silver property’s in Mexico. Silver One was founded in 2007 and is headquartered in Vancouver Canada.
Revenue and Cost Analysis
Silver One 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 $1.6 million in both 2018 and 2019. Their largest expenses were compensation and promotion related expenses. Exploration and evaluation expenses were negligible in both years.
Silver One Resources – Royalty and Streaming Agreements
Some of the company’s claims in Nevada are subject to net smelter royalties ranging from 2% to 3%. The company’s Mexican properties are subject to a 1.5% net smelter royalty, with a 1% buyback option.
Mineral Resources
The Candelaria protect has inferred resources totaling 82.8 million ounces of silver.
Balance Sheet Analysis
Silver One has a sound balance sheet with sufficient short term liquidity, low liability levels, and a portfolio of long term assets.
Debt Analysis
As of year-end 2019 the company does not have any debt outstanding. They have a small long term lease obligation valued at $311 thousand.
Silver One Resources – Share Dynamics and Capital Structure
As of July 2020, Silver One had 195.2 million common shares outstanding. In addition, they have 9.4 million options and 45.1 million warrants outstanding. Fully diluted shares outstanding is around 249.7 million shares.
Silver One has a dilutive capital structure. Investors should consider their place in the capital structure before investing.
Silver One Resources – Dividends
The company does not currently pay a dividend and is unlikely to do so for the foreseeable future.
Management – Skin in the game
Around 5% of the company is owned by management and directors. Insiders at Silver One have not made and relevant transactions in the company’s stock recently, providing no signal for investors.
Silver One Resources Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$958 thousand/$17.3 million = .05
A debt to equity ratio of .05 indicates that Silver One uses very little debt financing and relies almost entirely on equity financing to fund itself.
Price to Book Ratio
Current Share Price/Book Value per Share.
$.82/$.07 = 12
Based on fully diluted shares outstanding Silver One has a book value per share of $.07. At the current market price this implies a price to book ration of 12, meaning the company trades at a significant premium to its book value.
Working Capital Ratio
Current Assets/Current Liabilities
$3.3 million/$349 thousand = 5
A working capital ratio of 5 indicates that Silver One has a sound short term liquidity position and should not have problems meeting its near-term obligations.
Silver Market – Economic Factors and Competitive Landscape
Silver 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 silver companies are poised to benefit from a strong economic tailwind.
Silver One Resources Stock – Summary and Conclusions
Silver One has a solid portfolio of assets with jurisdictional risk diversified between Nevada and Mexico. The Candelaria property in Nevada has historically produced significant amounts of silver. The company successfully raised capital in July 2020, and thus have a sound liquidity position moving forward.
However, there is little exploration expense and in order to bring existing assets into production would require 18-24 months just for permitting, according to the company. In addition, there is a significant dilutive overhang in the form of options and warrants.
Although the company has promising properties and a solid balance sheet, Silver One common stock is highly speculative. It should only be considered as a small position for highly risk tolerant investors, with a well-diversified precious metals 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.
