Common Stock: Southern Silver Exploration Company (TSXV: SSV)
Current Market Price: $.49 CAD
Market Capitalization: $69.2 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Southern Silver Exploration Company – Summary of the Company
Southern Silver Exploration Company is a silver exploration company focused on the acquisition, exploration, and development of silver properties. Their properties are located in The United States and Mexico. The company was founded in 1963 and is headquartered in Vancouver Canada.
Revenue and Cost Analysis
The company does not have any assets that are currently producing and therefore does not have any revenue. They consistently run a net loss and are likely to continue to do so for the foreseeable future.
In the fiscal year 2020 (Ending April 2020), Southern Silver had a net loss of $2.4 million. Their largest expenses were compensation and promotion related. They had a small exploration expense of $43 thousand.
Southern Silver Exploration Company – Royalty and Streaming Agreements
Both of the company’s properties are subject to net smelter royalty’s ranging from 1% to 2%.
Balance Sheet Analysis
The company has a descent balance sheet with sufficient liquidity and low liability levels.
Debt Analysis
As of fiscal year-end 2020, the company does not have any debt outstanding.
Southern Silver Exploration Company – Share Dynamics and Capital Structure
As of April 30, 2020, the company has 132.4 million common shares outstanding. In addition, they have 54 million warrants and 13.2 million options outstanding. Fully diluted shares outstanding is around 199.6 million shares.
Southern Silver has a highly dilutive capital structure. Investors should carefully consider their place in the capital structure before investing.
Southern Silver Exploration Company – 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 Southern Silver have been net sellers of the company’s stock in the recent past. However, the amounts sold were too small to be relevant, providing little signal to investors.
Southern Silver Exploration Company – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$337 thousand/$8.3 million = .04
A debt to equity ratio of .04 indicates that Southern Silver 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.
$.49/ $.04 = 12
Based on fully diluted shares outstanding, Southern Silver has a book value per share of $.04. At the current market price this implies a price to book ratio of 12, meaning the company trades at a significant premium to its book value.
Working Capital Ratio
Current Assets/Current Liabilities
$3.7 million/ $337 thousand = 11
A working capital ratio of 11 indicates a strong liquidity position. Southern Silver should not have a problem 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.
Southern Silver Exploration Company – Summary and Conclusions
Southern Silver Exploration Company calls itself an explorer, however its largest expenses are compensation and promotion related. The company has spent almost nothing on exploration over the past 2 years. If I wanted to invest in a pure exploration play, I would invest in a company that is actually exploring its properties. I would not invest in Southern Silver under any circumstances.
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.
