Common Stock: Strikepoint Gold (TSXV: SKP)
Current Market Price: $.10 CAD
Market Capitalization: $12.5 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Strikepoint Gold Stock – Summary of the Company
Strikepoint is a mineral exploration company focused on the acquisition, exploration, and development of gold and silver properties in Canada. They have a portfolio of exploration stage properties, mostly in British Columbia and The Yukon. Strikepoint was founded in 1982 and is headquartered in Vancouver, Canada.
Revenue and Cost Analysis
Strikepoint does not have any property’s 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 $4 million in 2019, less than 2018’s net loss of $8.2. This decrease was due to lower exploration expenses in 2019. Exploration expenses were the company’s largest expenses in both years, totaling $2 million and $5 million in 2019 and 2018 respectively.
Strikepoint Gold – Royalty and Streaming Agreements
Several of the company’s exploration properties are subject to net smelter royalty’s ranging from 1% to 3%.
The company owns a 1% net smelter royalty on the Skita gold property, which it sold in January 2020 and a .5% net smelter royalty on the Glacier Creek property, which it sold in January 2020.
Balance Sheet Analysis
Strikepoint has a sound balance sheet with sufficient liquidity and low liability levels.
Strikepoint Gold – Debt Analysis
As of year-end 2019, the company does not have any debt outstanding.
Strikepoint Gold Stock – Share Dynamics and Capital Structure
As of April 2020, the company had 125.5 million common shares outstanding. In addition, they have 12.5 million options and 30 million warrants outstanding. Fully diluted shares outstanding is around 168 million shares.
Strikepoint has a dilutive capital structure. Investors should carefully consider their place in the capital structure before investing.
Strikepoint Gold 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 Strikepoint Gold have not made any relevant transactions related to the company’s stock recently, providing no signal to investors.
Strikepoint Gold Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$103 thousand/ $524 thousand =.2
A debt to equity ratio of .2 indicates that Strikepoint relies mostly on equity financing to fund itself, with very little debt.
Price to Book Ratio
Current Share Price/Book Value per Share.
$.10/$.003 = 32
Based on fully diluted shares outstanding, Strikepoint has a book value per share of $.003. At the current market price, this implies a price to book ratio of 32, meaning the company’s stock currently trades at a significant premium to the book value of the company.
Working Capital Ratio
Current Assets/Current Liabilities
$578 thousand/ $103 thousand = 5.6
A working capital ratio of 5.6 indicates sufficient short term liquidity. Strikepoint should not have a problem 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.
Strikepoint Gold Stock – Summary and Conclusions
Strikepoint owns a portfolio of exploration properties in proven gold regions of Canada. The company is actively exploring its property’s and is in good financial health.
However, the company has a dilutive capital structure and exploration has not been aggressive. Although several of the properties appear promising, no single property has been explored sufficiently for me to feel comfortable investing. For this reason, I would not consider investing in Strikepoint stock now, but I will continue to monitor the company, and reconsider my investment decision based on new exploration results. For now, I would prefer to allocate to more promising Canadian explorers, 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.
