Common Stock: Wallbridge Mining (TSX: WM)
Current Market Price: $1.15 CAD
Market Capitalization: $680 million CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
Wallbridge Mining Stock – Summary of the Company
Wallbridge mining company is focused on the acquisition, exploration, development, and eventual operation of mining properties. They focus primarily on gold, in addition to copper, nickel, and platinum.
Their main property is the Fenelon Gold property in Quebec. This project is still in the exploration stage. Wallbridge also has several other exploration stage projects in Canada. They were founded in 1996 and their headquarters are in Ontario, Canada.
Revenue and Cost Analysis
Wallbridge only owns exploration stage properties, none of their properties are currently producing. Therefore, they have no revenue and consistently run a net loss. In 2019, they had a net loss of $3.1 million, slightly more than 2018’s net loss of $2.7 million.
Wallbridge expects to spend $36 million in 2020 to fund its operations. This includes general administrative costs as well as CAPEX and exploration expenses. They have stated that they will need additional funding to continue their operations.
Wallbridge Mining – Royalty and Streaming Agreements
The Fenelon Gold property is subject to 3 separate net smelter royalties totaling 4%. Many of their other exploration properties have royalty’s attached.
Balance Sheet Analysis
The company had a strong balance sheet at year end 2019. Current assets totaled $58 million, including $57 million in cash. Current liabilities were $9 million.
Wallbridge had total assets of $115 million, compared to total liabilities of $12.4 million. Most of these assets are long term assets such as property and equipment.
Although the company has sufficient liquidity for now, they have stated they will need to raise additional funds. The strength of their balance sheet in the medium term will depend on their ability to raise capital and the terms at which that capital is raised.
Wallbridge Mining – Debt Analysis
Wallbridge does not have any debt. They do have a small lease obligation. Almost all their contractual obligations are current, long term obligations are minimal.
Wallbridge Mining Stock – Share Dynamics and Capital Structure
As of March 2020, Walbridge had 591.6 million common shares outstanding. They also have dilutive instruments outstanding such as options, warrants and deferred share units. Fully diluted shares outstanding is 609 million.
Wallbridge’s capital structure is not overly dilutive at the moment, and the company has no senior debt. However, they will need to raise additional capital which will likely result in further dilution. Investors should carefully consider the effects of further dilution on their position in the capital structure.
Wallbridge Mining Stock – Significant Ownership Position
Eric Sprott owns 23% of the outstanding common shares.
Kirkland Lake gold owns 9.9% of the outstanding common shares.
Wallbridge Mining Stock – Dividends
The company does not pay a dividend and is unlikely to do so for the foreseeable future.
Management – Skin in the game
Over the past 18 months’ insiders at Wallbridge have been net sellers of WM stock. This is generally viewed as a bearish signal for the stock.
Wallbridge Mining Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$12.4 million/$103.2 million = .12
A debt to equity ratio of .12 means Wallbridge uses very little debt in its capital structure. Given that the company will need to raise additional capital, investors should consider the implication of the company raising additional equity capital.
Price to Book Ratio
Current Share Price/Book Value per Share.
$1.15/$.17 = 6.8
Based on fully diluted shares outstanding Wallbridge has a book value per share of $.17. At the current market price this implies a price to book ratio of 6.8. A price to book ratio of 6.8 means Wallbridge stock trades at a significant premium to the book value of its assets.
Working Capital Ratio
Current Assets/Current Liabilities
$58.6 million/$9 million = 6.5
A working capital ratio of 6.5 indicates sufficient short term liquidity. Wallbridge is likely going to be able to meet 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.
Wallbridge Mining Stock – Summary and Conclusions
Wallbridge owns a promising gold property in Quebec, the Fenelon Gold property. Results from 2019 were strong and this project will continue to be developed. Liquidity is adequate in the short term; however, the cost of development is high and Wallbridge will need to raise additional capital.
They currently have no debt in their capital structure. They have limited dilutive instrument outstanding, however when they raise additional capital shareholders are likely to be further diluted.
Overall Wallbirdge’s financial position is acceptable given its stage in the lifecycle of the Fenelon property. The major risks come from the fact that most of the company’s value comes from a single asset and the risk of additional capital being raised on unfavorable terms (assuming they can raise it at all).
WM shares may be acceptable for highly risk tolerant investors within a diversified portfolio of gold stocks. The Fenelon gold property has significant upside if it is developed, and Wallbridge could be an attractive acquisition target in the interim.
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.
