One of the most common ways for a resource investor to evaluate a company is to look at the firm’s cash position versus its market capitalization. The market cap is arrived at by simply multiplying the stock price on any given day by the number of shares outstanding. A company’s cash on hand can be found on the company’s website under its latest financial statements, which all publicly listed companies are required by law to publish.
In mineral exploration, cash is king. Cash flow not only allows the company to meet its day to day expenses (known in the vernacular as “G&A” (general and administrative)) such as salaries, office overhead, marketing, etc., but can also be accumulated into a war chest the firm will draw upon to fund the next phase of exploration. Without cash, a mineral exploration company is unable to do soil sampling, aerial surveys, or conduct the all-important diamond drilling that will allow it to delineate a resource for eventual mining of the property.
A company in a healthy cash position will usually have a decent-sized market cap, because investors tend to bid up the price of the stock based on the company’s seeming ability to move its projects forward.
Some companies have very little money in the kitty but investors continue to buy or hold the stock, keeping their market caps high. This could mean investors have confidence that the company is on sound footing despite not having much cash to burn, evidenced by, for example, an updated resource estimate, or a partnership agreement with a large producer. More negatively, it could also be a warning signal to investors that the market may be overvaluing the company. Below are 5 companies that meet this description of “outlier” juniors trading at a significant premium to their cash positions. As always, investors are urged to do their own due diligence in making a decision whether to invest.
Copper Fox Metals Inc. (TSXV:CUU). Calgary-based Copper Fox Metals has a market capitalization of $278 million but according to its financial statement ended April 30, holds cash of just $540,895, showing that CUU trades at 514 times its cash value. Copper Fox is an example of a company with big potential based on its Schaft Creek project in northern British Columbia. Copper Fox announced on July 16 it will form a joint venture with Canadian diversified mining giant Teck Resources (TSX:TCK.B, NYSE:TCK) to explore and develop the property. Under the deal Teck will hold 75 percent of the mine and spend a total of $60 million in three equal payments, while Copper Fox will retain 25 percent. Copper Fox has also brought in significant investment capital, announcing since January private placements totalling $9.65 million. Over the last month the stock has risen 9.68 percent.
Dynasty Metals and Mining (TSX:DMM). Canada-based Dynasty Metals has two advanced-stage gold properties in Ecuador, the producing Zaruma Gold Project and the Jerusalem Gold Project, along with the Dynasty Gold Fields discovery. The company has a $33.5 million market cap but as of June 30, 2013, reported just $69,892 in cash, meaning DMM is trading at 485 times cash value. However, Dynasty said in an August 15 news release, available on SEDAR, that it exported about 2,800 ounces of gold and 13,400 ounces of silver for an approximate value of $3.9 million, between June 30 and August 15, which should be reflected in its next financial statement.
RTG Mining (TSX:RTG). RTG Mining is earning a 51 percent interest in the Segilola Gold Project in Nigeria, which the company describes as the largest undeveloped gold resource in Nigeria. It also holds a 51% interest in the Mkushi Copper Project in Zambia. Through a merger with Ratel Group and a listing on the Toronto main board in April, RTG Mining raised C$20 million. It also has B2Gold Corp (TSX:BTO) as an 18.2 percent shareholder in the company. As of Monday’s close, RTG had a market cap of $32.5 million, which is 171 times its cash holdings of $189,032 as of March 31, 2013. RTG investors are clearly seeing the value of the resource at Segilola, which according to the company’s website, sits at 521,814 ounces of gold in the indicated category and 96,445 ounces inferred.
Wildcat Silver (TSXV:WS) Wildcat Silver is developing the Hermosa project in Arizona, of which it owns 80 percent. A preliminary economic assessment on the silver mine estimates average annual production of 15.5 million ounces for the first five years of a 16-year mine. Wildcat has a market cap of $302.9 million and according to its last financial statement ended June 30, cash of $3.048 million, showing that WS currently trades at 99 times cash. In March Wildcat announced it will acquire Canadian exploration company Riva Gold, which plans to participate in developing Hermosa. According to the press release, Riva has a cash balance of $8.1 million and has agreed to loan Wildcat C$1 million. Wildcat has enjoyed a good run on its stock price this year, with a year to date gain of 291.8 percent.
Almonty Industries (AII). Almonty Industries mines tungsten from its Los Santos project in Spain. At a market cap of $21.3 million, Almonty is trading at 66 times its current cash position of $322,000, as of March 31. The company could be in a position to expand its holdings according to a news release earlier this month stating that Almonty has approached Ormonde Mining (LSE:ORM) for a potential acquisition. While the initial approach was rejected, Almonty said it is “considering its various options regarding Ormonde.” Ormonde is developing the Barruecopardo tungsten project in Spain which, according to the company’s website, would supply about 12 percent of non-Chinese tungsten concentrate. Almonty is up 10.5 percent in the last 6 months.
Securities Disclosure: I, Andrew Topf, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Almonty Industries is a client of the Investing News Network. This article is not paid-for content.
5 Juniors Trading at Big Premiums to Cash
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