Seeking Alpha
Profile| Send Message| ()  

When it comes to small-cap gold mining stocks, better known as the 'junior miners' most eyes are always focused on production and mining developments, but what about their fundamentals? In this article, I wanted to take a closer look at three of the junior miners which carry absolutely no debt, trade under $10.00/share and have at least $10 million in cash on their books. For this analysis, the companies needed to meet the following criteria:

  • Currently have a TD/TC ratio of no more than 0.00.
  • Currently trade under $10.00/share
  • Currently have a market cap under $350 million
  • Currently have at least $10 million in cash on their books

After developing this screen, I've found three small-cap gold mining companies that currently carry a total-debt-to-total-cash (TD/TC) ratio that is exactly at zero.

I've also chosen to include stocks that are currently trading under $10/share in an effort to bring to light some of the small-cap gold mining companies which may not be on the radars of the larger institutional investors.

Company

Symbol

Price

Mkt Cap

Total Debt

Total Cash (mrq)

TD/TC Ratio

DRD Gold Ltd.

(DRD)

$8.07

$305.57M

0.00

$46.57 M

0.00

Vista Gold Corp.

(VGZ)

$2.27

$174.18M

0.00

$122.39 M

0.00

Midway Gold Corp.

(MDW)

$1.30

$166.73M

0.00

$11.14 M

0.00

DRD Gold Ltd.: It should be noted that shares of DRD Gold closed Thursday's trading session at $8.07/share, currently possess a market cap of $305.57 million and have been given a TD/TC of 0.00 which are based on the statistical calculations of my formula. The company's fundamentals include a total of $46.57 million in total cash on its books, a book value of $4.97/share and absolutely no debt. In my opinion, the fact DRD has a TD/TC ratio of 0.00 and an annual yield of 1.10% ($0.08) could be a good thing for those looking to establish a long-term position.

Recent Highlights: According to the company's website, "FY2012 DRDGOLD produced 232 353 ounces of gold (including Blyvoor for 11 months of the year) - 135 708 ounces (58%) was produced at Ergo. In FY2011, this figure was 265 179 for DRDGOLD (including Blyvoor) and 144 065 ounces at Ergo. Gold sales generated revenue of R3 004 million, based on an average gold price of US$1 679 per ounce and a rand/US$ exchange rate of R7.70/US$. Pleasingly, the group's operating margin rose from 29% in FY2011 to 35% in FY2012".

Vista Gold Corp.: Shares of Vista Gold, which closed at $2.27/share on Thursday, currently possess a market cap of $174.18 million and have been given a TD/TC ratio of 0.00 based on the statistical calculations of my formula. The company's fundamentals include a total of $112.39 million in total cash on its books (it should be noted that the company currently has a negative operating cash flow of $31.56 million and a negative free cash flow of $18.96 million), a book value of $1.69/share and absolutely no debt. In my opinion, the fact VGZ has a TD/TC ratio of 0.00 could be a good thing moving forward although the fact the company has been unable to generate sustainable revenue concerns me.

Recent Highlights: According to the company's January 2013 presentation Vista Gold has a total of 5.427 million in proven and probable gold reserves between its Mt. Todd and Los Cardones projects. With regard to the company's Mt. Todd project, it is using a two-phased development strategy. Phase 1 to include 30,000/tpd project using higher cut-off grade (0.5 g/t vs. 0.4 g/t) with low grade stockpile. Phase 2 to include expansion to 45,000/tpd after pay-back of initial capital, a reduction in cut-off grade to 0.4 g/t and processing of stockpiled material. This approach should bode well for the company's long-term prospects as the site.

Midway Gold Corp.: At the close of Thursday's trading session shares of Midway Gold Corp. finished the day at $1.30/share, held a market cap of $166.73 million, and had a TD/TC ratio of 0.00 since the company possesses absolutely no debt. The company's fundamentals include a total of $11.14 million in total cash on its books (it should be noted that the company currently has a negative operating cash flow of $13.98 million and a negative free cash flow of $12.77 million), and a book value of $0.48/share.

Although Midway's fundamentals include a total cash number of $11.14 million based on the company's most recent reportable quarter, it should be noted that company announced a $70 million dollar strategic financing plan on November 21st and that plan was subsequently closed on December 13th

Recent Highlights: On January 7th the company announced its drilling results from the Gold Rock Project located in White Pine County, Nevada. The results were broken down over four labeled zones and included 83.3 meters of 0.89 grams per ton at its zone labeled "GR12-01c" (which included 1.2 meters of 3.53 grams per ton and 1.5 meters of 5.10 grams per ton). In zones labeled "GR12-02c" and "GR13-02c", Midway reported results of 9.1 meters of 3.26 grams per ton and 114.0 meters of 0.58 grams per ton. Lastly, and in the zone labeled "GR12-17", Midway reported 106.7 meters of 1.23 grams per ton, 1.5 meters of 4.90 grams per ton, 1.5 meters of 7.44 grams per ton, and 3.0 meters of 3.77 grams per ton.

Final Analysis

For potential investors looking to establish a position in DRD Gold, Vista Gold, or Midway Gold, I'd weigh both the primary positive and negative catalysts going forward. When it comes to initial position size I'd look to establish a small-medium sized position at current levels and keep an eye out for any improvement in earnings and project-based catalysts.

Source: 3 Micro-Cap Gold Mining Stocks With Zero Debt And Long-Term Catalysts