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Torex Gold Is Golden

Jun. 05, 2020 7:02 PM ETTorex Gold Resources Inc. (TORXF), TXG:CA14 Comments
John Manfreda profile picture
John Manfreda


  • Valuation metrics for Torex are still cheap.
  • Cash holdings will increase significantly.
  • Another Mine will come into production.
  • Risk associated when a new mine will come into production.

Hello there to all my Seeking Alpha followers. Sorry, for the hiatus. I took a break from writing about precious metals stocks, market news, and general contrarian investments, due to the fact that I started a new career, and a new profession. However, recently, I have had the itching and inspiration, to write about investments that will prosper and thrive during these uncertain times. Since March 20th, 2020, the HUI gold bugs index has increased from 166.29 to roughly 280 points. I say roughly, because I am not sure when this article will be published, so the numbers provided will not be exact by the time you read this. Due to this run up in price, a good amount of gold stocks are now overvalued or fairly valued. But there is one stock that I feel is good buy despite this run up. That stock is called Torex Gold (OTCPK:TORXF). What I like about this stock is its valuation. Currently, this company is trading at a price to book value ratio of 1.52, an enterprise value to revenue ratio of 1.64, and an Enterprise value to EBITDA ratio of 3.45. I did not calculate some of the traditional ratios used such as the Price/Earnings (P/E) ratio because, when valuing resource companies, you can't use the same standard valuation metrics as one would when valuing a company such as Walmart (WMT) or Bank of America (BAC). In terms of the company's balance sheet, I calculated a current ratio of 1.52, and a total assets to total liabilities ratio of 3.09. So, I believe that the company's balance sheet is healthy as there are enough assets that can be generated into cash to pay off all liabilities owed with the current year; and the total assets

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John Manfreda profile picture
"Bear Markets are the authors of Bull Markets, and Bull Markets are the authors of Bear Markets""Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.""The stock market is filled with individuals who know the price of everything, but the value of nothing.""Price is what you pay, value is what you get"- Disclosure: I am not a financial advisor. All articles are my opinion - they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading or investing.

Analyst’s Disclosure: I am/we are long TORXF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Lastly, I want to make it clear, that this article was written for informational purposes only, and should not be construed as investment advice. I am not a financial advisor, this is only my thoughts about a specific stock, if you have any interest in investing in this stock, please talk to an investment professional, and do your own research.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (14)

On fundamentals excellent choice, maybe the cheapest on EV/ EBITDA. As you pointed the risk is that is a single mine generating the cash flow. Mexico situation is not a big problem all EMs need productive assets operating and bring dollars in. On same way of thinking please check Centerra, St. Barbara, Dacian, Eldorado, Kinross. Nice fundamentals , low or no debt and spread out production. Nice have your thoughts.
John Manfreda profile picture
thank you
CEO.ca links to ink worth highlighting
Thanks John great summary on the economics. Any insight on the people, has management successfully built and sold in the area prior. Will do my own DD but thought I’d ask all the same.
John Manfreda profile picture
Management looks solid to me. Management is very subjective, so for an article that is public, I tend not to write about it. Here's a look for you to get started. The CEO and COO use to work for Vale for a long time, which is a well respected company. The CFO comes from Goldcorp.
Unfortunately I would be concerned.........Is it safe to travel to Guerrero Mexico?
Do not travel due to crime. Crime and violence are widespread. Armed groups operate independently of the government in many areas of Guerrero. ... U.S. government employees may not travel to the entire state of Guerrero, including Acapulco, Zihuatanejo, Ixtapa, and Taxco.Dec 17, 2019
John Manfreda profile picture
I think there is a lot of political risk everywhere. Just look whats happening here in the US. That is why you need an international portfolio that is geopolitically spread out around the world.
fazsha profile picture
@John Manfreda That's a little overly simplistic. Guerrero is a Level 4 danger state in Mexico, one of only 4 rated that high.
I've been slowly reducing my stake in Torex - partly on poor relative performance but also because of unconfirmed reports of problems with gangs in Guerrero (rivals fighting over 'protection' money).
Thanks for the article - I'm long and holding.
John Manfreda profile picture
Your welcome, I am glad you liked it.
EM2C2 profile picture
Torex's prognosis as a long term investment almost wholly depends project execution and getting the right people in to do the job. There is Media Luna as you pointed out, but there is also substantial ongoing sustaining capital at El Limon. Then there is the whole tax situation in Mexico. Its one thing to be generating cash, its another thing to get it out of the country.
John Manfreda profile picture
Very thought provoking comment.
EM2C2 profile picture
Don't mistake me, definitely a risk vs reward scenario; and Im counting on the later.
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