Victoria Gold Corp. (TSX: VGCX) – A prudent gold stock for investors
Victoria Gold Corp. (TSX: VGCX) Founded on September 21, 1981, as Victoria Resource Corporation and later rebranded in July 2008, Victoria Gold Corp. is headquartered in Toronto, Canada. Specializing in the strategic acquisition, assessment, and advancement of mineral properties, the company has a prominent project portfolio that includes Eagle Gold, Dublin Gulch, Eagle Extension, and Canalask.
The flagship asset is the Dublin Gulch property, a 100% owned expanse of approximately 555 square kilometers in central Yukon, Canada, home to the Eagle and Olive-Shamrock Gold deposit.Victoria Gold Corp. actively participates in the acquisition, exploration, and operation of mineral properties across Canadian and United States territories, with a primary focus on gold deposits.
The company has demonstrated a legacy of innovation and adaptability in the mining sector, reflecting its commitment to excellence. With its strategic approach, Victoria Gold Corp. plays a significant role in the exploration and development of mineral resources, contributing to its position in the industry.
Highlights and News Updates
- On October 25th, 2023, the company reported the final set of analytical results from the 2023 exploration campaign at the Raven deposit.
- On October 11th, 2023, the company further amended its secured debt agreement dated December 18, 2020, as amended December 20, 2021, June 16, 2022, and February 17, 2023.
- On September 15th, 2023, the company acquired Sabre Gold Mines Corp.’s Yukon assets via the acquisition of its wholly owned Yukon subsidiary, Golden Predator Mining Corp.
- On August 21st, 2023, the company provided an update on its operations at the Eagle gold mine in Yukon, Canada. The second evacuation of the mine earlier in August due to wildfires, favorable conditions allowed for the return of employees to the site on Aug. 10, the company said.
Key Data
Third Quarter 2023 Highlights
- Recognized revenue was CA $105.127 million based on sales of 41,561 oz of gold in the quarter, revenue is up by 4.40% compared to last year’s third quarter. Operating earnings were CA $19.899 million in the quarter.
- Net income stood at CA $5.631 million, compared to last year’s third quarter which was a loss of CA $7.56 million.
- EPS was CA $0.08 per share on a basic basis and CA $0.08 per share on a diluted basis for the quarter.
- EBITDA stood at CA $34.647 million in the third quarter up by 16% compared to last year’s first quarter.
Financials
The company has shown significant growth in revenue, notwithstanding a decline in FY22. Overall, it has made substantial improvements compared to previous years when it incurred losses in FY2018 and FY2019. Achieving a positive net profit is crucial for sustained growth and long-term survival. Positive net profit allows the company to cover expenses, invest in future growth, and potentially distribute dividends to shareholders.
However, in FY2022, there was a notable 67% decline in net profit compared to the previous fiscal year. Several factors contributed to this downturn. Increased costs of goods sold, currency fluctuations, expenses related to subsidiaries, high deferred taxes, and substantial finance costs all negatively impacted the company’s financial performance.
To enhance net profit in the future, the company could consider implementing strategies such as cost optimization, managing currency risks, streamlining subsidiary operations, optimizing tax planning, and exploring more favorable financing options. A thorough analysis of these factors is essential, and the implementation of appropriate measures is crucial to address challenges and improve overall profitability.
The company’s commitment to reducing debt is strategic, aiming to enhance financial stability and lower associated interest expenses. This approach not only demonstrates responsible financial management but also has the potential to improve the company’s overall financial health in the long run.
Considering the company’s assets, which are valued at CA $1.017 billion, including CA $18.879 million in cash, the current level of debt does not raise significant concerns. The company’s solid asset base provides a reassuring buffer, indicating a favorable balance between assets and liabilities. This information is likely to be reassuring for investors, as it suggests a manageable debt position in relation to the company’s overall financial standing.
Despite the company’s stable quarterly revenue, there was a noticeable decline in net profit during Q1’23. This downturn can be attributed to various factors, including high administration expenses, slightly elevated costs of goods sold, high finance costs, currency fluctuations, and the payment of deferred taxes. These elements collectively impacted the company’s profitability for the quarter.
It’s noteworthy that despite the decline in net profit, the stability of the quarterly revenue signals the company’s capacity to generate consistent income. Moreover, there is a positive development with the profit stabilizing from Q2’23 onwards. This stabilization suggests that the company may have implemented corrective measures or experienced improved conditions that positively influenced its financial performance.
While challenges in Q1’23 impacted net profit, the overall stability of revenue and subsequent profit stabilization in the following quarter can be seen as positive signs for the company’s financial resilience and adaptability. Monitoring how the company continues to navigate and respond to such challenges will be essential for investors and stakeholders.
Currently, the EPS of the company is CA $0.54 down by 67% compared to last year’s EPS. In FY2018 and FY2019 EPS was negative due to negative earnings.
Forecast
Right now, the company is trading at CA $6.78 with a 1-year projected target of around CA $9.26 and a low estimation of CA $5.38; the average price target is CA $8.
Technical Analysis
- The stock has corrected more than 30% and now it is taking support on its support level.
- Right now, the RSI (56.61) indicator is above 50, and it also gives us a bullish divergence.
- The stock has the potential to bounce back up to 35% from the current market price. Analysts are bullish on this stock.
Indicators Summary – Buy
- The price action analysis of the stock indicates a positive uptrend in the stock. Market sentiments are bullish.
- MACD (0.14) indicator is going to give a bullish signal.
- VWAP (6.70) indicator is also going to give us a bullish signal on the stock.
Risk factors
There are several risk factors in the company.
- The company is highly exposed to commodity fluctuation. A decrease in demand for gold can impact the company’s financials.
- As it’s a mining company they are also exposed to operational challenges, equipment failures, labour issues, and environmental regulations.
- They are also exposed to currency fluctuation. In FY2022, the company lost more than CA $16 Million.
Stock Recommendation
Gold is widely recognized as a safe-haven asset, sought by investors during periods of geopolitical tensions, economic crises, or market turmoil. It serves as a store of value and a means to preserve wealth, offering stability when traditional assets may be more volatile.
As a hedge against inflation, gold distinguishes itself from paper currencies, which can be subject to devaluation over time. Gold tends to maintain its purchasing power, making it a reliable tool for wealth preservation. During times of economic uncertainty or market volatility, gold prices often experience an uptick.
The precious metal’s historical track record supports its reputation as a valuable asset, showcasing the ability to retain worth and act as a stable store of value. Despite short-term volatility, gold has demonstrated long-term appreciation, making it a sound investment over extended periods.
Beyond its role as an investment, gold finds practical applications in everyday life. From jewelry making to electronic components, medical devices, and aerospace applications, gold’s unique properties make it indispensable across various industries.
Considering these factors, there is a potential for a rise in gold prices in the future. Such a scenario could positively impact companies like Victoria Gold Corp., particularly given its focus on gold deposits. The increased value of gold could enhance the company’s financial prospects and contribute to its overall success in the mining sector.
MarketFacts gives a “Buy” rating on the stock at the closing price of CA $6.78 as of December 21st, 2023.
| CMP (CA) (December 21, 2023) | $6.78 |
| Target Price | $9.26 |
| Recommendation | Buy |
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