Victoria Gold Corp. (TSX:VGCX): A Mid-Term Gold Stock Analysis, Your Next Recommended Investment
Victoria Gold Corp.(TSX: VGCX) specializes in the strategic acquisition, assessment, and advancement of mineral properties, with a prominent project portfolio featuring Eagle Gold, Dublin Gulch, Eagle Extension, and Canalask. Founded on September 21, 1981, the company is headquartered in Toronto, Canada.
Distinguished by its commitment to excellence, Victoria Gold Corp. is actively involved in the acquisition, exploration, and operation of mineral properties across both Canadian and United States territories. Focusing primarily on gold deposits, the company’s flagship asset is the 100% owned Dublin Gulch property. Encompassing approximately 555 square kilometers in central Yukon, Canada, this property is home to the Eagle and Olive-Shamrock Gold deposit.
Originally established as Victoria Resource Corporation and subsequently rebranded as Victoria Gold Corp. in July 2008, the company has maintained a legacy of innovation and adaptability.
Highlights and News Updates
- On June 12th, 2023, Victoria Gold maintained at outperform by BMO; Price target kept at CA $15.
- On April 10th, 2023, Victoria Gold filed an updated technical report for Eagle Gold Mine.
- On April 5th, 2023, Victoria Gold Corp said it produced 37,619 ounces of gold during Q1.
- On February 24th, 2023, Victoria Gold issued a new mine plan and mineral reserve estimate for the Eagle Gold Mine.
Key Data
First Quarter 2023 Highlights
- Recognized revenue was CA $96.5 million based on sales of 38,201 oz of gold in the quarter down by 62% compared to last year’s first quarter. Operating earnings were CA $17.8 million in the quarter.
- Net income stood at CA $0.98 million, down by 93% compared to last year’s first quarter.
- EPS was CA $0.02 per share on a basic basis and CA $0.02 per share on a diluted basis for the quarter down by 94%.
- EBITDA stood at CA $26.4 million in the first quarter down by 3.33% compared to last year’s first quarter.
Financials
It is good to see that the company’s revenue has grown significantly. Even though there was a decline in revenue in FY22, it seems that overall, the company has made substantial improvements in generating revenue compared to previous years when it incurred losses in FY2018 and FY2019.
Generating a positive net profit is a crucial goal for the company as it indicates its ability to sustain growth and ensure its survival in the long term. By achieving positive net profit, the company can cover its expenses, invest in future growth opportunities, and potentially distribute dividends to shareholders if the company’s management decides to pay.
In FY2022, the company experienced a significant downturn in net profit, plummeting by 67% compared to the previous fiscal year. This decline can be attributed to several factors that adversely impacted the company’s financial performance. Firstly, there was a notable increase in the cost of sales of goods, exerting pressure on profitability. Additionally, currency fluctuations had a detrimental effect, as the company faced challenges stemming from varying exchange rates. Moreover, expenses associated with subsidiaries placed a strain on the company’s financials, contributing to the decline in net profit. Furthermore, high deferred taxes and substantial finance costs further compounded the situation. Collectively, these factors played a crucial role in the noteworthy decline in net profit during FY2022.
To improve net profit in the future, the company could consider strategies such as cost optimization, managing currency risks, streamlining subsidiary operations, optimizing tax planning, and exploring more favorable financing options. It’s important for the company to analyze these factors in-depth and implement appropriate measures to address them and enhance profitability.
As of the first quarter ending on March 31st, 2023, the company’s long-term debt is reported as CA $208.849 Million, reflecting a decrease of 15% compared to the debt level disclosed in the FY2022 annual results. This reduction in long-term debt signifies the company’s efforts to alleviate its debt burden, which is considered a positive indication for investors.
By actively reducing its debt, the company aims to enhance its financial stability and reduce the associated interest expenses. This approach can bolster investor confidence and potentially improve the company’s overall financial health in the long run.
The company also has assets worth CA $1.017 Billion including cash of CA $20.572 Million. So, for now, the debt of the company is not a concern.
Despite the company’s quarterly revenue remaining stable, there has been a notable decline in net profit during Q1’23. This decline is attributed to some factors, including high administration expenses, slightly elevated costs of goods sold, high finance costs, currency fluctuations, and the payment of deferred taxes. These factors collectively impacted the company’s profitability for the quarter. However, it’s worth noting that despite the decline in net profit, the stability of the quarterly revenue indicates the company’s ability to generate consistent income.
Currently, the EPS of the company is CA $0.54 down by 67% compared to last year’s EPS. In FY2018 and in FY2019 EPS was negative due to negative earnings.
Forecast
Right now, the company is trading at CA $7.67 with a 1-year projected target of around CA $9.4 and a low estimation of CA $7; the average price target is CA $8.5.
Technical Analysis
- The stock has corrected more than 31% and now it is taking support on its support level.
- Right now, the RSI (34.68) indicator is below 50, and it also gives us a bullish divergence.
- The stock has the potential to bounce back up to 43% 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 (-0.366) indicator is going to give a bullish signal.
- VWAP (8.27) 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 commonly perceived as a safe-haven asset. When investors seek refuge during times of geopolitical tensions, economic crises, or market turmoil, they often turn to gold as a store of value and a way to preserve wealth.
Gold has long been considered a store of value and a hedge against inflation. Unlike paper currencies, which can be devalued over time due to factors like inflation or economic instability, gold tends to maintain its purchasing power and can act as a wealth preservation tool. During times of economic uncertainty or market volatility, gold prices may rise.
Gold has a long history of being a valuable asset. Over the years, it has demonstrated the ability to retain its worth and act as a reliable store of value. While gold prices can be volatile in the short term, the precious metal has shown long-term appreciation and has been a sound investment over extended periods.
Gold is not just used as an investment asset but also finds various applications in everyday life due to its unique properties. Some common uses of gold are in Jewellery making, electronic applications, Medical devices, or in Aerospace and aviation. Due to these factors in the future, we can expect a rise in the price of gold and this can impact Victoria Gold Corp. positively which will be beneficial for the company.
MarketFacts gives a “Buy” rating on the stock at the closing price of CA $7.4 as of June 26th, 2023.
| CMP (CA) (Jun 26, 2023) | $7.66 |
| Target Price | $9.4 |
| Recommendation | Buy |
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