Attention Value Investors: This Could Be the Cheapest Stock on the Planet

Gran Colombia Gold Corp. (TSX:GCM) could be significantly more valuable if gold prices go higher.

| More on:
Gold bullion on a chart

Image source: Getty Images.

Gran Colombia Gold (TSX:GCM) is a Canadian-based gold and silver exploration and development company focused on acquiring and developing properties. The company’s principal product is gold and it also produces silver. GCG’s properties are primarily located in Colombia. Gran Columbia Gold (GCG) holds 100% of Frontino Gold’s gold and silver assets, including the largest underground gold and silver mining operation in Colombia. Indirectly, GCG also has property interests in Guyana.

The company has a price to earnings ratio of 3.09, price to book ratio of 2.16, dividend yield of 3.13% and market capitalization of $363 million. Debt is very sparingly used at GCG as evidenced by a debt to equity ratio of just 0.29. The company has depressed performance metrics with an operating margin of (6.51)% and a return on equity of (53.25)%. GCG’s offices are located in Toronto, Ontario and Bogota, Colombia and the company has over 3000 employees.

Disciplined exploration strategy

GCG owns the rights to interests in a venture called the Marmato Project, which it acquired a few years back. These individual properties in Marmato are held under different licenses but are all part of the same geological system. In 2019, GCG created value for shareholders by spinning-out the Marmato Mining Assets to a separate company.

GCG also owns other exploration projects in Colombia and implements a disciplined exploration and development strategy. The company has a comprehensive environmental, safety and community program, meeting international standards of best practice.

South American exposure

GCG also owns a 100% interest in the Lo Increíble Properties in Venezuela. In 2011, the Venezuelan government nationalized gold exploration and mining operations in the country, including a minimum state equity participation of 55% in gold projects, a new 13% royalty and the banning of export sales by producers.

The company engaged the Venezuelan government with respect to negotiations for the company’s properties in Venezuela for adapting the project to then-current Venezuelan legal requirements while being indemnified for nationalization of a majority stake of such properties.

For the purposes of holding, developing and financing the company’s Venezuelan assets, GCG entered into a share purchase agreement with the potential of spinning off the Lo Increíble Properties. Through the proposed spin-off of the company’s Venezuelan assets, GCG will retain a major stake in the new company while leveraging the capital markets to provide the funding required for exploration and development of the mining assets.

Effectively navigating regulations

Mineral exploration and mining activities are affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls and income taxes. In 2019, the company entered into a three-year refining agreement with an international refinery to sell all the gold and silver it produced, significantly reducing the company’s risk.

The company’s activities in foreign jurisdictions are affected by possible political or economic instability and government regulations relating to the mining industry and foreign investors therein. The risks created by potential political and economic instability include extreme fluctuations in currency exchange rates and high rates of inflation. Despite these risks, GCG could be significantly more valuable if gold prices climb higher.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Nikhil Kumar has no position in any of the stocks mentioned.

More on Investing


Got $5,000? Buy and Hold These 3 Value Stocks for Years

Given their solid underlying businesses, healthy growth prospects, and attractive valuation, I am bullish on these three value stocks.

Read more »

money cash dividends
Stocks for Beginners

Got $1,000 to Invest in Stocks? Put It in This Index Fund

This low-cost beginner-friendly ETF is a great way to invest $1,000.

Read more »

Overhead shot of young adults using technology at a table
Tech Stocks

3 Cheap Tech Stocks to Buy Right Now

Given their long-term growth prospects and discounted stock prices, I am bullish on these tech stocks.

Read more »

money cash dividends
Dividend Stocks

Have $500? 2 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

Want some absurdly cheap stocks for your portfolio? Here are two options trading at a huge discount right now.

Read more »

Gas pipelines
Dividend Stocks

TFSA Passive Income: Is Enbridge Stock a Buy, Sell, or Hold?

Enbridge now offers a yield near 8%. Is the dividend safe?

Read more »

A worker uses the cloud for paperless work. tech
Tech Stocks

Wanna Beat the Market? Try These 2 Tech Stocks That Look Undervalued Today

Here's why undervalued TSX stocks such as Vitalhub can help you generate outsized gains in the next 12 months.

Read more »

Redwood trees stretch up to the sunlight.
Tech Stocks

These 3 Magnificent Stocks Keep Driving Higher

Constellation Software, Dollarama and another TSX stock have consistently generated positive investment returns. Here’s why they belong in your retirement…

Read more »

sale discount best price
Dividend Stocks

3 Stocks to Buy While They Are on Sale

Top TSX dividend stocks are trading at discounted prices.

Read more »