White Gold Corp.

White Gold Corp. (TSXV: WGO) is an exploration company which focuses on new high-grade discoveries with prospective targets. The company has more than 423,000 hectares of land in its portfolio, wherein the company has flagship Golden Saddle and Arc deposits of gold resources of approximately 1,039,600 oz indicated at 2.26 g/t and approximately 508,700 ounces inferred at 1.48 g/t gold which remains open for expansion.

Key Updates:

Recently the company announced a positive trench, GT probe and soil sample results which identified additional and widespread structurally controlled gold mineralization at several places across JP Ross.

• The company reported enhanced results at Twenty-nine (29) trenches totaling 1,114 linear metres were trenched on 9 separate target areas utilizing an 8-ton tracked excavator. Furthermore, the company also reported an additional target during the course of exploration.
• WGO also reported Stage Fright target, trench JPRSF20T009 encountered a high-grade zone grading 8.88 g/t Au over 2.5m, and trench JPRSF20T010 exposed from two separate mineralized zones grading 1.06 g/t Au over 2.5m, and 1.83 g/t Au over 2.5m.

Q3FY20 Financial Highlights:

• WGO announced its quarterly results, wherein the company posted a loss before undernoted items of CAD 1.611 million, as compared to a loss of CAD 1.439 million in the previous corresponding period (pcp).
• The increase in the loss was driven by higher contingent liability accretion expense (CAD 0.486 million versus CAD 0.428 million in pcp), higher marketing, office and administration costs (CAD 0.243 million versus CAD 0.237 million in pcp), significantly higher professional fees (CAD 0.105 million versus CAD 0.012 million in pcp) and higher stock-based compensation (CAD 0.375 million versus CAD 0.21 million in pcp). The negatives were partially offset by lower consulting fees, a decline in depreciation expense and a slide in advance royalty accretion expense.
• The company reported a net loss of CAD 1.42 million, as compared to net profit of CAD 1.49 million in Q3FY19.
• WGO posted a cash balance of CAD 5.59 million, while total assets were recorded at CAD 118.292 million.

Q3FY20 Income Statement Highlights (Source: Company Reports)

Risks: The company is focusing on exploration activities and is conducting several soil tests. Thus, the future prospect of the company remains uncertain. Any negative outcome from the exploration activities would dampen the company’s prospect.

Stock Recommendation:

The company has a favorable mining jurisdiction, site of the historic Klondike Gold Rush, which is adjacent to other recently discovered gold deposits. Moreover, the company has strong strategic partners and has financial backing and technical expertise from Agnico Eagle, Kinross, Eric Sprott etc. On the flip side, the company is yet to record a mining deposit ad yet to report revenue. Further, accumulated deposits increased to CAD 104.306 million in Q3FY20, from CAD 101.596 million in FY19. Shares of WGO is hovering below the crucial short-term and long-term support levels of 50-day, 150-day and 200-day SMAs. Moreover, the Moving Average Convergence Divergence (MACD) is hovering below its 9-day SMA signal line, with the difference between 12-day and 26-day EMA is negative. Hence, considering the aforesaid facts, we prefer to remain on the sidelines and recommend an ‘Avoid’ rating on the stock of WGO at CAD 0.80 on December 24, 2020.

WGO Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Greenlane Renewables Inc.

Greenlane Renewables Inc. (TSXV: GRN) is a global provider of biogas upgrading systems. Its systems produce renewable natural gas from organic waste sources including landfills, wastewater treatment plants, dairy farms and food waste, suitable for either injection into the natural gas grid or vehicle fuel. 

Key Highlights 

• Pure play in the RNG space:The Company is a pure-play in the RNG space, offering multiple core biogas upgrading technologies, in use and proven in the industry today. Biogas upgrading sales are forecasted by industry to grow at a minimum 30% Compound Annual Growth Rate (CAGR) over the next five years in North America and Europe. The group’s leadership in biogas upgrading, scope and breadth of product offerings, and 30+ years’ industry experience are fierce competitive advantages.

Source: Company 

The global leader in biogas upgrading: The Company successfully delivered globally more than 110 systems, which have been installed in 18 countries, including for the most extensive RNG production facilities in North America and Europe. As on September 30, 2020, the sales value is more than CAD 690 million, which has increased 53% since December 31, 2018. The group also holds the largest installed capacity. 

Source: Company  

Financial overview of Q3 2020 (Expressed in thousands of Canadian dollars)

Source: Company 

• In Q3 2020, the Company posted higher sales numbers, increased by 31% and stood at CAD 6.5 million, compared to CAD 4.9 million in the previous corresponding period. The increase in revenue was primarily due to revenues recognized from seven customer contracts under the completion of Upgrader projects.

Source: Company

• The company posted a gross profit of CAD 1.6 million in Q3 2020, compared to CAD 1.2 million in Q3 2019, and Gross margin stood at 26%. The gross profit margin on an annual basis is expected to be in the range of 25-30% in the upcoming time.
• In the reported quarter, the group posted a net profit of CAD 0.74 million, compared to a loss of CAD 1.7 million in the previous corresponding period. The decrease in finance cost coupled with the gain on extinguishment of a promissory note were the reasons behind posting a net profit, partially offset by a loss on foreign exchange. 

Risks associated with investment 

Manufacturing and installing the Company’s products can sometimes be subject to delays for various reasons, including labour slowdowns, technological malfunctions, defective materials, or workplace safety. Such delays may discourage clients from continuing doing business with the Company and may hurt its sales and financials. 

Stock recommendation

The Company plans to scale up operations as it wins new upgrader projects and increases working capital reserves to permit participation in more and larger projects, including bonding provisions. With an appropriate financing structure in place, the group is also searching out consolidation opportunities in the highly fragmented biogas upgrading industry. Furthermore, management plans to expand Greenlane’s business beyond equipment sales into project development through the build own operate the business model. In the upcoming time, the gross profit margin on an annual basis is expected to be in the range of 25-30%, which looks impressive. The stock has gained handsomely in the recent past and soared more than 500% in the last three months. However, on the valuation front, the stock is available at forward EV/Sales multiple of 5.5x which is significantly higher than the industry median of 3.2x. Hence, considering the aforementioned facts, we recommend a ‘Watch’ Stance on the stock at the closing price of CAD 2.49 on December 24, 2020.

Source: Refinitiv (Thomson Reuters)

Disclaimer

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