GoldSpot Discoveries Corp.

GoldSpot Discoveries Corp. (TSXV: SPOT) is a technology company that uses artificial intelligence (“AI”) and traditional domain expertise alongside a portfolio of software tools to assist in discovering new mineral deposits for its clients.

Key Updates:

• Robust performance from Consulting segment: For 9MFY21, the company reported its consulting income of CAD 6.342 million, significantly higher than CAD 3.461 million in pcp. The growth was supported by the addition of sixteen new clients, which indicates growing demand for the company’s services, which is encouraging. The group expect the same trend to continue for the near term as well.

Source: Company Report

• Implementation of innovative integrated learning: In order to get better exploration results, the group introduced innovative integrated technology which combines traditional targeting and machine learning. Recently, Quebec Precious Metals reported extended High-Grade Gold-Bearing Lloyd Vein System to a 4.2KM Prospective Corridor at the Elmer East Project by using the above technology. Additionally, the company’s technology also spotted potential Lithium Targets at the Critical Elements Bourier Claims within the Nemiscau greenstone belt. This is expected to attract new clients for the company in the coming days.
  

• Acquisition of Geotic Inc. to support upcoming growth: During the third quarter of FY21, the company acquired Geotic Inc., an award-winning provider of mining industry software including applications for geological and geophysical modeling, based in Val-d’Or, Québec. Geotic Inc. has more than 580 active licenses across platform and is expected to provide cost effective data analytics through its simplified manual data collection methods. With the above collaboration with Geotic Inc., the group promises to offer customized and deeper analytics for its clients depending upon the requirements.
  

• Strong balance sheet: The company’s D/E ratio stands at 0.01x in Q3FY21, as compared to the industry median of 0.23x. The above indicates better financial flexibility and is a key positive. Moreover, the group reported its long-term debt to total capital at 0.3% in Q3FY21, which is significantly lower than the industry median of 13.8%, which implies lower balance-sheet risk.
  

Risks: The company reported a huge loss from its net investments, which has impacted the company’s overall performance. Continuation of the above trend is likely to dampen the upcoming cash flows and profitability. 

Q3FY21 Financial Highlights:

• SPOT declared its quarterly results, wherein the group reported its Consulting income of CAD 2.051 million, higher than CAD 1.586 million in pcp. Meanwhile, the group recorded a net investment loss of CAD 10.363 million, versus a gain of CAD 2.924 million in pcp.
• Total expenses stood higher at CAD 2.654 million, as compared to CAD 1.549 million in pcp, primarily due to higher operating, general and administrative costs and an increase in Finance expenses.
• The group reported a net loss of CAD 9.566 million, as compared to a net income of CAD 2.962 million in pcp.

Q3FY21 Income Statement Highlights (Source: Company Report)

Stock Recommendation:

The company's Q3 2021 results highlighted its accelerating revenue growth, which was fueled by its team and data scientists through new and expanded client relationships, as well as new SaaS tools and services, fueled by its AI client-focused decision-products, which grew by 29% compared to the same quarter last year. Ridgeline was recently bought by the company, which increased its field logistics capability and, as a result, the group's client service menu would enable it to capture more deferred revenue and deliver a more appealing value proposition. Additionally, the company is investing in a wide portfolio of AI-powered tools and services to guarantee it is well-positioned for long-term success. Hence considering the bright prospects and aforesaid facts, we give a ‘Speculative Buy’ rating on the stock of SPOT at the last traded price of CAD 0.81 on January 10, 2022. 

   Technical Analysis Summary:

One-Year Technical Price Chart (as on January 10, 2022). Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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