Analyzing Small Cap Stocks: Andean Precious Metals (TSXV: APM)

The TDR Three Key Takeaways regarding Andean Precious Metals and Small Cap Stock:

• Andean Precious Metals (TSXV: APM) is a mining company based in Monterey, Mexico, operating the Golden Queen Mine in California and a processing facility in Bolivia. 
• Andean’s market cap of $149 million is well-supported by its $146 million working capital and significant insider ownership. 
• The company’s strategic share buybacks and strong asset base provide an attractive investment opportunity in the small-cap mining sector.

Andean Precious Metals (TSXV: APM), a mining company headquartered in Monterey, Mexico, stands out as an intriguing company which was highlighted in our recent Small Cap Sunday Episode. Trading at 99 cents per share and with a market cap of $149 million, Andean Precious Metals offers an intriguing opportunity for investors looking to capitalize on the stability and potential growth of a mature mining company. The firm operates the Golden Queen Mine in California and boasts a substantial processing facility in Bolivia, positioning itself as a key player in the mining industry.

Andean’s operations are characterized by its ability to produce and process ore, which differentiates it from many companies in the mining sector that are still in the exploration or early development stages. The processing facility in Bolivia, with a capacity exceeding that of its mine, serves the local industry akin to an oil refinery. This model ensures stable revenues, as the price fluctuations of raw materials and processed goods remain correlated.

Andean’s financial health is strong, significantly reducing investment risk. The company has $146 million in working capital, nearly matching its market cap, and assets valued at $180 million after depreciation. This strong asset backing makes the stock an attractive buy relative to its current market price.

Andean’s proactive financial management is evident through its positive cash flow and strategic share buybacks. Last year, the company repurchased 3.8% of its float, increasing the shareholders’ stake and offering a tax-efficient alternative to dividends. This approach underlines the management’s confidence in the company’s future and its commitment to enhancing shareholder value.

Operating in Bolivia presents certain challenges, primarily related to credit accessibility and dealing with tax authorities. However, Andean’s strong capital position and experienced management mitigate these risks effectively. Notably, the company has garnered significant investment from prominent figures like Eric Sprott, who owns 14% of the company, along with a 5% stake held by ETFs and 53% by insiders. This insider ownership underscores confidence in Andean’s prospects and management capabilities.

Despite facing operational disruptions, including a fire in California and unusual weather in Bolivia, Andean has demonstrated resilience. The company’s revenue grew by 43%, maintaining an average in 4 years EBITDA of $25 million, which translates to trading at approximately six times EBITDA—a highly attractive multiple.

Andean Precious Metals is an undervalued small-cap company with strong financials, strategic operations, and significant insider confidence, offering substantial upside potential and lower risk for mining sector investors. Its balanced growth potential and financial stability make it an attractive investment opportunity. Want to be updated on Cannabis, AI, Small Cap, and Crypto? Subscribe to our Daily Baked in Newsletter!