Spartan Resources Limited's (ASX:SPR) Path To Profitability

With the business potentially at an important milestone, we thought we'd take a closer look at Spartan Resources Limited's (ASX:SPR) future prospects. Spartan Resources Limited engages in the exploration, evaluation, and development of gold projects. The AU$604m market-cap company posted a loss in its most recent financial year of AU$35m and a latest trailing-twelve-month loss of AU$25m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which Spartan Resources will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Spartan Resources

Expectations from some of the Australian Metals and Mining analysts is that Spartan Resources is on the verge of breakeven. They expect the company to post a final loss in 2024, before turning a profit of AU$12m in 2025. So, the company is predicted to breakeven just over a year from now. How fast will the company have to grow each year in order to reach the breakeven point by 2025? Working backwards from analyst estimates, it turns out that they expect the company to grow 132% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, we won’t go into details of Spartan Resources' upcoming projects, but, bear in mind that by and large a metal and mining business has lumpy cash flows which are contingent on the natural resource mined and stage at which the company is operating. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before we wrap up, there’s one aspect worth mentioning. Spartan Resources currently has no debt on its balance sheet, which is quite unusual for a cash-burning metals and mining company, which typically has high debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of Spartan Resources to cover in one brief article, but the key fundamentals for the company can all be found in one place – Spartan Resources' company page on Simply Wall St. We've also put together a list of key aspects you should further examine:

1. Valuation: What is Spartan Resources worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Spartan Resources is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Spartan Resources’s board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.