We're Keeping An Eye On Aldoro Resources' (ASX:ARN) Cash Burn Rate

Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the right price. By way of example, Aldoro Resources (ASX:ARN) has seen its share price rise 550% over the last year, delighting many shareholders. But while the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.

Given its strong share price performance, we think it's worthwhile for Aldoro Resources shareholders to consider whether its cash burn is concerning. In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. Let's start with an examination of the business' cash, relative to its cash burn.

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Does Aldoro Resources Have A Long Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. When Aldoro Resources last reported its December 2024 balance sheet in March 2025, it had zero debt and cash worth AU$1.3m. Importantly, its cash burn was AU$2.3m over the trailing twelve months. That means it had a cash runway of around 7 months as of December 2024. That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. You can see how its cash balance has changed over time in the image below.

See our latest analysis for Aldoro Resources

How Is Aldoro Resources' Cash Burn Changing Over Time?

Because Aldoro Resources isn't currently generating revenue, we consider it an early-stage business. So while we can't look to sales to understand growth, we can look at how the cash burn is changing to understand how expenditure is trending over time. As it happens, the company's cash burn reduced by 42% over the last year, which suggests that management are mindful of the possibility of running out of cash. Aldoro Resources makes us a little nervous due to its lack of substantial operating revenue. We prefer most of the stocks on this list of stocks that analysts expect to grow.

How Easily Can Aldoro Resources Raise Cash?

Even though it has reduced its cash burn recently, shareholders should still consider how easy it would be for Aldoro Resources to raise more cash in the future. Companies can raise capital through either debt or equity. Commonly, a business will sell new shares in itself to raise cash and drive growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.

Aldoro Resources has a market capitalisation of AU$92m and burnt through AU$2.3m last year, which is 2.5% of the company's market value. That means it could easily issue a few shares to fund more growth, and might well be in a position to borrow cheaply.

So, Should We Worry About Aldoro Resources' Cash Burn?

On this analysis of Aldoro Resources' cash burn, we think its cash burn relative to its market cap was reassuring, while its cash runway has us a bit worried. Even though we don't think it has a problem with its cash burn, the analysis we've done in this article does suggest that shareholders should give some careful thought to the potential cost of raising more money in the future. Separately, we looked at different risks affecting the company and spotted 6 warning signs for Aldoro Resources (of which 4 shouldn't be ignored!) you should know about.

Of course Aldoro Resources may not be the best stock to buy. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.