Loss-Making Burgundy Diamond Mines Limited (ASX:BDM) Set To Breakeven

With the business potentially at an important milestone, we thought we'd take a closer look at Burgundy Diamond Mines Limited's (ASX:BDM) future prospects. Burgundy Diamond Mines Limited, a resources company, focuses on the mining, production, cutting, polishing, grading, and sale of diamonds. On 31 December 2024, the AU$38m market-cap company posted a loss of US$97m for its most recent financial year. Many investors are wondering about the rate at which Burgundy Diamond Mines 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.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Expectations from some of the Australian Metals and Mining analysts is that Burgundy Diamond Mines is on the verge of breakeven. They expect the company to post a final loss in 2024, before turning a profit of US$4.0m in 2025. The company is therefore projected to breakeven around 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2025? Working backwards from analyst estimates, it turns out that they expect the company to grow 104% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

We're not going to go through company-specific developments for Burgundy Diamond Mines given that this is a high-level summary, however, take into account 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. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

View our latest analysis for Burgundy Diamond Mines

Before we wrap up, there’s one issue worth mentioning. Burgundy Diamond Mines currently has a debt-to-equity ratio of 119%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Burgundy Diamond Mines which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Burgundy Diamond Mines, take a look at Burgundy Diamond Mines' company page on Simply Wall St. We've also compiled a list of essential factors you should further research:

1. Historical Track Record: What has Burgundy Diamond Mines' performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Burgundy Diamond Mines' 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.