Is Ballard Mining (ASX:BM1) Using Too Much Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that Ballard Mining Limited (ASX:BM1) does use debt in its business. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things get really bad, the lenders can take control of the business. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Ballard Mining's Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Ballard Mining had debt of AU$4.54m, up from AU$998 in one year. On the flip side, it has AU$2.22m in cash leading to net debt of about AU$2.31m.

A Look At Ballard Mining's Liabilities

According to the balance sheet data, Ballard Mining had liabilities of AU$9.26m due within 12 months, but no longer term liabilities. Offsetting this, it had AU$2.22m in cash and AU$232.6k in receivables that were due within 12 months. So its liabilities total AU$6.80m more than the combination of its cash and short-term receivables.

Given Ballard Mining has a market capitalization of AU$198.9m, it's hard to believe these liabilities pose much threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Carrying virtually no net debt, Ballard Mining has a very light debt load indeed. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Ballard Mining can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

See our latest analysis for Ballard Mining

Given its lack of meaningful operating revenue, investors are probably hoping that Ballard Mining finds some valuable resources, before it runs out of money.

Caveat Emptor

Importantly, Ballard Mining had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at AU$1.1m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through AU$5.3m of cash over the last year. So suffice it to say we do consider the stock to be risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 3 warning signs for Ballard Mining (2 can't be ignored) you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.