We're Not Very Worried About Osmond Resources' (ASX:OSM) Cash Burn Rate

There's no doubt that money can be made by owning shares of unprofitable businesses. For example, Osmond Resources (ASX:OSM) shareholders have done very well over the last year, with the share price soaring by 102%. 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.

So notwithstanding the buoyant share price, we think it's well worth asking whether Osmond Resources' cash burn is too risky. 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. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

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How Long Is Osmond Resources' Cash Runway?

A company's cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. In June 2025, Osmond Resources had AU$4.3m in cash, and was debt-free. Importantly, its cash burn was AU$1.6m over the trailing twelve months. That means it had a cash runway of about 2.6 years as of June 2025. That's decent, giving the company a couple years to develop its business. You can see how its cash balance has changed over time in the image below.

View our latest analysis for Osmond Resources

How Is Osmond Resources' Cash Burn Changing Over Time?

Although Osmond Resources reported revenue of AU$31k last year, it didn't actually have any revenue from operations. To us, that makes it a pre-revenue company, so we'll look to its cash burn trajectory as an assessment of its cash burn situation. With cash burn dropping by 4.8% it seems management feel the company is spending enough to advance its business plans at an appropriate pace. Admittedly, we're a bit cautious of Osmond Resources due to its lack of significant operating revenues. So we'd generally prefer stocks from this list of stocks that have analysts forecasting growth.

Can Osmond Resources Raise More Cash Easily?

While Osmond Resources is showing a solid reduction in its cash burn, it's still worth considering how easily it could raise more cash, even just to fuel faster growth. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. Commonly, a business will sell new shares in itself to raise cash and drive growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).

Since it has a market capitalisation of AU$109m, Osmond Resources' AU$1.6m in cash burn equates to about 1.5% of its market value. So it could almost certainly just borrow a little to fund another year's growth, or else easily raise the cash by issuing a few shares.

Is Osmond Resources' Cash Burn A Worry?

As you can probably tell by now, we're not too worried about Osmond Resources' cash burn. For example, we think its cash burn relative to its market cap suggests that the company is on a good path. On this analysis its cash burn reduction was its weakest feature, but we are not concerned about it. After taking into account the various metrics mentioned in this report, we're pretty comfortable with how the company is spending its cash. On another note, Osmond Resources has 4 warning signs (and 3 which are a bit unpleasant) we think you should know about.

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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.