Is Arizona Sonoran Copper (TSE:ASCU) Using Too Much Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. Importantly, Arizona Sonoran Copper Company Inc. (TSE:ASCU) does carry debt. But is this debt a concern to shareholders?

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When Is Debt A Problem?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Arizona Sonoran Copper's Debt?

As you can see below, Arizona Sonoran Copper had US$5.94m of debt, at September 2025, which is about the same as the year before. You can click the chart for greater detail. But it also has US$44.4m in cash to offset that, meaning it has US$38.4m net cash.

A Look At Arizona Sonoran Copper's Liabilities

According to the last reported balance sheet, Arizona Sonoran Copper had liabilities of US$9.97m due within 12 months, and liabilities of US$109.5m due beyond 12 months. Offsetting these obligations, it had cash of US$44.4m as well as receivables valued at US$151.0k due within 12 months. So its liabilities total US$75.0m more than the combination of its cash and short-term receivables.

Since publicly traded Arizona Sonoran Copper shares are worth a total of US$493.1m, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, Arizona Sonoran Copper boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Arizona Sonoran Copper's ability to maintain a healthy balance sheet going forward. 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 Arizona Sonoran Copper

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

So How Risky Is Arizona Sonoran Copper?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months Arizona Sonoran Copper lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$57m and booked a US$7.5m accounting loss. With only US$38.4m on the balance sheet, it would appear that its going to need to raise capital again soon. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 2 warning signs for Arizona Sonoran Copper you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.