We Think New Pacific Metals (TSE:NUAG) Can Easily Afford To Drive Business Growth

Just because a business does not make any money, does not mean that the stock will go down. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

So should New Pacific Metals (TSE:NUAG) shareholders be worried about its cash burn? In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

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Does New Pacific Metals Have A Long Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. When New Pacific Metals last reported its March 2025 balance sheet in May 2025, it had zero debt and cash worth US$17m. In the last year, its cash burn was US$6.3m. That means it had a cash runway of about 2.8 years as of March 2025. Arguably, that's a prudent and sensible length of runway to have. The image below shows how its cash balance has been changing over the last few years.

See our latest analysis for New Pacific Metals

How Is New Pacific Metals' Cash Burn Changing Over Time?

New Pacific Metals didn't record any revenue over the last year, indicating that it's an early stage company still developing its 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. Even though it doesn't get us excited, the 54% reduction in cash burn year on year does suggest the company can continue operating for quite some time. Clearly, however, the crucial factor is whether the company will grow its business going forward. So you might want to take a peek at how much the company is expected to grow in the next few years.

Can New Pacific Metals Raise More Cash Easily?

While we're comforted by the recent reduction evident from our analysis of New Pacific Metals' cash burn, it is still worth considering how easily the company could raise more funds, if it wanted to accelerate spending to drive growth. Companies can raise capital through either debt or equity. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund 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.

Since it has a market capitalisation of US$279m, New Pacific Metals' US$6.3m in cash burn equates to about 2.2% of its 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.

Is New Pacific Metals' Cash Burn A Worry?

As you can probably tell by now, we're not too worried about New Pacific Metals' cash burn. For example, we think its cash burn relative to its market cap suggests that the company is on a good path. And even its cash burn reduction was very encouraging. After considering a range of factors in this article, we're pretty relaxed about its cash burn, since the company seems to be in a good position to continue to fund its growth. On another note, New Pacific Metals has 3 warning signs (and 2 which don't sit too well with us) 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.