Is SSR Mining (TSE:SSRM) A Risky Investment?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. As with many other companies SSR Mining Inc. (TSE:SSRM) makes use of debt. But should shareholders be worried about its use of debt?

Why Does Debt Bring Risk?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

View our latest analysis for SSR Mining

What Is SSR Mining's Debt?

As you can see below, SSR Mining had US$228.7m of debt at March 2024, down from US$280.1m a year prior. However, its balance sheet shows it holds US$492.0m in cash, so it actually has US$263.3m net cash.

How Strong Is SSR Mining's Balance Sheet?

According to the last reported balance sheet, SSR Mining had liabilities of US$352.8m due within 12 months, and liabilities of US$960.2m due beyond 12 months. On the other hand, it had cash of US$492.0m and US$103.8m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$717.2m.

This deficit is considerable relative to its market capitalization of US$1.04b, so it does suggest shareholders should keep an eye on SSR Mining's use of debt. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. While it does have liabilities worth noting, SSR Mining also has more cash than debt, so we're pretty confident it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if SSR 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.

In the last year SSR Mining wasn't profitable at an EBIT level, but managed to grow its revenue by 21%, to US$1.3b. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is SSR Mining?

While SSR Mining lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow US$245m. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. The good news for SSR Mining shareholders is that its revenue growth is strong, making it easier to raise capital if need be. But we still think it's somewhat risky. When we look at a riskier company, we like to check how their profits (or losses) are trending over time. Today, we're providing readers this interactive graph showing how SSR Mining's profit, revenue, and operating cashflow have changed over the last few years.

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.

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