These 4 Measures Indicate That SSR Mining (TSE:SSRM) Is Using Debt Extensively

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that SSR Mining Inc. (TSE:SSRM) does use debt in its business. But is this debt a concern to shareholders?

When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. 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. When we examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for SSR Mining

What Is SSR Mining's Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2024 SSR Mining had US$253.2m of debt, an increase on US$228.2m, over one year. But it also has US$365.8m in cash to offset that, meaning it has US$112.5m net cash.

How Strong Is SSR Mining's Balance Sheet?

The latest balance sheet data shows that SSR Mining had liabilities of US$254.9m due within a year, and liabilities of US$940.3m falling due after that. On the other hand, it had cash of US$365.8m and US$114.8m worth of receivables due within a year. So it has liabilities totalling US$714.6m more than its cash and near-term receivables, combined.

This deficit isn't so bad because SSR Mining is worth US$1.65b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. Despite its noteworthy liabilities, SSR Mining boasts net cash, so it's fair to say it does not have a heavy debt load!

The modesty of its debt load may become crucial for SSR Mining if management cannot prevent a repeat of the 32% cut to EBIT over the last year. When a company sees its earnings tank, it can sometimes find its relationships with its lenders turn sour. 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 SSR Mining's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While SSR Mining has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. In the last three years, SSR Mining's free cash flow amounted to 37% of its EBIT, less than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While SSR Mining does have more liabilities than liquid assets, it also has net cash of US$112.5m. So although we see some areas for improvement, we're not too worried about SSR Mining's balance sheet. Given our hesitation about the stock, it would be good to know if SSR Mining insiders have sold any shares recently. You click here to find out if insiders have sold recently.

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.