Here's Why We're Not At All Concerned With RecycLiCo Battery Materials' (CVE:AMY) Cash Burn Situation

We can readily understand why investors are attracted to unprofitable companies. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

Given this risk, we thought we'd take a look at whether RecycLiCo Battery Materials (CVE:AMY) shareholders should be worried about its cash burn. For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. Let's start with an examination of the business' cash, relative to its cash burn.

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How Long Is RecycLiCo Battery Materials' Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. In April 2025, RecycLiCo Battery Materials had CA$16m in cash, and was debt-free. Importantly, its cash burn was CA$1.4m over the trailing twelve months. So it had a very long cash runway of many years from April 2025. Even though this is but one measure of the company's cash burn, the thought of such a long cash runway warms our bellies in a comforting way. You can see how its cash balance has changed over time in the image below.

Check out our latest analysis for RecycLiCo Battery Materials

How Is RecycLiCo Battery Materials' Cash Burn Changing Over Time?

RecycLiCo Battery Materials 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 48% reduction in cash burn year on year does suggest the company can continue operating for quite some time. RecycLiCo Battery Materials makes us a little nervous due to its lack of substantial operating revenue. We prefer most of the stocks on this list of stocks that analysts expect to grow.

How Hard Would It Be For RecycLiCo Battery Materials To Raise More Cash For Growth?

While RecycLiCo Battery Materials 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. Many companies end up issuing new shares to fund future 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.

RecycLiCo Battery Materials has a market capitalisation of CA$32m and burnt through CA$1.4m last year, which is 4.4% of the company's market value. That's a low proportion, so we figure the company would be able to raise more cash to fund growth, with a little dilution, or even to simply borrow some money.

So, Should We Worry About RecycLiCo Battery Materials' Cash Burn?

It may already be apparent to you that we're relatively comfortable with the way RecycLiCo Battery Materials is burning through its cash. For example, we think its cash runway 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. Separately, we looked at different risks affecting the company and spotted 4 warning signs for RecycLiCo Battery Materials (of which 3 don't sit too well with us!) 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.