Is Blackrock Silver (CVE:BRC) In A Good Position To Deliver On Growth Plans?

Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the right price. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

So, the natural question for Blackrock Silver (CVE:BRC) shareholders is whether they should be concerned by its rate of cash burn. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. Let's start with an examination of the business' cash, relative to its cash burn.

See our latest analysis for Blackrock Silver

How Long Is Blackrock Silver's Cash Runway?

A company's cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. In January 2024, Blackrock Silver had CA$4.8m in cash, and was debt-free. Looking at the last year, the company burnt through CA$6.4m. That means it had a cash runway of around 9 months as of January 2024. To be frank, this kind of short runway puts us on edge, as it indicates the company must reduce its cash burn significantly, or else raise cash imminently. The image below shows how its cash balance has been changing over the last few years.

How Is Blackrock Silver's Cash Burn Changing Over Time?

Blackrock Silver didn't record any revenue over the last year, indicating that it's an early stage company still developing its business. Nonetheless, we can still examine its cash burn trajectory as part of our assessment of its cash burn situation. The 63% reduction in its cash burn over the last twelve months could be interpreted as a sign that management are worried about running out of cash. While the past is always worth studying, it is the future that matters most of all. So you might want to take a peek at how much the company is expected to grow in the next few years.

How Hard Would It Be For Blackrock Silver To Raise More Cash For Growth?

While we're comforted by the recent reduction evident from our analysis of Blackrock Silver's 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. Many companies end up issuing new shares to fund future growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.

Blackrock Silver's cash burn of CA$6.4m is about 11% of its CA$60m market capitalisation. Given that situation, it's fair to say the company wouldn't have much trouble raising more cash for growth, but shareholders would be somewhat diluted.

Is Blackrock Silver's Cash Burn A Worry?

Even though its cash runway makes us a little nervous, we are compelled to mention that we thought Blackrock Silver's cash burn reduction was relatively promising. We don't think its cash burn is particularly problematic, but after considering the range of factors in this article, we do think shareholders should be monitoring how it changes over time. On another note, we conducted an in-depth investigation of the company, and identified 5 warning signs for Blackrock Silver (3 are a bit concerning!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies insiders are buying, and this list of stocks growth stocks (according to analyst forecasts)

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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.