Is Euro Manganese (CVE:EMN) Weighed On By Its Debt Load?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We can see that Euro Manganese Inc. (CVE:EMN) does use debt in its business. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Euro Manganese's Debt?

As you can see below, at the end of September 2025, Euro Manganese had CA$30.6m of debt, up from CA$27.5m a year ago. Click the image for more detail. However, it also had CA$9.49m in cash, and so its net debt is CA$21.1m.

How Healthy Is Euro Manganese's Balance Sheet?

According to the last reported balance sheet, Euro Manganese had liabilities of CA$33.9m due within 12 months, and liabilities of CA$11.0k due beyond 12 months. On the other hand, it had cash of CA$9.49m and CA$648.0k worth of receivables due within a year. So its liabilities total CA$23.8m more than the combination of its cash and short-term receivables.

Given this deficit is actually higher than the company's market capitalization of CA$21.4m, we think shareholders really should watch Euro Manganese's debt levels, like a parent watching their child ride a bike for the first time. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Euro Manganese will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

See our latest analysis for Euro Manganese

Over 12 months, Euro Manganese reported revenue of CA$4.4m, which is a gain of 36%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Despite the top line growth, Euro Manganese still had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping CA$11m. When we look at that alongside the significant liabilities, we're not particularly confident about the company. It would need to improve its operations quickly for us to be interested in it. Not least because it burned through CA$8.0m in negative free cash flow over the last year. That means it's on the risky side of things. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 5 warning signs for Euro Manganese (3 make us uncomfortable) you should be aware of.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.