Here's Why We're Not Too Worried About Kingsmen Resources' (CVE:KNG) Cash Burn Situation

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. By way of example, Kingsmen Resources (CVE:KNG) has seen its share price rise 474% over the last year, delighting many shareholders. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.

So notwithstanding the buoyant share price, we think it's well worth asking whether Kingsmen Resources' cash burn is too risky. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

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How Long Is Kingsmen Resources' Cash Runway?

A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. In June 2025, Kingsmen Resources had CA$1.7m in cash, and was debt-free. Looking at the last year, the company burnt through CA$1.2m. That means it had a cash runway of around 17 months as of June 2025. While that cash runway isn't too concerning, sensible holders would be peering into the distance, and considering what happens if the company runs out of cash. The image below shows how its cash balance has been changing over the last few years.

See our latest analysis for Kingsmen Resources

How Is Kingsmen Resources' Cash Burn Changing Over Time?

Kingsmen Resources 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. During the last twelve months, its cash burn actually ramped up 90%. While this spending increase is no doubt intended to drive growth, if the trend continues the company's cash runway will shrink very quickly. Kingsmen Resources makes us a little nervous due to its lack of substantial operating revenue. So we'd generally prefer stocks from this list of stocks that have analysts forecasting growth.

How Easily Can Kingsmen Resources Raise Cash?

Given its cash burn trajectory, Kingsmen Resources shareholders may wish to consider how easily it could raise more cash, despite its solid cash runway. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. Commonly, a business will sell new shares in itself to raise cash and drive growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).

Kingsmen Resources has a market capitalisation of CA$34m and burnt through CA$1.2m last year, which is 3.4% 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 Kingsmen Resources' Cash Burn?

Even though its increasing cash burn makes us a little nervous, we are compelled to mention that we thought Kingsmen Resources' cash burn relative to its market cap was relatively promising. While we're the kind of investors who are always a bit concerned about the risks involved with cash burning companies, the metrics we have discussed in this article leave us relatively comfortable about Kingsmen Resources' situation. Separately, we looked at different risks affecting the company and spotted 4 warning signs for Kingsmen Resources (of which 3 are a bit unpleasant!) 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.