Lode Gold Resources (CVE:LOD) Is Making Moderate Use Of Debt

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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 note that Lode Gold Resources Inc. (CVE:LOD) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

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. If things get really bad, the lenders can take control of the business. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Lode Gold Resources's Net Debt?

As you can see below, at the end of September 2025, Lode Gold Resources had CA$4.70m of debt, up from CA$3.55m a year ago. Click the image for more detail. However, it also had CA$184.7k in cash, and so its net debt is CA$4.52m.

How Healthy Is Lode Gold Resources' Balance Sheet?

The latest balance sheet data shows that Lode Gold Resources had liabilities of CA$6.47m due within a year, and liabilities of CA$14.7k falling due after that. On the other hand, it had cash of CA$184.7k and CA$140.5k worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by CA$6.16m.

This is a mountain of leverage relative to its market capitalization of CA$10.1m. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. There's no doubt that we learn most about debt from the balance sheet. But it is Lode Gold Resources's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for Lode Gold Resources

Since Lode Gold Resources has no significant operating revenue, shareholders probably hope it will develop a valuable new mine before too long.

Caveat Emptor

Importantly, Lode Gold Resources had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping CA$2.7m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through CA$3.9m of cash over the last year. So in short it's a really risky stock. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the 5 warning signs we've spotted with Lode Gold Resources (including 4 which are a bit unpleasant) .

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.