Will Mkango Resources (CVE:MKA) Spend Its Cash Wisely?

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, Mkango Resources (CVE:MKA) has seen its share price rise 400% over the last year, delighting many shareholders. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

Given its strong share price performance, we think it's worthwhile for Mkango Resources shareholders to consider whether its cash burn is concerning. 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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When Might Mkango Resources Run Out Of Money?

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. When Mkango Resources last reported its March 2025 balance sheet in May 2025, it had zero debt and cash worth US$3.1m. Importantly, its cash burn was US$3.4m over the trailing twelve months. That means it had a cash runway of around 11 months as of March 2025. 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. Depicted below, you can see how its cash holdings have changed over time.

Check out our latest analysis for Mkango Resources

How Is Mkango Resources' Cash Burn Changing Over Time?

Mkango Resources 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. It's possible that the 3.5% reduction in cash burn over the last year is evidence of management tightening their belts as cash reserves deplete. Mkango Resources 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 Easily Can Mkango Resources Raise Cash?

Even though it has reduced its cash burn recently, shareholders should still consider how easy it would be for Mkango Resources to raise more cash in the future. Companies can raise capital through either debt or equity. Commonly, a business will sell new shares in itself to raise cash and drive 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.

Mkango Resources has a market capitalisation of US$149m and burnt through US$3.4m last year, which is 2.3% of the company's market value. That means it could easily issue a few shares to fund more growth, and might well be in a position to borrow cheaply.

Is Mkango Resources' Cash Burn A Worry?

Even though its cash runway makes us a little nervous, we are compelled to mention that we thought Mkango 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 Mkango Resources' situation. On another note, Mkango Resources has 5 warning signs (and 4 which are concerning) we think 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.