Here's Why We're Watching NOA Lithium Brines' (CVE:NOAL) 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. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.

Given this risk, we thought we'd take a look at whether NOA Lithium Brines (CVE:NOAL) shareholders should be worried about its cash burn. 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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How Long Is NOA Lithium Brines' 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 March 2025, NOA Lithium Brines had CA$6.6m in cash, and was debt-free. Importantly, its cash burn was CA$12m over the trailing twelve months. Therefore, from March 2025 it had roughly 7 months of cash runway. That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. The image below shows how its cash balance has been changing over the last few years.

See our latest analysis for NOA Lithium Brines

How Is NOA Lithium Brines' Cash Burn Changing Over Time?

Because NOA Lithium Brines isn't currently generating revenue, we consider it an early-stage 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. As it happens, the company's cash burn reduced by 9.2% over the last year, which suggests that management may be mindful of the risks of their depleting cash reserves. NOA Lithium Brines 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 NOA Lithium Brines Raise Cash?

Even though it has reduced its cash burn recently, shareholders should still consider how easy it would be for NOA Lithium Brines to raise more cash in the future. 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. 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.

Since it has a market capitalisation of CA$86m, NOA Lithium Brines' CA$12m in cash burn equates to about 13% of its market value. 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 NOA Lithium Brines' Cash Burn A Worry?

Even though its cash runway makes us a little nervous, we are compelled to mention that we thought NOA Lithium Brines' cash burn relative to its market cap was relatively promising. Summing up, we think the NOA Lithium Brines' cash burn is a risk, based on the factors we mentioned in this article. Separately, we looked at different risks affecting the company and spotted 5 warning signs for NOA Lithium Brines (of which 4 are significant!) 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.