Health Check: How Prudently Does Omineca Mining and Metals (CVE:OMM) Use Debt?

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.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. As with many other companies Omineca Mining and Metals Ltd. (CVE:OMM) makes use of debt. But the more important question is: how much risk is that debt creating?

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Why Does Debt Bring Risk?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Omineca Mining and Metals's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Omineca Mining and Metals had debt of CA$11.2m, up from CA$10.3m in one year. On the flip side, it has CA$667.3k in cash leading to net debt of about CA$10.5m.

A Look At Omineca Mining and Metals' Liabilities

The latest balance sheet data shows that Omineca Mining and Metals had liabilities of CA$2.13m due within a year, and liabilities of CA$11.2m falling due after that. Offsetting these obligations, it had cash of CA$667.3k as well as receivables valued at CA$108.4k due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by CA$12.6m.

This deficit is considerable relative to its market capitalization of CA$14.4m, so it does suggest shareholders should keep an eye on Omineca Mining and Metals' use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Omineca Mining and Metals'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.

Check out our latest analysis for Omineca Mining and Metals

Given its lack of meaningful operating revenue, investors are probably hoping that Omineca Mining and Metals finds some valuable resources, before it runs out of money.

Caveat Emptor

Importantly, Omineca Mining and Metals had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping CA$2.1m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled CA$3.2m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. 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 6 warning signs for Omineca Mining and Metals (4 don't sit too well with us) you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.