Here's Why San Lorenzo Gold (CVE:SLG) Can Afford Some Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that San Lorenzo Gold Corp. (CVE:SLG) 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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is San Lorenzo Gold's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2025 San Lorenzo Gold had debt of CA$2.45m, up from CA$1.72m in one year. However, it does have CA$1.03m in cash offsetting this, leading to net debt of about CA$1.42m.

A Look At San Lorenzo Gold's Liabilities

Zooming in on the latest balance sheet data, we can see that San Lorenzo Gold had liabilities of CA$1.47m due within 12 months and liabilities of CA$1.29m due beyond that. Offsetting this, it had CA$1.03m in cash and CA$47.3k in receivables that were due within 12 months. So it has liabilities totalling CA$1.68m more than its cash and near-term receivables, combined.

Of course, San Lorenzo Gold has a market capitalization of CA$53.7m, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since San Lorenzo Gold will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for San Lorenzo Gold

Given its lack of meaningful operating revenue, investors are probably hoping that San Lorenzo Gold finds some valuable resources, before it runs out of money.

Caveat Emptor

Importantly, San Lorenzo Gold had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at CA$250k. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through CA$1.3m of cash over the last year. So to be blunt we think it is risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 4 warning signs for San Lorenzo Gold (of which 2 are a bit concerning!) you should know about.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.