Is San Lorenzo Gold (CVE:SLG) Using Too Much 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. We note that San Lorenzo Gold Corp. (CVE:SLG) does have debt on its balance sheet. But is this debt a concern to shareholders?

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When Is Debt A Problem?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does San Lorenzo Gold Carry?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 San Lorenzo Gold had CA$2.33m of debt, an increase on CA$1.47m, over one year. On the flip side, it has CA$1.23m in cash leading to net debt of about CA$1.10m.

How Strong Is San Lorenzo Gold's Balance Sheet?

The latest balance sheet data shows that San Lorenzo Gold had liabilities of CA$1.18m due within a year, and liabilities of CA$1.44m falling due after that. On the other hand, it had cash of CA$1.23m and CA$45.3k worth of receivables due within a year. So its liabilities total CA$1.35m more than the combination of its cash and short-term receivables.

Given San Lorenzo Gold has a market capitalization of CA$18.4m, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. 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.

See 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. Indeed, it lost CA$211k at the EBIT level. 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. 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 in short it's a really risky stock. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example San Lorenzo Gold has 4 warning signs (and 2 which are potentially serious) we think you should know about.

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.