Here's Why Ucore Rare Metals (CVE:UCU) Can Afford Some 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.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that Ucore Rare Metals Inc. (CVE:UCU) does use debt in its business. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

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. 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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest 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.

What Is Ucore Rare Metals's Net Debt?

As you can see below, at the end of June 2025, Ucore Rare Metals had CA$13.8m of debt, up from CA$10.7m a year ago. Click the image for more detail. On the flip side, it has CA$12.5m in cash leading to net debt of about CA$1.29m.

A Look At Ucore Rare Metals' Liabilities

Zooming in on the latest balance sheet data, we can see that Ucore Rare Metals had liabilities of CA$7.32m due within 12 months and liabilities of CA$11.6m due beyond that. Offsetting this, it had CA$12.5m in cash and CA$2.30m in receivables that were due within 12 months. So it has liabilities totalling CA$4.05m more than its cash and near-term receivables, combined.

This state of affairs indicates that Ucore Rare Metals' balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the CA$369.6m company is struggling for cash, we still think it's worth monitoring its balance sheet. But either way, Ucore Rare Metals has virtually no net debt, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is Ucore Rare 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.

View our latest analysis for Ucore Rare Metals

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

Caveat Emptor

Over the last twelve months Ucore Rare Metals produced an earnings before interest and tax (EBIT) loss. Indeed, it lost CA$8.1m at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled CA$9.0m in negative free cash flow over the last twelve months. So to be blunt we think it is risky. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example Ucore Rare Metals has 5 warning signs (and 4 which are concerning) we think you should know about.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.