Does Atalaya Mining Copper (LON:ATYM) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. Importantly, Atalaya Mining Copper, S.A. (LON:ATYM) does carry debt. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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 Atalaya Mining Copper's Debt?

The image below, which you can click on for greater detail, shows that Atalaya Mining Copper had debt of €31.5m at the end of March 2025, a reduction from €50.1m over a year. But on the other hand it also has €69.7m in cash, leading to a €38.2m net cash position.

A Look At Atalaya Mining Copper's Liabilities

Zooming in on the latest balance sheet data, we can see that Atalaya Mining Copper had liabilities of €119.8m due within 12 months and liabilities of €56.4m due beyond that. Offsetting these obligations, it had cash of €69.7m as well as receivables valued at €70.9m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €35.5m.

Since publicly traded Atalaya Mining Copper shares are worth a total of €732.8m, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. While it does have liabilities worth noting, Atalaya Mining Copper also has more cash than debt, so we're pretty confident it can manage its debt safely.

See our latest analysis for Atalaya Mining Copper

Better yet, Atalaya Mining Copper grew its EBIT by 235% last year, which is an impressive improvement. That boost will make it even easier to pay down debt going forward. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Atalaya Mining Copper's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Atalaya Mining Copper may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. During the last three years, Atalaya Mining Copper burned a lot of cash. While investors are no doubt expecting a reversal of that situation in due course, it clearly does mean its use of debt is more risky.

Summing Up

We could understand if investors are concerned about Atalaya Mining Copper's liabilities, but we can be reassured by the fact it has has net cash of €38.2m. And we liked the look of last year's 235% year-on-year EBIT growth. So we don't have any problem with Atalaya Mining Copper's use of debt. We'd be motivated to research the stock further if we found out that Atalaya Mining Copper insiders have bought shares recently. If you would too, then you're in luck, since today we're sharing our list of reported insider transactions for free.

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.