Coeur Mining (NYSE:CDE) Is Making Moderate Use Of 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 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 Coeur Mining, Inc. (NYSE:CDE) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

Why Does Debt Bring Risk?

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, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

See our latest analysis for Coeur Mining

What Is Coeur Mining's Debt?

The chart below, which you can click on for greater detail, shows that Coeur Mining had US$449.2m in debt in December 2022; about the same as the year before. On the flip side, it has US$93.5m in cash leading to net debt of about US$355.7m.

A Look At Coeur Mining's Liabilities

According to the last reported balance sheet, Coeur Mining had liabilities of US$219.4m due within 12 months, and liabilities of US$737.8m due beyond 12 months. Offsetting this, it had US$93.5m in cash and US$36.3m in receivables that were due within 12 months. So its liabilities total US$827.3m more than the combination of its cash and short-term receivables.

This deficit is considerable relative to its market capitalization of US$1.33b, so it does suggest shareholders should keep an eye on Coeur Mining's use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Coeur Mining can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Over 12 months, Coeur Mining made a loss at the EBIT level, and saw its revenue drop to US$786m, which is a fall of 5.7%. We would much prefer see growth.

Caveat Emptor

Importantly, Coeur Mining had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost US$41m 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. However, it doesn't help that it burned through US$327m of cash over the last year. So in short it's a really risky stock. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. We've identified 2 warning signs with Coeur Mining (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.