Is Coeur Mining (NYSE:CDE) Using Too Much Debt?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 can see that Coeur Mining, Inc. (NYSE:CDE) does use debt in its business. But the more important question is: how much risk is that debt creating?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. When we examine debt levels, we first consider both cash and debt levels, together.

Check out our latest analysis for Coeur Mining

How Much Debt Does Coeur Mining Carry?

As you can see below, Coeur Mining had US$429.4m of debt, at March 2023, which is about the same as the year before. You can click the chart for greater detail. However, it also had US$81.9m in cash, and so its net debt is US$347.5m.

How Strong Is Coeur Mining's Balance Sheet?

We can see from the most recent balance sheet that Coeur Mining had liabilities of US$226.2m falling due within a year, and liabilities of US$716.7m due beyond that. On the other hand, it had cash of US$81.9m and US$35.6m worth of receivables due within a year. So its liabilities total US$825.3m more than the combination of its cash and short-term receivables.

This deficit is considerable relative to its market capitalization of US$1.05b, 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. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Coeur Mining'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.

Over 12 months, Coeur Mining made a loss at the EBIT level, and saw its revenue drop to US$785m, which is a fall of 4.2%. 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$57m 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$360m of cash over the last year. So suffice it to say we consider the stock very 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. For example - Coeur Mining has 1 warning sign we think you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.