Northcliff Resources (TSE:NCF) Is Making Moderate Use Of Debt

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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. As with many other companies Northcliff Resources Ltd. (TSE:NCF) makes use of debt. But is this debt a concern to shareholders?

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When Is Debt A Problem?

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. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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 step when considering a company's debt levels is to consider its cash and debt together.

What Is Northcliff Resources's Debt?

You can click the graphic below for the historical numbers, but it shows that as of October 2025 Northcliff Resources had CA$3.55m of debt, an increase on none, over one year. However, it does have CA$1.62m in cash offsetting this, leading to net debt of about CA$1.92m.

How Strong Is Northcliff Resources' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Northcliff Resources had liabilities of CA$5.23m due within 12 months and no liabilities due beyond that. Offsetting this, it had CA$1.62m in cash and CA$3.36m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by CA$246.2k.

Having regard to Northcliff Resources' size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the CA$153.8m company is struggling for cash, we still think it's worth monitoring its balance sheet. But either way, Northcliff Resources has virtually no net debt, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Northcliff Resources 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.

View our latest analysis for Northcliff Resources

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

Caveat Emptor

Over the last twelve months Northcliff Resources produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at CA$1.2m. 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. Another cause for caution is that is bled CA$3.0m in negative free cash flow over the last twelve months. So suffice it to say we do consider the stock to be risky. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. To that end, you should be aware of the 4 warning signs we've spotted with Northcliff Resources .

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.