Is Nickel 28 Capital (CVE:NKL) Using Too Much 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.' 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. As with many other companies Nickel 28 Capital Corp. (CVE:NKL) makes use of debt. But the real question is whether this debt is making the company risky.

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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. If things get really bad, the lenders can take control of the business. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

What Is Nickel 28 Capital's Net Debt?

As you can see below, Nickel 28 Capital had US$35.4m of debt at October 2025, down from US$38.2m a year prior. However, it does have US$9.48m in cash offsetting this, leading to net debt of about US$25.9m.

How Healthy Is Nickel 28 Capital's Balance Sheet?

According to the last reported balance sheet, Nickel 28 Capital had liabilities of US$8.04m due within 12 months, and liabilities of US$39.4m due beyond 12 months. On the other hand, it had cash of US$9.48m and US$194.0k worth of receivables due within a year. So it has liabilities totalling US$37.8m more than its cash and near-term receivables, combined.

This is a mountain of leverage relative to its market capitalization of US$48.9m. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Nickel 28 Capital 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.

See our latest analysis for Nickel 28 Capital

Given its lack of meaningful operating revenue, investors are probably hoping that Nickel 28 Capital finds some valuable resources, before it runs out of money.

Caveat Emptor

Importantly, Nickel 28 Capital had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at US$1.7m. 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. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled US$1.0m in negative free cash flow over the last twelve months. So to be blunt we think it is risky. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Nickel 28 Capital (of which 2 can't be ignored!) you should know about.

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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.