Is Freeman Gold (CVE:FMAN) Weighed On By Its Debt Load?

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 note that Freeman Gold Corp. (CVE:FMAN) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. 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. 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. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Freeman Gold Carry?

The image below, which you can click on for greater detail, shows that at August 2025 Freeman Gold had debt of CA$3.49m, up from none in one year. But it also has CA$14.8m in cash to offset that, meaning it has CA$11.3m net cash.

How Strong Is Freeman Gold's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Freeman Gold had liabilities of CA$1.35m due within 12 months and liabilities of CA$3.49m due beyond that. Offsetting these obligations, it had cash of CA$14.8m as well as receivables valued at CA$95.9k due within 12 months. So it actually has CA$10.0m more liquid assets than total liabilities.

This short term liquidity is a sign that Freeman Gold could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Freeman Gold has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Freeman Gold's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for Freeman Gold

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

So How Risky Is Freeman Gold?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months Freeman Gold lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through CA$5.8m of cash and made a loss of CA$3.8m. But at least it has CA$11.3m on the balance sheet to spend on growth, near-term. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. 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. We've identified 4 warning signs with Freeman Gold (at least 2 which are a bit concerning) , and understanding them should be part of your investment process.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.