We're Hopeful That San Lorenzo Gold (CVE:SLG) Will Use Its Cash Wisely
We can readily understand why investors are attracted to unprofitable companies. For example, San Lorenzo Gold (CVE:SLG) shareholders have done very well over the last year, with the share price soaring by 1,029%. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?
So notwithstanding the buoyant share price, we think it's well worth asking whether San Lorenzo Gold's cash burn is too risky. For the purpose of this article, we'll define cash burn as the amount of cash the company is spending each year to fund its growth (also called its negative free cash flow). First, we'll determine its cash runway by comparing its cash burn with its cash reserves.
Does San Lorenzo Gold Have A Long Cash Runway?
A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. In June 2026, San Lorenzo Gold had CA$24m in cash, and was debt-free. Importantly, its cash burn was CA$5.4m over the trailing twelve months. Therefore, from June 2026 it had 4.4 years of cash runway. There's no doubt that this is a reassuringly long runway. The image below shows how its cash balance has been changing over the last few years.
Check out our latest analysis for San Lorenzo Gold
How Is San Lorenzo Gold's Cash Burn Changing Over Time?
While San Lorenzo Gold did record statutory revenue of CA$80k over the last year, it didn't have any revenue from operations. That means we consider it a pre-revenue business, and we will focus our growth analysis on cash burn, for now. Its cash burn positively exploded in the last year, up 306%. That kind of sharp increase in spending may pay off, but is generally considered quite risky. San Lorenzo Gold makes us a little nervous due to its lack of substantial operating revenue. We prefer most of the stocks on this list of stocks that analysts expect to grow.
Can San Lorenzo Gold Raise More Cash Easily?
While San Lorenzo Gold does have a solid cash runway, its cash burn trajectory may have some shareholders thinking ahead to when the company may need to raise more cash. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Many companies end up issuing new shares to fund future growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.
Since it has a market capitalisation of CA$636m, San Lorenzo Gold's CA$5.4m in cash burn equates to about 0.9% of its market value. So it could almost certainly just borrow a little to fund another year's growth, or else easily raise the cash by issuing a few shares.
So, Should We Worry About San Lorenzo Gold's Cash Burn?
As you can probably tell by now, we're not too worried about San Lorenzo Gold's cash burn. In particular, we think its cash runway stands out as evidence that the company is well on top of its spending. While we must concede that its increasing cash burn is a bit worrying, the other factors mentioned in this article provide great comfort when it comes to the cash burn. After taking into account the various metrics mentioned in this report, we're pretty comfortable with how the company is spending its cash, as it seems on track to meet its needs over the medium term. On another note, we conducted an in-depth investigation of the company, and identified 3 warning signs for San Lorenzo Gold (2 are a bit unpleasant!) that you should be aware of before investing here.
If you would prefer to check out another company with better fundamentals, then do not miss this free list of interesting companies, that have HIGH return on equity and low debt or this list of stocks which are all forecast to grow.
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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.