Companies Like True North Copper (ASX:TNC) Could Be Quite Risky

editorial-team@simplywallst.com (Simply Wall St)

Sat, Mar 15, 2025, 5:27 PM 4 min read

Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the right price. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.

So should True North Copper (ASX:TNC) shareholders be worried about its cash burn? In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

View our latest analysis for True North Copper

Does True North Copper 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. When True North Copper last reported its December 2024 balance sheet in March 2025, it had zero debt and cash worth AU$19m. Looking at the last year, the company burnt through AU$37m. That means it had a cash runway of around 6 months as of December 2024. To be frank, this kind of short runway puts us on edge, as it indicates the company must reduce its cash burn significantly, or else raise cash imminently. You can see how its cash balance has changed over time in the image below.

debt-equity-history-analysis — ASX:TNC Debt to Equity History March 15th 2025

How Well Is True North Copper Growing?

At first glance it's a bit worrying to see that True North Copper actually boosted its cash burn by 27%, year on year. And we must say we find it concerning that operating revenue dropped 31% over the same period. Taken together, we think these growth metrics are a little worrying. Of course, we've only taken a quick look at the stock's growth metrics, here. You can take a look at how True North Copper has developed its business over time by checking this visualization of its revenue and earnings history.

How Easily Can True North Copper Raise Cash?

True North Copper revenue is declining and its cash burn is increasing, so many may be considering its need to raise more cash in the future. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. Many companies end up issuing new shares to fund future growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).

Since it has a market capitalisation of AU$43m, True North Copper's AU$37m in cash burn equates to about 84% of its market value. That suggests the company may have some funding difficulties, and we'd be very wary of the stock.

Is True North Copper's Cash Burn A Worry?

There are no prizes for guessing that we think True North Copper's cash burn is a bit of a worry. In particular, we think its cash burn relative to its market cap suggests it isn't in a good position to keep funding growth. And although we accept its increasing cash burn wasn't as worrying as its cash burn relative to its market cap, it was still a real negative; as indeed were all the factors we considered in this article. Looking at the metrics in this article all together, we consider its cash burn situation to be rather dangerous, and likely to cost shareholders one way or the other. On another note, we conducted an in-depth investigation of the company, and identified 5 warning signs for True North Copper (3 are potentially serious!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies with significant insider holdings, and this list of stocks growth stocks (according to analyst forecasts)

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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.