07-05-2025
Will Green Critical Minerals (ASX:GCM) Spend Its Cash Wisely?
Just because a business does not make any money, does not mean that the stock will go down. By way of example, Green Critical Minerals (ASX:GCM) has seen its share price rise 433% over the last year, delighting many shareholders. But while history lauds those rare successes, those that fail are often forgotten; who remembers
So notwithstanding the buoyant share price, we think it's well worth asking whether Green Critical Minerals' cash burn is too risky. For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.
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How Long Is Green Critical Minerals' Cash Runway?
A company's cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. As at December 2024, Green Critical Minerals had cash of AU$1.9m and no debt. In the last year, its cash burn was AU$2.6m. That means it had a cash runway of around 9 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.
ASX:GCM Debt to Equity History May 7th 2025
Check out our latest analysis for Green Critical Minerals
How Is Green Critical Minerals' Cash Burn Changing Over Time?
Green Critical Minerals didn't record any revenue over the last year, indicating that it's an early stage company still developing its business. So while we can't look to sales to understand growth, we can look at how the cash burn is changing to understand how expenditure is trending over time. As it happens, the company's cash burn reduced by 47% over the last year, which suggests that management are mindful of the possibility of running out of cash. Admittedly, we're a bit cautious of Green Critical Minerals due to its lack of significant operating revenues. We prefer most of the stocks on this list of stocks that analysts expect to grow.
How Easily Can Green Critical Minerals Raise Cash?
While Green Critical Minerals is showing a solid reduction in its cash burn, it's still worth considering how easily it could raise more cash, even just to fuel faster growth. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Commonly, a business will sell new shares in itself to raise cash and drive 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).
