Ucore Rare Metals (CVE:UCU) Is Carrying A Fair Bit Of Debt
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 can see that Ucore Rare Metals Inc. (CVE:UCU) does use debt in its business. But the more important question is: how much risk is that debt creating?
What Risk Does Debt Bring?
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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.
How Much Debt Does Ucore Rare Metals Carry?
You can click the graphic below for the historical numbers, but it shows that as of September 2025 Ucore Rare Metals had CA$23.1m of debt, an increase on CA$12.1m, over one year. However, it does have CA$19.3m in cash offsetting this, leading to net debt of about CA$3.79m.
How Strong Is Ucore Rare Metals' Balance Sheet?
Zooming in on the latest balance sheet data, we can see that Ucore Rare Metals had liabilities of CA$16.5m due within 12 months and liabilities of CA$11.8m due beyond that. On the other hand, it had cash of CA$19.3m and CA$937.3k worth of receivables due within a year. So its liabilities total CA$8.12m more than the combination of its cash and short-term receivables.
Having regard to Ucore Rare Metals' size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the CA$711.5m company is short on cash, but still worth keeping an eye on the balance sheet. Carrying virtually no net debt, Ucore Rare Metals has a very light debt load indeed. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Ucore Rare Metals can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.
See our latest analysis for Ucore Rare Metals
Since Ucore Rare Metals has no significant operating revenue, shareholders probably hope it will develop a valuable new mine before too long.
Caveat Emptor
Importantly, Ucore Rare Metals had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at CA$9.4m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through CA$9.2m of cash over the last year. So to be blunt we think it is risky. 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. Be aware that Ucore Rare Metals is showing 5 warning signs in our investment analysis , and 4 of those are a bit concerning...
If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.
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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.