Is Arianne Phosphate (CVE:DAN) Using Too Much Debt?
Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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. Importantly, Arianne Phosphate Inc. (CVE:DAN) does carry debt. But the more important question is: how much risk is that debt creating?
When Is Debt A Problem?
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. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
What Is Arianne Phosphate's Debt?
As you can see below, at the end of September 2025, Arianne Phosphate had CA$42.1m of debt, up from CA$28.9m a year ago. Click the image for more detail. However, because it has a cash reserve of CA$2.73m, its net debt is less, at about CA$39.4m.
How Strong Is Arianne Phosphate's Balance Sheet?
Zooming in on the latest balance sheet data, we can see that Arianne Phosphate had liabilities of CA$42.5m due within 12 months and liabilities of CA$3.77m due beyond that. Offsetting these obligations, it had cash of CA$2.73m as well as receivables valued at CA$291.9k due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by CA$43.2m.
When you consider that this deficiency exceeds the company's CA$40.6m market capitalization, you might well be inclined to review the balance sheet intently. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Arianne Phosphate will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.
View our latest analysis for Arianne Phosphate
Since Arianne Phosphate has no significant operating revenue, shareholders probably hope it will develop a valuable new mine before too long.
Caveat Emptor
Over the last twelve months Arianne Phosphate produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at CA$2.3m. Considering that alongside the liabilities mentioned above make us nervous about the company. It would need to improve its operations quickly for us to be interested in it. Not least because it burned through CA$2.3m in negative free cash flow over the last year. That means it's on the risky side of things. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 4 warning signs for Arianne Phosphate (of which 2 make us uncomfortable!) you should know about.
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.