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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.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, B2Gold Corp. (TSE:BTO) does carry debt. But is this debt a concern to shareholders?
When Is Debt Dangerous?
Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
View our latest analysis for B2Gold
What Is B2Gold's Net Debt?
As you can see below, at the end of September 2021, B2Gold had US$53.9m of debt, up from US$40.9m a year ago. Click the image for more detail. However, it does have US$546.5m in cash offsetting this, leading to net cash of US$492.6m.
How Healthy Is B2Gold's Balance Sheet?
We can see from the most recent balance sheet that B2Gold had liabilities of US$199.5m falling due within a year, and liabilities of US$370.8m due beyond that. Offsetting this, it had US$546.5m in cash and US$32.5m in receivables that were due within 12 months. So its total liabilities are just about perfectly matched by its shorter-term, liquid assets.
Having regard to B2Gold's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the US$4.15b company is struggling for cash, we still think it's worth monitoring its balance sheet. Succinctly put, B2Gold boasts net cash, so it's fair to say it does not have a heavy debt load!
While B2Gold doesn't seem to have gained much on the EBIT line, at least earnings remain stable for now. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine B2Gold's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.