With the business potentially at an important milestone, we thought we'd take a closer look at Geopacific Resources Limited's (ASX:GPR) future prospects. Geopacific Resources Limited engages in the exploration and development of gold deposits in Papua New Guinea. The AU$112m market-cap company posted a loss in its most recent financial year of AU$4.6m and a latest trailing-twelve-month loss of AU$3.7m shrinking the gap between loss and breakeven. The most pressing concern for investors is Geopacific Resources' path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Geopacific Resources

Geopacific Resources is bordering on breakeven, according to some Australian Metals and Mining analysts. They expect the company to post a final loss in 2021, before turning a profit of AU$19m in 2022. The company is therefore projected to breakeven just over a year from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 40%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of Geopacific Resources' upcoming projects, though, keep in mind that generally metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with Geopacific Resources is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Geopacific Resources' case is 54%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Geopacific Resources, so if you are interested in understanding the company at a deeper level, take a look at Geopacific Resources' company page on Simply Wall St. We've also compiled a list of important factors you should further examine:

1. Valuation: What is Geopacific Resources worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Geopacific Resources is currently mispriced by the market.

2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Geopacific Resources’s board and the CEO’s background.

3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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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.