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There's no doubt that money can be made by owning shares of unprofitable businesses. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.
So should Bougainville Copper (ASX:BOC) shareholders be worried about its cash burn? In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.
When Might Bougainville Copper Run Out Of Money?
A company's cash runway is calculated by dividing its cash hoard by its cash burn. When Bougainville Copper last reported its December 2024 balance sheet in February 2025, it had zero debt and cash worth K21m. In the last year, its cash burn was K14m. Therefore, from December 2024 it had roughly 19 months of cash runway. While that cash runway isn't too concerning, sensible holders would be peering into the distance, and considering what happens if the company runs out of cash. The image below shows how its cash balance has been changing over the last few years.
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How Is Bougainville Copper's Cash Burn Changing Over Time?
Whilst it's great to see that Bougainville Copper has already begun generating revenue from operations, last year it only produced K3.4m, so we don't think it is generating significant revenue, at this point. As a result, we think it's a bit early to focus on the revenue growth, so we'll limit ourselves to looking at how the cash burn is changing over time. Over the last year its cash burn actually increased by a very significant 72%. Oftentimes, increased cash burn simply means a company is accelerating its business development, but one should always be mindful that this causes the cash runway to shrink. Of course, we've only taken a quick look at the stock's growth metrics, here. You can take a look at how Bougainville Copper has developed its business over time by checking this visualization of its revenue and earnings history .
Can Bougainville Copper Raise More Cash Easily?
While Bougainville Copper does have a solid cash runway, its cash burn trajectory may have some shareholders thinking ahead to when the company may need to raise more cash. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. Many companies end up issuing new shares to fund future growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.