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With the business potentially at an important milestone, we thought we'd take a closer look at West Red Lake Gold Mines Ltd.'s (CVE:WRLG) future prospects. West Red Lake Gold Mines Ltd. engages in the acquisition, exploration and evaluation, and development of gold properties in Canada. The company’s loss has recently broadened since it announced a CA$33m loss in the full financial year, compared to the latest trailing-twelve-month loss of CA$83m, moving it further away from breakeven. Many investors are wondering about the rate at which West Red Lake Gold Mines will turn a profit, with the big question being “when will the company 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 West Red Lake Gold Mines
According to the 4 industry analysts covering West Red Lake Gold Mines, the consensus is that breakeven is near. They expect the company to post a final loss in 2024, before turning a profit of CA$39m in 2025. So, the company is predicted to breakeven approximately a year from now or less! At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 78%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
We're not going to go through company-specific developments for West Red Lake Gold Mines given that this is a high-level summary, however, bear in mind that typically a metal and mining business has lumpy cash flows which are contingent on the natural resource mined and stage at which the company is operating. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
Before we wrap up, there’s one issue worth mentioning. West Red Lake Gold Mines currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in West Red Lake Gold Mines' case is 71%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
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There are key fundamentals of West Red Lake Gold Mines which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at West Red Lake Gold Mines, take a look at West Red Lake Gold Mines' company page on Simply Wall St. We've also compiled a list of key aspects you should further research: