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We can readily understand why investors are attracted to unprofitable companies. Indeed, Fredonia Mining (CVE:FRED) stock is up 254% in the last year, providing strong gains for shareholders. But while the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.
In light of its strong share price run, we think now is a good time to investigate how risky Fredonia Mining's cash burn is. For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. Let's start with an examination of the business' cash, relative to its cash burn.
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How Long Is Fredonia Mining's Cash Runway?
A company's cash runway is calculated by dividing its cash hoard by its cash burn. When Fredonia Mining last reported its December 2024 balance sheet in February 2025, it had zero debt and cash worth US$727k. Importantly, its cash burn was US$875k over the trailing twelve months. So it had a cash runway of approximately 10 months from December 2024. That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. Depicted below, you can see how its cash holdings have changed over time.
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How Is Fredonia Mining's Cash Burn Changing Over Time?
Because Fredonia Mining isn't currently generating revenue, we consider it an early-stage business. Nonetheless, we can still examine its cash burn trajectory as part of our assessment of its cash burn situation. As it happens, the company's cash burn reduced by 34% over the last year, which suggests that management are mindful of the possibility of running out of cash. Fredonia Mining makes us a little nervous due to its lack of substantial operating revenue. We prefer most of the stocks on this list of stocks that analysts expect to grow.
Can Fredonia Mining Raise More Cash Easily?
Even though it has reduced its cash burn recently, shareholders should still consider how easy it would be for Fredonia Mining to raise more cash in the future. 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 comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).