We're Keeping An Eye On Group Eleven Resources' (CVE:ZNG) Cash Burn Rate
We can readily understand why investors are attracted to unprofitable companies. Indeed, Group Eleven Resources...
We can readily understand why investors are attracted to unprofitable companies. Indeed, Group Eleven Resources (CVE:ZNG) stock is up 103% 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. So notwithstanding the buoyant share price, we think it's well worth asking whether Group Eleven Resources' cash burn is too risky. For the purpose of this article, we'll define cash burn as the amount of cash the company is spending each year to fund its growth (also called its negative free cash flow).
We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. How Long Is Group Eleven Resources' Cash Runway? You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. When Group Eleven Resources last reported its March 2025 balance sheet in May 2025, it had zero debt and cash worth CA$3.1m. In the last year, its cash burn was CA$3.5m. So it had a cash runway of approximately 11 months from March 2025.
That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. The image below shows how its cash balance has been changing over the last few years. TSXV:ZNG Debt to Equity History May 30th 2025 See our latest analysis for Group Eleven Resources How Is Group Eleven Resources' Cash Burn Changing Over Time? Because Group Eleven Resources isn't currently generating revenue, we consider it an early-stage business. So while we can't look to sales to understand growth, we can look at how the cash burn is changing to understand how expenditure is trending over time.
Over the last year its cash burn actually increased by 49%, which suggests that management are increasing investment in future growth, but not too quickly. That's not necessarily a bad thing, but investors should be mindful of the fact that will shorten the cash runway. Admittedly, we're a bit cautious of Group Eleven Resources due to its lack of significant operating revenues. So we'd generally prefer stocks from this list of stocks that have analysts forecasting growth. Can Group Eleven Resources Raise More Cash Easily? Given its cash burn trajectory, Group Eleven Resources shareholders should already be thinking about how easy it might be for it to raise further cash in the future.
Companies can raise capital through either debt or equity. 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. Story Continues Group Eleven Resources has a market capitalisation of CA$76m and burnt through CA$3.5m last year, which is 4.6% of the company's market value. Given that is a rather small percentage, it would probably be really easy for the company to fund another year's growth by issuing some new shares to investors, or even by taking out a loan.
So, Should We Worry About Group Eleven Resources' Cash Burn? Even though its increasing cash burn makes us a little nervous, we are compelled to mention that we thought Group Eleven Resources' cash burn relative to its market cap was relatively promising. We don't think its cash burn is particularly problematic, but after considering the range of factors in this article, we do think shareholders should be monitoring how it changes over time. On another note, Group Eleven Resources has 5 warning signs (and 3 which are a bit concerning) we think you should know about. Of course Group Eleven Resources may not be the best stock to buy.
So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.