Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the right price. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

So should GoGold Resources (TSE:GGD) shareholders be worried about its cash burn? In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

See our latest analysis for GoGold Resources

When Might GoGold Resources Run Out Of Money?

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. As at June 2024, GoGold Resources had cash of US$76m and no debt. Importantly, its cash burn was US$21m over the trailing twelve months. That means it had a cash runway of about 3.6 years as of June 2024. There's no doubt that this is a reassuringly long runway. You can see how its cash balance has changed over time in the image below.

How Well Is GoGold Resources Growing?

At first glance it's a bit worrying to see that GoGold Resources actually boosted its cash burn by 16%, year on year. The revenue growth of 2.4% gives a ray of hope, at the very least. Considering both these factors, we're not particularly excited by its growth profile. In reality, this article only makes a short study of the company's growth data. This graph of historic earnings and revenue shows how GoGold Resources is building its business over time.

How Hard Would It Be For GoGold Resources To Raise More Cash For Growth?

GoGold Resources seems to be in a fairly good position, in terms of cash burn, but we still think it's worthwhile considering how easily it could raise more money if it wanted to. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Many companies end up issuing new shares to fund future growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.

GoGold Resources has a market capitalisation of US$357m and burnt through US$21m last year, which is 5.9% of the company's market value. That's a low proportion, so we figure the company would be able to raise more cash to fund growth, with a little dilution, or even to simply borrow some money.