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Health Check: How Prudently Does VVC Exploration (CVE:VVC) Use Debt?

Simply Wall St · 4d ago

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. As with many other companies VVC Exploration Corporation (CVE:VVC) makes use of debt. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does VVC Exploration Carry?

You can click the graphic below for the historical numbers, but it shows that as of October 2025 VVC Exploration had CA$2.84m of debt, an increase on CA$2.06m, over one year. On the flip side, it has CA$80.2k in cash leading to net debt of about CA$2.76m.

debt-equity-history-analysis
TSXV:VVC Debt to Equity History January 5th 2026

How Healthy Is VVC Exploration's Balance Sheet?

According to the last reported balance sheet, VVC Exploration had liabilities of CA$11.2m due within 12 months, and liabilities of CA$1.30m due beyond 12 months. On the other hand, it had cash of CA$80.2k and CA$9.7k worth of receivables due within a year. So its liabilities total CA$12.4m more than the combination of its cash and short-term receivables.

When you consider that this deficiency exceeds the company's CA$8.59m market capitalization, you might well be inclined to review the balance sheet intently. Hypothetically, extremely heavy dilution would be required if the company were forced to pay down its liabilities by raising capital at the current share price. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since VVC Exploration will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

See our latest analysis for VVC Exploration

Since VVC Exploration has no significant operating revenue, shareholders probably hope it will develop a valuable new mine before too long.

Caveat Emptor

Over the last twelve months VVC Exploration produced an earnings before interest and tax (EBIT) loss. Its EBIT loss was a whopping CA$3.9m. Considering that alongside the liabilities mentioned above make us nervous about the company. It would need to improve its operations quickly for us to be interested in it. Not least because it had negative free cash flow of CA$2.0m over the last twelve months. So suffice it to say we consider the stock to be risky. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - VVC Exploration has 3 warning signs we think you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.