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These 4 Measures Indicate That Atalaya Mining Copper (LON:ATYM) Is Using Debt Safely

Simply Wall St · 5d 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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that Atalaya Mining Copper, S.A. (LON:ATYM) does have debt on its balance sheet. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things get really bad, the lenders can take control of the business. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Atalaya Mining Copper Carry?

As you can see below, Atalaya Mining Copper had €24.1m of debt at September 2025, down from €35.7m a year prior. However, it does have €113.9m in cash offsetting this, leading to net cash of €89.8m.

debt-equity-history-analysis
LSE:ATYM Debt to Equity History January 6th 2026

A Look At Atalaya Mining Copper's Liabilities

The latest balance sheet data shows that Atalaya Mining Copper had liabilities of €124.4m due within a year, and liabilities of €54.3m falling due after that. On the other hand, it had cash of €113.9m and €69.5m worth of receivables due within a year. So it actually has €4.72m more liquid assets than total liabilities.

This state of affairs indicates that Atalaya Mining Copper's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the €1.46b company is struggling for cash, we still think it's worth monitoring its balance sheet. Simply put, the fact that Atalaya Mining Copper has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for Atalaya Mining Copper

Better yet, Atalaya Mining Copper grew its EBIT by 330% last year, which is an impressive improvement. If maintained that growth will make the debt even more manageable in the years ahead. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Atalaya Mining Copper can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While Atalaya Mining Copper has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Looking at the most recent three years, Atalaya Mining Copper recorded free cash flow of 40% of its EBIT, which is weaker than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Atalaya Mining Copper has net cash of €89.8m, as well as more liquid assets than liabilities. And we liked the look of last year's 330% year-on-year EBIT growth. So is Atalaya Mining Copper's debt a risk? It doesn't seem so to us. We'd be very excited to see if Atalaya Mining Copper insiders have been snapping up shares. If you are too, then click on this link right now to take a (free) peek at our list of reported insider transactions.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.