It's evident that owning shares in unprofitable businesses can be lucrative, as demonstrated by success stories like Salesforce.com. However, the risks associated with cash burn cannot be ignored, and for shareholders of Ausgold (ASX: AUC), the question of concern arises regarding its cash burn rate. 

Assessing Ausgold's Cash Runway 

Ausgold, an ASX mid cap shares, cash runway, a measure of how long a company can sustain its operations with its current cash reserves, is a critical factor for investors. As of June 2023, the company held AU$9.5 million in cash with no debt. However, its cash burn rate over the trailing twelve months amounted to AU$13 million, indicating a cash runway of approximately 9 months from June 2023. This relatively short runway suggests that Ausgold must either decrease its cash burn or seek additional funding to sustain its operations.  

Analyzing Cash Burn Trends 

While Ausgold has begun generating revenue from operations, its revenue remains modest, totaling AU$50k last year. Consequently, the focus shifts to the trajectory of the company's cash burn over time. Over the past year, Ausgold's cash burn increased by 5.2%, signaling management's commitment to investing in future growth.  

However, sustained increases in spending could further shorten the company's cash runway. Despite management's strategic initiatives, the lack of significant operating revenues raises concerns about Ausgold's long-term sustainability. 

Evaluation of Cash Raise Potential 

Given the increasing cash burn rate, Ausgold may require additional funding in the future. Typically, companies raise cash through issuing shares or taking on debt. However, the dilutive impact on shareholders is a key consideration. Ausgold's cash burn, representing 22% of its market capitalization, indicates the potential for costly dilution if the company opts to issue more shares to fund its growth. This possibility underscores the need for caution among shareholders. 

Concerns Surrounding Cash Burn 

Ausgold's cash burn situation presents challenges for the company. While the moderate increase in cash burn may seem manageable, the short cash runway raises apprehensions about its financial health. Investors should weigh the risks associated with Ausgold's cash burn against its growth prospects. Despite potential opportunities, the inherent risks make the stock a source of concern for investors. 



Conclusion 

In conclusion, Ausgold's cash burn situation poses a significant concern for investors. Despite management's efforts to invest in growth, the company's short cash runway and increasing cash burn rate raise doubts about its ability to sustain operations without additional funding. Investors should carefully evaluate Ausgold's financial position and future prospects before making investment decisions.