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Are Metminco Limited’s (ASX:MNC) Interest Costs Too High?

Metminco Limited (ASX:MNC) is a small-cap stock with a market capitalization of AU$1.46M. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? Given that MNC is not presently profitable, it’s vital to understand the current state of its operations and pathway to profitability. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Nevertheless, I know these factors are very high-level, so I’d encourage you to dig deeper yourself into MNC here.

How does MNC’s operating cash flow stack up against its debt?

Over the past year, MNC has borrowed debt capital of around AU$808.02K made up of predominantly near term debt. With this increase in debt, the current cash and short-term investment levels stands at AU$834.38K for investing into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, though these low levels of cash means that operational efficiency is worth a look. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can take a look at some of MNC’s operating efficiency ratios such as ROA here.

Can MNC pay its short-term liabilities?

With current liabilities at AU$3.58M, it appears that the company has been able to meet these commitments with a current assets level of AU$3.91M, leading to a 1.09x current account ratio. Generally, for Metals and Mining companies, this is a reasonable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.

ASX:MNC Historical Debt Apr 20th 18
ASX:MNC Historical Debt Apr 20th 18

Can MNC service its debt comfortably?

With debt at 9.41% of equity, MNC may be thought of as having low leverage. MNC is not taking on too much debt commitment, which may be constraining for future growth. Risk around debt is extremely low for MNC, and the company also has the ability and headroom to increase debt if needed going forward.

Next Steps:

MNC’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. Keep in mind I haven’t considered other factors such as how MNC has been performing in the past. I suggest you continue to research Metminco to get a better picture of the stock by looking at:

  1. Historical Performance: What has MNC’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

  2. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.

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