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Loss-Making Rio2 Limited (CVE:RIO) Expected To Breakeven In The Medium-Term

With the business potentially at an important milestone, we thought we'd take a closer look at Rio2 Limited's (CVE:RIO) future prospects. Rio2 Limited engages in the exploration, development, and mining of mineral properties in Canada, Peru, and Chile. The CA$46m market-cap company’s loss lessened since it announced a US$11m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$9.9m, as it approaches breakeven. As path to profitability is the topic on Rio2's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Rio2

Rio2 is bordering on breakeven, according to the 2 Canadian Metals and Mining analysts. They anticipate the company to incur a final loss in 2023, before generating positive profits of US$51m in 2024. Therefore, the company is expected to breakeven roughly 2 years from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 95% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
earnings-per-share-growth

Given this is a high-level overview, we won’t go into details of Rio2's upcoming projects, however, keep in mind that typically a metal and mining business has lumpy cash flows which are contingent on the natural resource mined and stage at which the company is operating. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

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Before we wrap up, there’s one aspect worth mentioning. Rio2 currently has no debt on its balance sheet, which is quite unusual for a cash-burning metals and mining company, which typically has high debt relative to its equity. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

This article is not intended to be a comprehensive analysis on Rio2, so if you are interested in understanding the company at a deeper level, take a look at Rio2's company page on Simply Wall St. We've also put together a list of pertinent factors you should further examine:

  1. Valuation: What is Rio2 worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Rio2 is currently mispriced by the market.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Rio2’s board and the CEO’s background.

  3. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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