It’s not just me, either. When A. Reader pointed out this bit of today’s NR that announces the acquisition of Klondex (KDX), we both had a giggle. IKN highlights:
“We structured the deal to use our excess cash balance so our
shareholders can benefit from the approximately 162,000 gold equivalent
ounces a year of production while minimizing dilution.”
Excess cash balance! Yup, like saltwater in a tidal pool HL has cash washing and lapping around. But once we’d stopped chortling and yokking at the words of HL President and CEO Phillips S. Baker Jr, it occurred to my lazy brain that it would be good to check out exactly how bad this company is at numbers and money and stuff so it was off to the RegFs and my stars, it’s even worse than I thought. Two exhibits for you today, the first its latest balance sheet:
As at year end 2017 HL had $186m in cash so yes, it does have the “liquidity” to shell out $157m to KDX shareholders. However, look a bit further down and….oh, what’s that? $502m in debt? Hmmm, and here’s the payback schedule on that Senior Secured (aka at the front of the queue) obligation:
2018: $34.8m
2019: $34.8m
2020: $34.8m
2021: 518.107m
In other words, if HL can conjure up six hundred and twenty million dollars in the next three years, all will be well. That thought brings us to Exhibit B of this post, the net profits at HL over the last ten years:
Do the math (and notice how generous your humble scribe is by going for the ten year period and not just the last five years) and you’ll see that HL has generated the sum total of $168.118m in the last ten years. TEN YEARS! What’s more, $151m of that came in just one year. So folks, what do you think the chances are that Hecla makes enough to pay down that debt organically by 2021? Yeah, me too.
Thank you for the Monday merriment, Phillips S. Baker.