By some happy coincidence, just hours after your author talks BS in balance sheets with his pal on the podcast, the company Eira Thomas has run into the ground, Lucara Diamond Corp (LUC.to), files its 1q20 financials and the BS is heaped large. Please consider that the following is the NUMBER ONE TOP BEST THING highlight of this company’s NR spinfest on results:
As at March 31, 2020, the Company had cash and cash equivalents of $27.4 million, an increase of $16.2 million from December 31, 2019. The Company maintained draws totalling $19.0 million on the working capital facility from Q1 2020. A balance of $31.0 million is available to be drawn for working capital, if required, subsequent to March 31, 2020. The Company begins the second quarter with a strong cash position and available liquidity.
They are proud that their cash line has gone from $11.2m to $27.4m in Q1. Fine and dandy, let’s have a look at the balance sheet:
Indeed it is true, up there line one. However, your author has painted his red in other places and I’m not even going to make a big fuss about the way working capital dropped by a couple of million during the quarter. What matters is in red and can be summed up in a very simple sentence:
“We are so bad, we need to take out a loan to pay our suppliers.”
That cash position as at end Dec’19 must have been pretty close to liquidity crunch moment on any given cash flow budget for the quarter, so that when “an insistent payable” (i.e. threatening lawsuits now) came calling, Eira had no choice. That bank loan Eira is so proud to have brought into the corporate structure wasn’t a luxury, it was a necessity and don’t forget, all this was pre-Covid19.
Eira Thomas has received multiple industry awards for decimating shareholder value at LUC, by the way. You mining people are a strange lot.