When Paul Andre Huet became chief executive officer of Klondex Mines Ltd. in 2012, he says the Canadian gold miner had just $400,000 in cash, one asset and $7 million in invoices.
“We never declared bankruptcy but on our financials we were literally done,” says Huet, who made the leap to the insolvent company from Premier Gold Mines Ltd.
Many might have considered the move career limiting but Huet knew Klondex’s sole asset well: Nevada’s Fire Creek gold project, having previously studied it for two other mining companies. Confident the deposit was more profitable than it appeared, he took the job, staving off Klondex’s creditors and turning Fire Creek into a producing mine in just over a year. Then he doubled down by looking for more assets that other miners shunned.
Five years on, Klondex shares are outperforming its peers while remaining undervalued. The stock has surged 22 percent in the last six months even as gold retreated through the end of 2016. That’s made it the top gainer on Toronto’s S&P/TSX Composite Gold index over that period. The stock slipped 0.9 percent to C$6.96 in Toronto at 1:23 p.m. for a market value of C$1.22 billion ($920 million).
“Klondex was doing well even without any gain in gold price because they were taking on assets that were crappy and showing they could generate cash flow,” Barry Allan, senior vice president at Mackie Research Capital Corp., said in a phone interview last week from Toronto. “That’s given them a cache value.”
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