A Glimpse Of Precious Metal Mining’s Future: Hecla Buys Klondex For 59% Premium

Big gold and silver miners have a problem: They’re evaporating. Each year they take more metal out of the ground than they discover, which brings them ever-closer to the end of the road. They know it and their shareholders know it, which means their stock prices tend to languish in the shadow of falling production and depressed future earnings.

The solution? Buy out junior miners sitting on resources big enough to arrest the majors’ decline. There aren’t that many such juniors, which points to a bidding war as the best are snapped up and the rest rise in sympathy.

Here’s an example that was announced a few hours ago:

Hecla to Acquire Three High-Grade Nevada Gold Mines with the Acquisition of Klondex Mines Ltd.

Hecla Mining Company (NYSE:HL) and Klondex Mines (NYSE:KLDX; TSX:KDX) today announced Hecla will acquire all the outstanding shares of Klondex, a high-grade Nevada underground gold producer with its Fire Creek, Midas and Hollister mines, through a plan of arrangement. Klondex’s Canadian assets will be spun out to its existing shareholders.

Under the Transaction, Hecla will acquire Klondex for consideration of US$462 million with a mix of cash and shares of Hecla common stock and the newly formed company (Klondex Canada). Klondex’s shareholders will receive US$2.47 per share in cash or shares of Hecla, which represents a 59% premium to Klondex’s 30-day volume-weighted average price, as at March 16, 2018, on the NYSE American.

“Opportunities to acquire significant land packages along Nevada’s prolific gold trends are very rare. Rarer still are for these land packages to have the highest grade mines in the U.S. and this transaction is consistent with Hecla’s strategy of owning large prospective land packages with mines where we can improve costs, grow reserves and expand production,” said Phillips S. Baker, Jr., Hecla’s President and CEO. “We structured the deal to use our excess cash balances so our shareholders can benefit from the approximately 162,000 gold equivalent ounces a year of production while minimizing dilution.”

Terms of the Transaction
Klondex shareholders may elect to receive either US$2.47 in cash (Cash Alternative) or 0.6272 of a Hecla share (Share Alternative), each full Hecla share being currently valued at US$3.94, subject in each case to pro-ration based on a maximum cash consideration of US$157.4 million and a maximum number of Hecla shares issued of 77.4 million. If all Klondex shareholders elect either the Cash Alternative or the Share Alternative, each Klondex shareholder would be entitled to receive US$0.8411 in cash and 0.4136 Hecla shares. Klondex shareholders may also elect to receive US$0.8411 in cash and 0.4136 of a Hecla share and Klondex shareholders who fail to make an election will automatically receive US$0.8411 in cash and 0.4136 of a Hecla share. Klondex shareholders will also receive shares of a newly formed company (Klondex Canada) which will hold Klondex’s Canadian assets, including the True North and Bison Gold Resources properties.

1 2 3
View single page >> |

Disclosure: Which juniors are likely to be bought out for big premiums in the next few years? That’s hard to predict. But here are five candidates to consider (full disclosure: The ...

more
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.