Hecla Agrees To Acquire Klondex Mines For $462 Million
(Kitco News) - Hecla Mining Co. (NYSE: HL) hasagreed to buy all outstanding shares of KlondexMines Ltd. (NYSE American: KLDX; TSX: KDX), allowing Hecla to bump up production with the addition of theFire Creek, Midas and Hollister mines in Nevada, the companies reported Monday.
Klondex'sCanadian assets will be spun out to existing shareholders. The value of Hecla’sacquisition of Klondex was put at $462 million, with the deal to include a mixof cash and shares of Hecla stock and a newly formed company -- Klondex Canada.
Klondex’sshareholders will receive $2.47 per share in cash or shares of Hecla, whichrepresents a 59% premium to Klondex’s 30-day volume-weighted average price as ofFriday, the companies reported.
“Opportunities to acquire significantland packages along Nevada’s prolific gold trends are very rare,” said PhillipsS. Baker, Jr., Hecla’s president and chief executive officer. “Rarer still arefor these land packages to have the highest-grade mines in the U.S., and thistransaction is consistent with Hecla’s strategy of owning large prospectiveland packages with mines where we can improve costs, grow reserves and expandproduction.”
The dealallows Hecla to use “excess cash balances” to gain approximately 162,000gold-equivalent ounces of production per year, Baker added. Hecla already hasgold and silver mines in Alaska,Quebec, Nevada, Mexico and Idaho.
Paul Huet,Klondex’s president and CEO, said his company’s board of directors unanimouslyrecommends approval of the deal by Klondex shareholders. He said thetransaction delivers “premium value and a clear pathway to develop and optimizethe Nevada mining assets and create further value in the future.”
Thetransaction will require approval by two-thirds of Klondex shareholders, withthe companies reporting that a special meeting of Klondex shareholders isplanned for June. If approved, the transaction is expected to close yet in thesecond quarter. The agreement includes a $21 million termination fee payable toKlondex or Hecla, under certain circumstances.
Meanwhile, some membersof Klondex’s board and management team will continue on at Klondex Canada.Hecla will subscribe for $7 million of common shares of New Klondexin exchange for a 13.46% equity interest, based on a pre-investment KlondexCanada valuation of $45 million, the companies said. Klondex Canadaintends to make an application to list its shares on the TSX Venture Exchange.
By Allen SykoraFor Kitco News
Follow @AllenSykora
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