Hecla Mining Company and Klondex Mines Ltd. announced that Hecla will acquire all three outstanding Klondex mines, through a plan of arrangement.
Hecla Mining Company (NYSE:HL) and Klondex Mines Ltd. (TSX:KDX) announced that 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.
As quoted in the press release:
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.
Highlights are as follows:
Benefits to Hecla Shareholders
- Adds significant land position with extensive exploration and development potential, and production in Nevada, one of the most prolific gold mining jurisdictions in the world.
- Increases pro-forma 2017 annual production by 27%, equating to 162koz on a gold equivalent basis or 11.5 million ounces on a silver equivalent basis.
- Fire Creek is a cornerstone producing asset with robust cash flows and significant opportunities for exploration, mine life expansion, and increased throughput.
- The Transaction is structured to minimize dilution and is expected to be accretive on most important financial and operating metrics.
- Allows Hecla the opportunity to capture meaningful synergies.
- Further increases the grade of one of the highest-grade asset portfolios in the industry.
- Klondex’s assets leverage Hecla’s core competency in narrow-vein underground mining.
Benefits to Klondex Shareholders
- Immediate and significant premium of approximately 59% based on the 30-day volume weighted average price and approximately 72% based on closing prices on March 16, 2018, with ongoing participation in upside through Hecla shares and through Klondex Canada shares.
- Superior financial strength and flexibility to support critical development and exploration programs for Klondex’s assets.
- Hecla is well capitalized, with a lower cost of capital, making possible critical development and exploration programs for Klondex’s assets.
- Proven track record of successfully acquiring and optimizing underground assets.
- Superior investment with enhanced liquidity and a far more diversified production and financial base.
- Hecla has extensive experience operating efficient underground mines for over 125 years.
- Ownership in Klondex Canada, a gold company created to leverage Klondex’s exploration expertise and significant mining infrastructure assets in Canada.
Phillips S. Baker, Jr., president and CEO of Helca, commented:
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. 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.
One of our core strengths is operating high-grade, narrow-vein underground mines, and Klondex’s three operating mines – Fire Creek, Midas and Hollister – are some of the highest-grade gold mines in the world. After extensive due diligence, we see significant opportunity to improve costs, throughput and recoveries over time with our expertise. The combined approximately 110 square mile land position offers the opportunity to make discoveries and grow the reserve base as we improve our knowledge of the geology, something we have done at our other operations. We expect this transaction to be accretive on many important financial and credit metrics, with potentially significant synergies. We are pleased that two significant Klondex shareholders have committed to support this transaction, and look forward to welcoming other Klondex shareholders to our company.