Hecla Agrees To Acquire Klondex Mines For $462 Million
(Kitco News) - Hecla Mining Co. (NYSE: HL) has agreed to buy all outstanding shares of Klondex Mines Ltd. (NYSE American: KLDX; TSX: KDX), allowing Hecla to bump up production with the addition of the Fire Creek, Midas and Hollister mines in Nevada, the companies reported Monday.
Klondex's Canadian assets will be spun out to existing shareholders. The value of Hecla’s acquisition of Klondex was put at $462 million, with the deal to include a mix of cash and shares of Hecla stock and a newly formed company -- Klondex Canada.
Klondex’s shareholders will receive $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 of Friday, the companies reported.
“Opportunities to acquire significant land packages along Nevada’s prolific gold trends are very rare,” said Phillips S. Baker, Jr., Hecla’s president and chief executive officer. “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.”
The deal allows Hecla to use “excess cash balances” to gain approximately 162,000 gold-equivalent ounces of production per year, Baker added. Hecla already has gold and silver mines in Alaska, Quebec, Nevada, Mexico and Idaho.
Paul Huet, Klondex’s president and CEO, said his company’s board of directors unanimously recommends approval of the deal by Klondex shareholders. He said the transaction delivers “premium value and a clear pathway to develop and optimize the Nevada mining assets and create further value in the future.”
The transaction will require approval by two-thirds of Klondex shareholders, with the companies reporting that a special meeting of Klondex shareholders is planned for June. If approved, the transaction is expected to close yet in the second quarter. The agreement includes a $21 million termination fee payable to Klondex or Hecla, under certain circumstances.
Meanwhile, some members of Klondex’s board and management team will continue on at Klondex Canada. Hecla will subscribe for $7 million of common shares of New Klondex in exchange for a 13.46% equity interest, based on a pre-investment Klondex Canada valuation of $45 million, the companies said. Klondex Canada intends to make an application to list its shares on the TSX Venture Exchange.