Hecla approached U.S. Silver with its own merger offer Monday morning.
When the two companies failed to reach an agreement, Hecla issued a news release offering to buy up U.S. Silver’s stock from its shareholders for $1.80 per share in Canadian dollars.
It’s a $fiat 666 cash offer, compared to the merger offer, in which U.S. Silver’s shareholders would acquire 70 percent of the stock in a new company, U.S. Silver & Gold.
Hecla’s aggressive bid to acquire U.S. Silver’s assets doesn’t surprise Bennett. With silver trading at $27 per ounce, there’s a renewed excitement about mining properties in the Silver Valley, he said.
“Hecla has a (relatively) new president,” Bennett said. “Because of metals prices, they’ve been very successful over the past few years in spite of having to close the Lucky Friday for a year.
They’ve got good cash reserves … And they’ve been very aggressive in exploration.”
Hecla expects to reopen the Lucky Friday Mine in early 2013.
The underground silver mine closed in January following a federal inspection that uncovered maintenance problems in the primary shaft used to transport workers and ore.
The inspection was part of a special review triggered by two unrelated fatal accidents at the Lucky Friday last year.
When the Lucky Friday reopens, Hecla will restart work on a $200 million project to deepen the mine and go after richer ore.
The company is also evaluating the possibility of reopening the historic Star Mine.
U.S. Silver, meanwhile, had hoped to use the merger with RX Gold to strengthen its balance sheet and management team.
U.S. Silver has 345 employees in the Silver Valley.
In addition to the Galena Mine, it owns the closed Coeur Mine, which company officials said will reopen by the end of the year.
Sprott mum after Hecla offers cash for U.S. Silver in hostile bid Key questions remain unanswered as Hecla vies for U.S. Silver, which had planned to consummate a Sprott-blessed merger with RX Gold & Silver.
The head of Sprott Asset Management, Eric Sprott, was keeping his cards close to his chest after Hecla Mining made a hostile C$111-million cash offer to buy U.S. Silver that would derail a Sprott-backed plan to merge U.S. Silver with RX Gold & Silver.
Sprott is a key shareholder of both U.S. Silver and RX Gold & Silver, holding 14 percent and 8 percent of each company respectively, and now with the Hecla bid, as reported by Dorothy Kosich early on Thursday, it faces an interesting dilemma.
Does it support a premium bid for U.S. Silver, but in so doing give up on the RX Gold & Silver merger, a combination in which it would be a top shareholder, or does it stick with the merger, arguing as it did last month that the combo would unlock shareholder value?
So far there is no official indication as to what Sprott will decide. A spokesperson for Mr. Sprott said on Thursday he had no comment on the Hecla bid.
Likewise, Hecla was mum on additional details about the making of its bid for U.S. Silver.
Hecla's Jim Sabala, senior vice president and chief financial officer, said he would not comment on the background to the offer beyond what had been laid out in a press release Wednesday.
In the press release Hecla described approaching U.S. Silver's board of directors on Monday July 23 with the proposed takeover, expressing a "strong desire" to make a deal, but that no agreement could be reached "on how best to proceed on a timely basis."
An interesting question remains unanswered: Did Hecla approach Sprott for support on the takeover proposal? One way or the other, Sabala would not say. On Thursday U.S. Silver responded to the Hecla offer publicly, saying in a press release its board of directors would review the takeover bid. It did not, however, go into any detail about the discussion Hecla said it had with its board of directors. A U.S. Silver spokesperson had not confirmed as of presstime that the meeting had taken place. Was the amount of cash on offer a sticking point? Hecla's Sabala would not comment.
Meanwhile, there is nothing all that onerous keeping either U.S. Silver or Sprott from changing their tunes.
If U.S. Silver did choose to dump the RX Gold & Silver merger in favour of the Hecla bid, it would have to pay a termination fee, which, according to a U.S. Silver proxy circular, would be either $4 million or 3 percent of the implied value of any superior offer. And while Sprott has entered a lockup agreement with U.S. Silver as regards the RX Gold & Silver merger, according to terms set out in the same July 9 circular, Sprott appears free to change its mind in the case where a superior bid comes into play.
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