Adds 27% more high-grade production to its strong North American
silver and gold mines
COEUR D’ALENE, Idaho & VANCOUVER, British Columbia--(BUSINESS WIRE)--
Hecla Mining Company (NYSE:HL)
(Hecla) and Klondex Mines Ltd. (NYSE American:KLDX; TSX:KDX) (Klondex)
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 (the
Transaction). 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.”
Mr. Baker continued, “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.”
“This transaction is an excellent outcome for Klondex and our
shareholders, delivering premium value and a clear pathway to develop
and optimize the Nevada mining assets and create further value in the
future,” said Paul Huet, Klondex’s President and CEO. “Hecla has a
proven track record of developing and optimizing mining assets such as
ours, and has a strong balance sheet that should help Fire Creek and our
other properties reach their full potential. Hecla operates a diverse
portfolio of some of the highest-grade mines in the world, and the
addition of our assets strengthens the portfolio further. We are
delighted to enter into this agreement and the Klondex board unanimously
recommends that Klondex shareholders vote in favour of this transaction.”
A Further Transformation of Hecla
- Seven large land positions located in Alaska, Quebec, Nevada,
Mexico and Idaho – Some of the safest and most prolific mining
jurisdictions in the world.
- Proven operational excellence to be leveraged across expanded
portfolio of high-grade mines – Hecla has an extensive track
record of optimizing acquired assets as demonstrated at Casa Berardi
and Greens Creek. Hecla’s expertise in narrow-vein mining and mill
optimization will be applied to the acquisitions to improve the
operational consistency and enhance the value of the expanded
portfolio.
- Well capitalized pro-forma company with strong cash flow and solid
balance sheet – Hecla expects to improve financial metrics with
the Nevada mines’ cash flow.
- Significant production base with highly prospective growth
opportunities and cost reductions – Adds about 162,000 oz of
annual gold equivalent production. Hecla will launch a significant
exploration program at Fire Creek and at the prospective Hatter Graben
discovery at Hollister.
- Increased precious metals production – Peer group leading
pro-forma production profile amongst intermediate precious metal
producers of 762koz AuEq (2017A) or 54.1moz AgEq and commodity
distribution of 30% Ag, 50% Au, 15% Zn and 5% Pb (by revenue).
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.
Klondex Canada
Klondex is pleased to be forming Klondex Canada. Certain members of
Klondex’s board and management team will continue on at Klondex Canada.
Hecla will subscribe for US$7.0million of common shares of New
Klondex in exchange for a 13.46% equity interest, based on a
pre-investment Klondex Canada valuation of US$45 million. Klondex
Canada intends to make an application to list its shares on the TSX-V.
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.
At closing existing Hecla and Klondex shareholders will own
approximately 83.8% and 16.2% of Hecla’s outstanding common stock,
respectively.
Major Shareholder Support
CI Investments Inc. and Sentry Investments Inc., which together hold
approximately 42.5 million shares of Klondex, representing approximately
23.7% of Klondex’s issued and outstanding shares, have entered into
support agreements with Hecla, agreeing to vote their Klondex shares in
favour of the Transaction. Each of Klondex’s directors and officers have
also entered into an agreement to support the Transactionand the
Board of Directors of Klondex has unanimously recommended that Klondex’s
affected securityholders vote in favour of the transaction.
Board of Directors’ Recommendations
The Transaction has been unanimously approved by the Board of Directors
of each of Klondex and Hecla. The Board of Directors of Klondex
unanimously recommends that Klondex’s affected securityholders vote in
favour of the Transaction.
GMP Securities L.P. and INFOR Financial Inc. have each acted as
financial advisors to Klondex with GMP Securities L.P. and Maxit Capital
LP having provided fairness opinions to the Board of Directors of
Klondex and the Independent Committee of the Board of Directors of
Klondex, respectively. CIBC World Markets Inc. and J.P. Morgan have each
acted as advisors to the Board of Directors of Hecla and have provided
fairness opinions to Hecla’s Board of Directors.
Each of the directors and senior officers of Klondex, who as of the date
hereof, collectively hold approximately 1.7% of Klondex’s issued and
outstanding common shares have entered into agreements to support the
Transaction.
Transaction Conditions and Timing
The Transaction will be implemented by way of a Court-approved plan of
arrangement under the Business Corporations Act (British Columbia) and
will require the approval of: (i) 66 2/3% of the
votes cast by the holders of Klondex’s common shares, (ii) 66 2/3%
of the votes cast by the affected securityholders of Klondex voting as a
single class, and (iii) if applicable, a majority of the votes cast by
the holders of Klondex’s common shares after excluding any votes of
Hecla and other persons required to be excluded under Canadian
Multilateral Instrument 61-101 Protection of Minority Security
Holders in Special Transactions, all at a special meeting to
consider the Transaction.
The completion of the Transaction will also be subject to applicable
regulatory approvals and closing conditions customary in transactions of
this nature. The Arrangement Agreement provides for customary
deal-protection provisions, including a non-solicitation covenant on the
part of Klondex and a right for Hecla to match any superior proposal.
The Arrangement Agreement includes a termination fee of US$21 million,
payable by Klondex or Hecla, under certain circumstances.
It is anticipated that the special meeting of Klondex shareholders to
consider the Transaction will be held in June 2018. The Transaction is
expected to close in the second quarter of 2018.
No Financing Contingency
Hecla has sufficient cash on hand and available under existing credit
arrangements to finance the cash portion of the consideration for the
Transaction.
Section 3(a)(10) of the United States Securities Act of 1933, as amended
(the Securities Act), exempts from the registration requirements of the
Securities Act the issuance and exchange of securities which have been
approved, after a hearing upon the fairness of the terms and conditions
on which all persons to whom it is proposed the securities will be
issued shall have the right to appear, by any Court expressly authorized
by law to grant such approval. The parties expect this exemption to
apply to Hecla’s issuance of shares in the Transaction and the issuance
of shares of Klondex Canada as a result of the expected Court approval
described below.
Advisors and Counsel
CIBC World Markets Inc. and J.P. Morgan are acting as financial advisors
to Hecla in connection with the Transaction. Cassels Brock & Blackwell
LLP is serving as Canadian counsel and K&L Gates LLP is acting as U.S.
counsel to Hecla.
GMP Securities L.P. and INFOR Financial Inc. are acting as financial
advisors to Klondex. Bennett Jones LLP is serving as Canadian counsel to
the Independent Committee of the Board of Directors of Klondex and
Dorsey & Whitney LLP is acting as U.S. counsel to Klondex.
Conference Call Details
Hecla and Klondex will host a conference call on Monday, March 19, 2018
at 8:30 a.m. Eastern Time to discuss the acquisition. You may join the
conference call by dialing toll-free 1-855-760-8158 or
1-720-634-2922. The participant code is HECLA. Hecla’s live
and archived webcast can be accessed at www.hecla-mining.com
under Investors or via Thomson StreetEvents Network.
ABOUT HECLA
Founded in 1891,Hecla Mining Company (NYSE:HL)
is a leading low-cost U.S. silver producer with operating mines in
Alaska, Idaho and Mexico, and is a growing gold producer with an
operating mine in Quebec, Canada. Hecla also has exploration and
pre-development properties in seven world-class silver and gold mining
districts in the U.S., Canada, and Mexico, and an exploration office and
investments in early-stage silver exploration projects in Canada.
ABOUT KLONDEX
Klondex is a junior-tier gold and silver mining company focused on
exploration, development, and production in a safe, environmentally
responsible, and cost-effective manner. Klondex has 100% interests in
three producing mineral properties: the Fire Creek Mine, the Midas Mine
and ore milling facility, and the Hollister Mine, all of which are
located in the state of Nevada, USA. Klondex also has a 100% interest in
the True North Mine and mill in Manitoba, Canada, and the Aurora Mine
and ore milling facility, located in Nevada, USA.
Important Additional Information About the Transaction and Where to
Find It
This material relates to Hecla’s proposed acquisition (the
“Transaction”) of Klondex. Shares of Hecla’s common stock (the “Hecla
Shares”) issued in connection with the proposed Transaction may be
registered pursuant to a registration statement to be filed with the SEC
or issued pursuant to an available exemption. This information is not a
substitute for any registration statement or any other document that
Hecla may file with the SEC or that it or Klondex may send to their
respective shareholders in connection with the offer and/or issuance of
Hecla Shares. Investors are urged to read any registration statement, if
and when filed, and all other relevant documents that may be filed with
the SEC or with Canadian regulatory authorities as and if they become
available because they will contain important information about the
issuance of Hecla Shares. Documents, if and when filed with the SEC,
will be available free of charge at the SEC’s website (www.sec.gov)
and under Hecla’s profile on the SEDAR website at www.sedar.com.
You may also obtain these documents by contacting Hecla’s Investor
Relations department at Hecla Mining Company; Investor Relations;
1-800-HECLA91 (1-800-432-5291); hmc-info@hecla-mining.com.
This release does not constitute an offer to sell or the solicitation
of an offer to buy any securities.
In connection with the proposed transaction, Klondex will file proxy
soliciting materials with the SEC and/or Canadian regulatory
authorities. The information contained in any such filing may not be
complete and may be updated, amended or changed. SHAREHOLDERS ARE URGED
TO READ SUCH MATERIALS WHEN AVAILABLE AND ANY OTHER RELEVANT MATERIALS
FILED WITH THE SEC AND/OR CANADIAN REGULATORY AUTHORITIES CAREFULLY IN
THEIR ENTIRETY BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH
RESPECT TO THE PROPOSED TRANSACTION BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION AND THE PARTIES THERETO.
Proxy solicitation materials will be mailed to Klondex’s shareholders
seeking their approval of the proposed transaction. Anyone may also
obtain a copy of such materials free of charge once available by
directing a request to: Klondex Mines Ltd., 6110 Plumas Street, Reno, NV
89506, Attention: Investor Relations or, Hecla Mining Company, 6500 N.
Mineral Drive, Suite 200, Coeur d’Alene, ID 83815-9408; Investor
Relations; 1-800-HECLA91 (1-800-432-5291). In addition, any relevant
materials filed with the SEC will be available free of charge at the
SEC’s website at www.sec.govand under Klondex’s profile on the SEDAR website at www.sedar.com.
Interested persons may also access copies of such documentation filed
with the SEC by visiting the Klondex’s website at www.klondexmines.com.
Participants in Solicitation
Hecla, Klondex, their respective directors and certain of their
respective executive officers may be considered participants in the
solicitation of proxies in connection with the proposed transaction.
Information about the directors and executive officers of Hecla is set
forth in its Annual Report on Form 10-K for the year ended December 31,
2017, which was filed with the SEC on February 15, 2018, its proxy
statement for its 2017 annual meeting of shareholders, which was filed
with the SEC on April 10, 2017, and its Current Report on Form 8-K,
which was filed with the SEC on June 1, 2017. These documents may be
obtained free of charge from the SEC’s website at www.sec.gov
and Hecla’s website at www.hecla-mining.com.
Information about the directors and executive officers of Klondex is set
forth in its Annual Report on Form 10-K for the year ended December 31,
2017, which was filed with the SEC on March 15, 2018, its proxy
statement for its 2017 annual and special meeting of shareholders, which
was filed with the SEC on April 11, 2017 and its Current Report on Form
8-K, which was filed with the SEC on May 8, 2017. Other information
regarding the participants in the proxy solicitations and a description
of their direct and indirect interests, by security holdings or
otherwise, will be contained in the Klondex proxy statement and other
relevant materials to be filed with the SEC when they become available.
These documents may be obtained free of charge from the SEC’s website at www.sec.gov
and Klondex’s website at www.klondexmines.com.
Cautionary Statements Regarding Forward Looking Statements
Statements made or information provided in this news release that are
not historical facts are "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 and
"forward-looking information" within the meaning of Canadian securities
laws. Words such as “may”, “will”, “should”, “expects”, “intends”,
“projects”, “believes”, “estimates”, “targets”, “anticipates” and
similar expressions are used to identify these forward-looking
statements. Such forward-looking statements or forward-looking
information include statements or information regarding the completion
of the Transaction; additions to Hecla’s gold production and cash flow;
the accretive nature of the Transaction; the realization of potential
synergies, the impact of the Transaction on Hecla’s financial
flexibility, cash flow, balance sheet and liquidity; and the exploration
potential of Klondex’s land position. The material factors or
assumptions used to develop such forward-looking statements or
forward-looking information include that the Hecla’s plans for
development and production will proceed as expected and will not require
revision as a result of risks or uncertainties, whether known, unknown
or unanticipated, to which the Hecla’s operations are subject.
Forward-looking statements involve a number of risks and uncertainties
that could cause actual results to differ materially from those
projected, anticipated, expected or implied. These risks and
uncertainties include, but are not limited to, metals price volatility,
volatility of metals production and costs, litigation, regulatory and
environmental risks, operating risks, project development risks,
political risks, labor issues, ability to raise financing and
exploration risks and results. Refer to Hecla’s Form 10K and 10-Q
reports for a more detailed discussion of factors that may impact
expected future results Neither Hecla nor Klondex undertakes any
obligation to update forward-looking statements in this news release
other than as may be required by law.
Similarly, please refer to the securities filings of Klondex for further
information concerning risks applicable to it and its forward-looking
information.
Information About Each Company
Information in this news release about Hecla has been provided by,
and is the responsibility of, Hecla. For further information about
Hecla, please refer to Hecla’s SEC filings, including its Annual Report
on Form 10-K filed on February 15, 2018 and its filings with Canadian
securities regulatory authorities under its issuer profile on SEDAR.
Information in this news release about Klondex has been provided by, and
is the responsibility of, Klondex. For further information about
Klondex, please refer to Klondex’s SEC filings, including its Annual
Report on Form 10-K filed on March 15, 2018 and its filings with
Canadian securities regulatory authorities under its issuer profile on
SEDAR.
Qualified Person (QP)
Pursuant to Canadian National Instrument 43-101, Dean McDonald, PhD,
P.Geo., Senior Vice President – Exploration of Hecla Mining Company, who
serves as a Qualified Person under National Instrument 43-101,
supervised the preparation of the scientific and technical information
in this news release as it relates to Hecla.
Pursuant to NI 43-101, Brian Morris, CPG, Senior Vice President –
Exploration of Klondex, who serves as a Qualified Person under NI
43-101, supervised the preparation of the scientific and technical
information in this news release as it relates to Klondex.
View source version on businesswire.com: https://www.businesswire.com/news/home/20180319005446/en/
Hecla:
Mike Westerlund
Vice
President, Investor Relations
800-HECLA91 (800-432-5291)
Investor
Relations
Email: hmc-info@hecla-mining.com
Website:
www.hecla-mining.com
or
Klondex:
Mike
Beckstead
Director, Investor Relations
O: 775-284-5757 | M:
406-290-4165
Email: mbeckstead@klondexmines.com
Website:
www.klondexmines.com
Source: Hecla Mining Company