Hecla Mining Company has reached a deal to acquire all outstanding shares in Klondex Mines, which owns Fire Creek, Midas and Hollister mines, for total consideration of $462m.
The deal will see Hecla offer shares in Hecla common stock and the newly formed company Klondex Canada in exchange for the acquisition, in addition to cash.
The transaction is anticipated to allow the company to acquire seven land positions with extensive exploration, development and production potential in Nevada.
Hecla expects the acquisition to expand its production base with its annual gold output set to increase by 27%, or 162,000 ounces (oz).
Klondex shareholders will have the option to receive either $2.47 in cash or 0.6272 of a Hecla share for each share currently held.
Hecla Mining Company president and CEO Phillips Baker said: “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 US, 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 balances so our shareholders can benefit from the approximately 162,000 gold equivalent ounces a year of production, while minimising dilution.”
The acquired land position covers an area of 284.89km² and offers potential for discoveries and growing the resource base.
The company currently intends to commence exploration programmes at Fire Creek and the prospective Hatter Graben discovery at Hollister.
Klondex Mines president and CEO Paul Huet said: “This transaction is an excellent outcome for Klondex and our shareholders, delivering premium value and a clear pathway to develop and optimise the Nevada mining assets and create further value in the future.”
The company’s Canadian assets are expected to be spun out to the company’s existing shareholders.
Klondex Canada will hold the company’s Canadian assets, including the True North and Bison Gold Resources properties.
Hecla and Klondex shareholders will own around 83.8% and 16.2% of Hecla’s outstanding common stock respectively once the transaction is closed.
The completion of the deal is subject to shareholder and regulatory approvals, as well as certain closing conditions.