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Hecla won’t buy U.S. Silver

U.S. Silver Corp. won’t be sold to Hecla Mining Company.

U.S. Silver shareholders on Aug. 7 approved a plan to combine operations with RX Gold & Silver Inc. That means U.S. Silver won’t be acquired by Coeur d’Alene-based Hecla, which in late July made a $108.6 million cash bid that hinged on U.S. Silver shareholders rejecting the RX transaction. U.S. Silver owns the large Galena mine in northern Idaho.

Hecla terminated its offer immediately after U.S. Silver shareholders approved a plan for U.S. Silver and RX Gold & Silver, both based in Toronto,  to form a new company 70 percent owned by U.S. Silver shareholders.

Hecla CEO Phil Baker, in the company’s second quarter earnings conference call with analysts, said the offer for U.S. Silver showed Hecla’s belief in its mining and exploration abilities, and in the fundamental value of silver. Hecla will continue to pursue acquisition opportunities, he said.

“Most of our clients (U.S. Silver shareholders) seemed to be more in favor of the Hecla buyout,” said Ron Nicklas, president of Coeur d’Alene-based Pennaluna & Co., which trades mining stocks. “I was surprised the shareholders went for the RX Gold merger, and the share price is indicating that.”

U.S. Silver stock fell 15 cents to $1.55 in midday trading Aug. 7.

Most Pennaluna clients who own U.S. Silver and supported the proposed Hecla purchase liked the prospect of having U.S. Silver Idaho assets under the control of an Idaho-based company, Nicklas said. A few supported the RX deal as having good potential if silver prices increase, he said.

Hecla probably won’t be hurt by the failed bid, Nicklas said.

“I wish they would’ve started earlier,” Nicklas said. “They ran out of time getting the story out.”

Hecla announced its $1.80-per-share offer ($1.78 in U.S. dollars) for U.S. Silver July 25. The takeover bid was hostile because talks between the companies broke down two days earlier.

U.S. Silver on July 30 announced its board unanimously recommended shareholders reject Hecla’s offer. U.S. Silver said the offer undervalued U.S. Silver assets and growth opportunities, did not compensate shareholders enough for benefits Hecla will get, and wasn’t compelling given low stock values in the industry.

Hecla had said the RX transaction involved taking on debt as well as assets of questionable value, whereas the Hecla offer delivered immediate and certain value as well as liquidity.

Baker, in Hecla’s second-quarter conference call, said the company will take an expense against earnings in the third quarter related to the U.S. Silver offer. The amount is not yet determined, he said.

About Brad Carlson