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Shares of Hecla Mining Company (NYSE:HL) and its takeover target Dolly Varden Silver Corporation (CVE:DV) both fell on Monday after the US silver producer withdrew its bid for the Vancouver-based explorer.
Hecla, which operates mine in Alaska, Idaho and Mexico, declined 5.1% in New York for a market valuation of $2.2 billion after the company expressed its “disappointment with Dolly Varden’s expensive debt financing followed by its planned dilutive private placement that effectively acts as a poison pill, raising the cost of acquiring Dolly Varden by more than 50%.”
Despite withdrawing our bid, Hecla will invest to maintain our 15.7% interest in Dolly Varden because of our long term commitment to the Dolly Varden property. We are disappointed that the Securities Commissions’ decisions take away the ability of existing shareholders to choose our premium bid, effectively forcing their continued ownership of Dolly Varden,” said Phillips S. Baker, Jr., Hecla’s President and CEO.
Hecla stock is up three-fold in 2016 on the back of a soaring silver price and is progressing with an expansion of its flagship Lucky Friday underground silver, lead and zinc mine in Idaho. Hecla expects to produce 13.5–14 million ounces of silver this year.
Source: Dolly Varden
Micro-cap Dolly Varden, worth $11 million in Toronto, fell 13% on the TSX Venture Exchange, but is still well above levels it enjoyed before Hecla launched its bid at a 97% premium to the prevailing share price at the end of June. Dolly Varden’s market value has soared 278% this year. The company wholly owns a 9,4000 hectare silver property in BC’s northwest with four historic mines.
Vancouver-based Dolly Varden said the Ontario Securities Commission agreed with Dolly Varden’s contention that “Hecla’s unsolicited bid for Dolly Varden was an insider bid and therefore Hecla must obtain and disseminate to the Company’s shareholders (at its own expense) an independent formal valuation.”
“We now look forward to completing our year-long transformation of Dolly Varden into a well-funded junior exploration company with an exciting project. By eliminating our debt and properly funding our company, we will be able to re-focus on further exploration and expansion of our prospective Dolly Varden silver property. The value of our company should compare favorably with our debt-free peers with funded field programs,” said Rosie Moore, Director and Interim President and CEO.
For more on the implications of the ruling and the issues raised by the hearings of the Ontario and BC Securities Commission click here.
