M&A activity continues within the Canadian resource sector, with the latest transaction occurring between Alexco Resources (TSX: AXU), and Hecla Mining (NYSE: HL). The transaction will see the largest silver producer in the US acquire one of the most promising silver properties in Canada.
The transaction will see Alexco shareholders receive 0.116 shares of Hecla for each share held, implying a premium of 23% and a price per share of US$0.47 based on the current five day average prices of the two firms. In the interim, Hecla is to take a 9.9% stake in Alexco until the transaction closes, as well as provide interim financing for working capital for further development of Alexco’s flagship Keno Hill property.
“As the United States’ largest silver producer, producing over 40% of silver mined in the U.S., it is natural that Hecla acquires Keno Hill which could also make Hecla Canada’s largest silver producer. Silver is a critical element to decarbonize the economy and the need for domestic supply is growing. Acquiring Keno Hill allows Hecla to further meet this need with a secure high-grade silver development and exploration project that has a small environmental footprint,” commented Hecla CEO Phillips S Baker Jr.
Ahead of the transaction closing, a US$30 million secured loan is to be provided to Alexco, in addition to the firm purchasing 9.0 million shares at $0.50 per share, for proceeds of $4.5 million.
As a part of the transaction, Hecla will acquire the silver streaming interest at Keno Hill held by Wheaton Precious Metals. The company is to pay US$135 million to the company in Hecla shares, which is conditional upon the completion of the transaction with Alexco. Upon the closing of the arrangements, Wheaton is expected to own a 5.0% stake in Hecla, while Alexco shareholders will own 3.0%.
The transaction is subject to shareholder approval by Alexco. A termination fee of US$10 million is also applicable. The transaction is currently expected to close in September 2022.
The transaction follows the news last month that Alexco was forced to suspend milling operations as a result of a lack of funding, while focusing its efforts on underground development.
Alexco Resources last traded at $0.55 on the TSX.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
