Mining News: Northern Neighbors: Hecla withdraws Dolly Varden takeover bid
Dolly Varden Silver Corp. July 25 reported that the British Columbia Securities Commission and the Ontario Securities Commission denied a request by Hecla Mining Company to stop Dolly Varden from completing a previously announced private placement financing. Hecla, which owned roughly 19.8 percent of Dolly Varden’s shares on a partially diluted basis, has argued that the financing would be destructive to the junior’s share value. In late June, Hecla made a bid to buy all of the outstanding Dolly Varden shares it does not already own in a deal valued at roughly C$12 million. The two commissions, however, agreed with Dolly Varden that Hecla’s unsolicited offer was an insider bid, and therefore Hecla must obtain and disseminate to Dolly Varden shareholders an independent formal valuation. As a result of the commissions’ rulings, Hecla withdrew its bid. “We are disappointed 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 percent,” said Hecla President and CEO Phillips Baker, Jr. On July 26, Dolly Varden closed the C$7.2 million financing, which included the sale of 9,115,861 shares at C62 cents each and up to 2,142,857 flow-through shares at C70 cents apiece. Some of the proceeds will be used to repay a C$2.5 million short-term loan from Sprott Private Resource Lending, an additional Sprott affiliate and The K2 Principal Fund. Dolly Varden said it will apply most of the balance of the proceeds for exploration at its Dolly Varden silver property in northwestern British Columbia. “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,” explained Rosie Moore, interim President and CEO, Dolly Varden. “Once Dolly Varden is in receipt of the formal valuation, it will be able to fully evaluate Hecla’s offer. We will then be in a position to ensure that our shareholders will receive meaningful advice and information upon which to make their decision to tender to a bid, should one go forward.” To maintain its pro rata interest in Dolly Varden, Hecla subscribed to 1,857,796 of the non-flow-through shares of the financing and purchased another 101,762 warrants at C43 cents. Each Warrant will entitle Hecla to acquire an additional Dolly Varden share at C70 cents for a period of two years. “Despite withdrawing our bid, Hecla will invest to maintain our 15.7 percent interest in Dolly Varden because of our long term commitment to the Dolly Varden property,” explained Baker. The known Dolly Varden deposits exhibit both volcanogenic massive sulfide (Eskay-like) and epithermal (Brucejack-like) mineralization styles. In August 2015, Dolly Varden published a maiden indicated resource of 31.8 million ounces of silver contained within 3.07 million metric tons of material averaging 321.6 grams per metric ton silver for the Dolly Varden, North Star, Torbrit, and Wolf deposits at its Dolly Varden property.
-Shane Lasley
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