Mining News: Northern Neighbors: Dolly Varden rejects Skeena merger bid

Skeena Resources Ltd. Aug. 27 reported that Dolly Varden Silver Corp. has turned down offers for a merger. Skeena confirmed that it recently proposed to acquire all of the shares of Dolly Varden in an exchange valued at roughly C$4.2 million. Under the proposal, each Dolly Varden share would be exchanged for 2.763 Skeena shares, which values each Dolly Varden Share at about C22.1 cents, representing a premium of 50.9 percent to the 10-day volume weighted average price of both companies’ shares. Skeena said it considers a counter-offer made by Dolly Varden unrealistic. Skeena had made a separate offer in July that Dolly Varden let expire. Skeena said it is discontinuing its current efforts to combine with Dolly Varden. Skeena believes that there are meaningful synergies that could result from the combination of junior exploration companies with resources in British Columbia, including the reduction in duplicative overhead costs. Unlike many junior exploration companies, Skeena has been able to raise funds in the current difficult capital markets. Skeena remains willing to consider any reasonable proposal from Dolly Varden and to work with the board of directors and management to negotiate a business combination transaction that would benefit the shareholders of both companies.

In a Sept. 1 response, Dolly Varden said Skeena’s offer did not reflect the value of the maiden resource for Dolly Varden, which was published just hours before the merger offer was delivered. “The timing of the Skeena offer was highly opportunistic, given that it was made less than nine hours after the company publicly disclosed its resource estimate,” Dolly Varden contended in its press release. “The company’s board viewed the Skeena offer as an attempt to exploit the lower market price of Dolly Varden’s shares before the market could fully consider and reflect the resource estimate issued earlier that same day.” Dolly Varden argues that Skeena’s offer would have been highly dilutive to shareholders based on the roughly 42.6 million oz of silver in the maiden resource, compared with the non-NI 43-101-compliant 18.9 million silver-equivalent oz (243,600 oz gold) in the resource Skeena has on its books. Dolly Varden said it expects that an alternative superior to the Skeena offer will emerge.

–Shane Lasley