Mining News: Northern Neighbors: Dolly Varden repays Hecla, considers takeover bid

Dolly Varden Silver Corp. July 4 said a special committee of independent directors has been appointed to review and evaluate an unsolicited takeover bid by Hecla Mining Co. On June 27, Hecla announced plans to acquire all of the shares of Dolly Varden Silver that it does not already own at C69 cents per share, or roughly C$12 million to acquire full ownership of the junior with assets in northwestern British Columbia. The Dolly Varden special committee, comprised of Thomas Wharton and Donald Birak, will consider Hecla’s offer and investigate all possible alternatives, including any competing offers the company may receive. In the meantime, Dolly Varden Silver has repaid a senior secured loan from Hecla Canada and Robert Gipson with proceeds from a secured short-term loan from Sprott Private Resource Lending, an additional Sprott affiliate and The K2 Principal Fund. The Sprott-K2 loan provided C$2.5 million in funds to Dolly Varden. A total of C$2.07 million of the Sprott-K2 proceeds was paid to Hecla, as agent to the Hecla-Gipson loan, to discharge all principal and accrued interest on that senior secured loan. The Sprott-K2 loan bears interest at an annual rate of four percent, has a term of six months, and can be prepaid at any time with no penalty except payment of interest for the full term. A total of 2.5 million purchase warrants were issued to Sprott and K2 in connection with the loan. Each warrant entitles the holder to purchase one share in the capital of Dolly Varden for a period of two years at a price of C38.5 cents per share. Hecla had previously notified the TSX Venture Exchange of its concerns and requested that the exchange not approve the issuance of warrants to Dolly Varden’s proposed lenders. Since that time, the exercise price of the warrants have been increased 40 percent from the original C27.5 cents per share exercise of warrants Dolly Varden originally offered the lenders. Rosie Moore, interim president and CEO of Dolly Varden, said, “Again, we wish to thank Hecla Canada and Robert L. Gipson for their support during a key time in the company’s transformation. We are reviewing all options and remain open to discussing further business opportunities. Our goal is for the company to become debt free and to grow the potential of the Dolly Varden silver property.”

-Shane Lasley