A small mining company that operates in northern Idaho is urging its shareholders to turn down an unsolicited buyout offer from Hecla Mining Co. of Coeur d’Alene, saying the $110 million bid is “opportunistically timed” to take advantage of record-low stock values in the silver industry.
“The Hecla offer is simply not compelling enough for us to abandon our strategic plan going forward,” Gordon Pridham, chairman and interim CEO of U.S. Silver Corp., said in a statement.
Instead, the board of Toronto-based U.S. Silver wants shareholders to back a previously announced merger with another Canadian firm, RX Gold & Silver.
The jockeying for control of assets comes amid renewed interest in Idaho’s Silver Valley, where both Hecla and U.S. Silver have operating silver mines and extensive land holdings.
U.S. Silver operates four silver-lead-copper mines in Shoshone County and has hired workers to step up production, mine development and exploration in response to high silver prices. Silver now trades around $27 per ounce.
Hecla is the largest silver producer in the United States and oldest precious metals mining company in North America. Hecla has two operating mines and exploration properties in the U.S. and Mexico, including the Lucky Friday Mine near Mullan and the Greens Creek mine in Alaska.
Hecla expects to reopen the Lucky Friday Mine in early 2013. The underground silver mine closed in January after a federal inspection that uncovered maintenance problems in the primary shaft used to transport workers and ore. The inspection was part of a special review triggered by two unrelated fatal accidents at the Lucky Friday last year.
Pridham said Hecla’s cash offer of $1.80 per share Canadian doesn’t reflect the value of U.S. Silver’s holdings, which include the Galena Mine in Silverton and several historic silver producers, including the Coeur and Calladay properties.
U.S. Silver’s shareholders are scheduled to vote Tuesday, Aug. 7 on the merger with RX Gold & Silver, which owns a Montana gold mine. If that merger goes through, U.S. Silver’s shareholders would get 70 percent ownership in a new company, U.S. Silver & Gold.
Hecla officials, meanwhile, say their cash offer represents a better deal for shareholders, offering a premium over the stock’s recent trading price of $1.43 per share.
Hecla approached U.S. Silver’s management team with a “friendly” merger offer July 23, according to a Hecla news release. When the parties failed to reach an agreement, Hecla took its offer directly to U.S. Silver’s shareholders, offering cash for their shares.
“It’s a good strategic fit for Hecla,” said Jim Sabela, Hecla’s chief financial officer. “We are a silver company, and no one knows the Silver Valley better than Hecla Mining Co.”
Hecla’s offer will be withdrawn if the merger with RX Gold & Silver goes through.
Hecla’s aggressive bid to acquire U.S. Silver’s assets doesn’t surprise Earl Bennett, professor emeritus at the University of Idaho’s School of Mines. There’s a renewed excitement about mining properties in the Silver Valley, he said.
“Hecla has a (relatively) new president” in Phillips Baker Jr., Bennett said. “Because of metals prices, they’ve been very successful over the past few years in spite of having to close the Lucky Friday for a year. They’ve got good cash reserves … and they’ve been very aggressive in exploration.”
When the Lucky Friday reopens, Hecla will restart work on a $200 million project to deepen the mine and go after richer ore. The company is also evaluating the possibility of reopening the historic Star Mine.
U.S. Silver had hoped to use the merger with RX Gold to strengthen its balance sheet and management team.
U.S. Silver has 345 employees in the Silver Valley. In addition to the Galena Mine, it owns the closed Coeur Mine, which company officials said will reopen by the end of the year.
The Idaho Statesman contributed.
