July 27, 2012 in Idaho

U.S. Silver mulls options

Board weighing offers from two companies
By The Spokesman-Review
 
Mining in Idaho

Hecla and U.S. Silver own the two largest mines in Idaho’s Silver Valley – the Lucky Friday and the Galena, respectively. Both companies also have large land holdings in the Coeur d’Alene District, where they’re working to reopen historic silver properties.

U.S. Silver Corp.’s board of directors will review an unsolicited bid from competitor Hecla Mining Co. to gain control of the company by buying up stock directly from U.S. Silver’s shareholders.

U.S. Silver issued the brief announcement Thursday, following Hecla’s surprise bid for the company’s assets through a maneuver sometimes referred to as a hostile takeover. Reuters valued the all-cash bid at about $109 million.

“I don’t think it’s an unfriendly offer,” said Earl Bennett, professor emeritus at the University of Idaho’s School of Mines. “I think U.S. Silver is now kind of scrambling to evaluate what they want to do. They’ve gone from no offers to two big-time offers on their plate.”

U.S. Silver officials said they were reviewing Hecla’s announcement with financial and legal advisers.

U.S. Silver is in the midst of finalizing a merger with a Canadian company, RX Gold & Silver. Shareholders are scheduled to vote on Aug. 7 on that proposal.

Hecla approached U.S. Silver with its own merger offer Monday morning. When the two companies failed to reach an agreement, Hecla issued a news release offering to buy up U.S. Silver’s stock from its shareholders for $1.80 per share in Canadian dollars. It’s a cash offer, compared to the merger offer, in which U.S. Silver’s shareholders would acquire 70 percent of the stock in a new company, U.S. Silver & Gold.

Hecla’s aggressive bid to acquire U.S. Silver’s assets doesn’t surprise Bennett. With silver trading at $27 per ounce, there’s a renewed excitement about mining properties in the Silver Valley, he said.

“Hecla has a (relatively) new president,” 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.”

Hecla expects to reopen the Lucky Friday Mine in early 2013. The underground silver mine closed in January following 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.

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, meanwhile, 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.


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