Strong Metals Prices Create Opportunities For Producers

When metals prices carry mining stocks higher, local companies can do more than just enjoy the ride.

Metals rallies present the opportunity for companies to raise cash. Of course, no one can predict when these rallies will occur, and mining companies often can’t wait for metals prices to make a move.

As with any decision in the mining business, raising cash through a stock offering involves risk.

Hecla Mining Co. waited for favorable market conditions to raise cash to finance new mining ventures locally and in Alaska. The timing seemed right in January, and Hecla used a New York brokerage firm to sell more than $22 million in common stock.

Hecla received $8.25 a share, a price higher than what the stock had traded at in previous months since a devestating earnings report last November.

Had Hecla waited for just a few weeks, it could have raised the same amount of cash by selling about 2.5 million shares of common stock instead of the 2.9 million shares it used. That assumes Hecla could have made the deal by selling shares for $9.38, where the stock closed on February 6.

“We thought it worked out very well,” said Vicki Veltkamp, manager of corporate communications, adding that hindsight can play into any decision in the business. “It didn’t negatively affect our stock price, and when the price did go up recently, it made our shareholders happy that they bought into the new shares.”

Timing an offer to buy another company can be even tricker.

Coeur d’Alene Mines sent an offer in January to buy an Australian gold mining company when Coeur’s shares were around $18. During the first part of February, the shares traded as high as $25.13.

The proposed offer gives shareholders of Gasgoyne Gold Mines NL seven shares of Coeur and 60 Australian dollars for every 100 shares of Gasgoyne stock they own.

So Coeur’s recent stock run-up “just makes our offer more valuable,” said Tony Ebersole, spokesman for Coeur. That may make the deal more attractive to Gasgoyne, but it also makes the buyout more expensive for Coeur.

Gasgoyne has until March 18 to respond to the takeover offer.

, DataTimes