Hecla Mining Company ( NYSE:HL) (Hecla or the Company) urges Aurizon shareholders to continue withdrawing shares tendered to Alamos’ inadequate bid and not to tender any new shares to the bid. Aurizon Mines Ltd. (Aurizon) announced yesterday that the British Columbia Securities Commission (the Commission) has cease traded Aurizon’s shareholder rights plan which means that today is the day shareholders can show Alamos their bid is inferior. All currencies are in CAD$ unless otherwise noted.
“The decision shareholders have to make is whether they want to tender into an Alamos bid that is $0.29 per share less than the Hecla deal and $0.14 less than Aurizon’s current share price,” said Phillips S Baker, Jr., Hecla’s President and CEO. “Clearly the alternative that puts the most value into Aurizon shareholders’ pockets is to hold the shares and get the premium valuation from Hecla. Alternatively, given that Alamos’ bid has traded to such a low point, shareholders can sell the Aurizon shares in the open market and receive additional value over the inferior bid of Alamos.”
The Commission’s decision highlights the need for Aurizon shareholders to withdraw any existing tendered shares and to not make any new deposits in order to secure the highest value for their shares. The Commission did not grant Alamos’ request to remove the $27.2 million termination fee payable to Hecla in the event that any person acquires more than 33 1/3% of Aurizon’s outstanding shares.
It is now up to the shareholders of Aurizon to show that they are not intimidated by Alamos’ coercive tactics and ensure that the financially superior Hecla Arrangement prevails. This can only happen if less than 17% of Aurizon’s outstanding shares are deposited to the Alamos bid. Counsel for Alamos disclosed in the hearing before the Commission on March 15, 2013 that only 6.5% of Aurizon’s shares were tendered to its offer as of that date.Hecla strongly urges Aurizon’s shareholders NOT to deposit their shares to the coercive Alamos bid and to withdraw any shares they have deposited for the following reasons:
- $0.29 per share premium – based on the closing share prices of Hecla and Alamos on March 18, 2013, and assuming that all shareholders elected to receive either cash or shares, the Hecla Arrangement will provide total consideration of $4.60 per Aurizon share, (including cash consideration of $3.11 per Aurizon share), which represents a $0.29 premium to the total consideration of the coercive bid by Alamos of $4.31 per share (including cash consideration of $2.04 per Aurizon share).
- 68% more cash consideration – the Hecla arrangement offers Aurizon shareholders greater value certainty through a maximum $513.6 million in cash, which is 68% higher than the maximum amount of cash offered by Alamos ($305 million maximum cash).
- A combination of Hecla and Aurizon offers shareholders the opportunity to participate in a North America-focused, US$1.64 billion precious metals company with excellent operating assets, and exploration potential:
- Operating mines – the combined company will own three low-cost, long-life operating mines with further growth and exploration opportunities at present operations.
- Superb, proven mining jurisdictions – with a focus in North America, a combination of Hecla and Aurizon offers shareholders the certainty of proven operations in stable, established mining-friendly jurisdictions.
- Complementary skills and mining experience – Hecla has been operating underground mines for over 120 years and brings experience and depth to the Aurizon team to build on the success to date at Casa Berardi. In contrast, Alamos does not currently operate any underground mines. Given the vast majority of the value of Aurizon is held in an underground mine with significant in-mine development programs underway to extend mine-life, an experienced underground miner like Hecla is far better positioned to enhance its value.
- In addition, the combined company will have a prudent level of debt that should lower its overall cost of capital. Hecla has structured a flexible financing package, having negotiated a six-month time period after the close of the transaction before any hedging requirements for a portion of its gold production would come into effect. Hecla is actively reviewing the numerous fixed income financing alternatives available to it, which could replace the fixed-term loan portion of the financing package, thereby eliminating the requirement to hedge a portion of its gold production.
- Support for the Alamos bid has significantly declined since the Hecla deal was announced. Counsel for Alamos disclosed in the hearing before the Commission on March 15, 2013 that only 6.5% of Aurizon’s shares were tendered to its offer as of that date. This is in stark contrast to the 13% of Aurizon’s shares that were tendered on March 5, 2013, and indicates that half of the shares deposited to the Alamos offer on that date have subsequently been withdrawn.
- Alamos has consistently claimed significant support for their bid by unnamed Aurizon shareholders. Alamos continued that claim before the Commission but only supplied one affidavit of support from a fund manager who had sold all of the Aurizon shares over which he had control to Alamos on January 11, 2013. Whatever supposed support Alamos has for their tender, it is not reflected in letters of support to the Commission or in shares being tendered. Alamos’ unsupported and nebulous claims serve only to confuse and bully Aurizon shareholders into tendering.
- The implied value of Alamos’ bid is at a 3.3% discount to the trading price of Aurizon, based on closing prices on March 18, 2013.