Further to the letter of intent signed in February, Hecla Mining Company (NYSE: HL) has now entered a definitive agreement to acquire ATAC Resources (TSXV: ATC) (OTCQB: ATADF) for an implied value of $39 million. The consideration is payable in shares of Hecla and shares of a new spin-out company named Cascadia Minerals, in which Hecla plans to invest $2 million for a 19.99% interest.
It is expected that ATAC shareholders, for each share held, will receive 0.0166 of a Hecla share and 0.1 of a Cascadia common share. As disclosed previously, the Hecla share portion would value ATAC at $0.14 per share, for a total value of $31 million. The Cascadia shares would add $0.036 per share to the value, for another $8 million in implied value.
The consideration in Hecla shares represents a premium of 66% based on ATAC’s 20-day volume-weighted average price as of the last trading day preceding announcement of the LOI, or a 109% premium when including the value of Cascadia shares.
Upon completion, Hecla would gain ownership of the Rackla and Connaught projects located in Canada’s Yukon Territory, where is developing one of the world's largest high-grade silver mines in the Keno Hill district.
“The acquisition of ATAC reflects the continued execution of our strategy of acquiring significant land packages in highly prospective and tier one mining jurisdictions,” Hecla CEO Phillips S. Baker Jr. said in a news release. “The Rackla and Connaught projects would further consolidate our position in Yukon after our strategic acquisition of Keno Hill, which we are developing, and is expected to be the largest and the highest grade primary silver mine in Canada."
Hecla is the largest silver producer in the US, and is projected to also be the largest in Canada with the Keno Hill silver property, which has 49.5 million oz. of silver in proven and probable reserves. Between 1913 and 1989, Keno Hill produced over 200 million oz. of silver, making it the second-largest historical silver producer in Canada.
With the Rackla property in Yukon, Hecla would be carrying on the 16 years of work by ATAC on two separate projects (Rau and Nadaleen), each with a distinct type of gold occurrences. The Rau project hosts the advanced-stage Tiger gold deposit containing measured and indicated resources of 4.5 million tonnes grading 3.19 g/t for 464,000 oz. The Nadaleen project hosts a group of Carlins-style targets, the most advanced being Osiris, with an indicated resource of 5.5 million tonnes grading at 4.12 g/t for 732,000 oz. and inferred resource of 9.4 million tonnes grading 3.47 g/t for 1 million oz.
The Connaught property, another precious metals asset being added to Hecla’s portfolio, is located 65 km west of Dawson City. The project has historically been explored as a high-grade silver-lead-zinc-copper-gold vein prospect modelled after mines in the Keno Hill district.
ATAC's remaining copper-focused projects will be held by the new exploration company Cascadia, subject to a right of first refusal to Hecla. These include the Catch, PIL, Rosy and Idaho Creek projects. Cascadia's initial focus will be the Catch property in central Yukon and the PIL property in northern British Columbia.
Shares of ATAC Resources shot up 19.2% by 12:45 p.m. ET Thursday. The company's market capitalization stood at $33.1 million.