Big decisions ahead - Coeur d'Alene Press: Business

Big decisions ahead

U.S. Silver board recommends shareholders reject Hecla bid

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Posted: Tuesday, July 31, 2012 12:15 am | Updated: 9:44 am, Fri Nov 16, 2012.

COEUR d'ALENE - There are big decisions directly ahead for shareholders of U.S. Silver Corp., the owner and operator of the Galena Mine and other properties in the Silver Valley.

The company on Monday made it clear what it believes those shareholders should do.

U.S. Silver Corp. announced that its board of directors had recommended that shareholders reject an unsolicited cash offer from Hecla Mining Co., of Coeur d'Alene, to buy up stock.

Hecla is seeking to acquire all of the outstanding common shares of U.S. Silver. That would give Hecla ownership of U.S. Silver's Silver Valley properties, which along with the Galena, includes the Coeur and Caladay mines. Hecla said it would pay $1.80 (Canadian) per share. Reuters put the all-cash offer at approximately $110 million.

The shareholders will have to make their decision in early August prior to their meeting.

"No one knows the Silver Valley better than Hecla," Jim Sabala, Hecla senior vice president and chief financial officer, told The Press Monday. "We feel our deal is better for the shareholders, so we're taking it directly to them."

But U.S. Silver, with corporate offices in Toronto, announced in early June it signed an agreement with RX Gold & Silver Inc. to combine the two companies, resulting in one under the name U.S. Silver and Gold Inc.

Gordon Pridham, chairman and interim CEO of U.S. Silver, said in a statement Monday that the board of directors recommended the RX Gold deal go forward.

"Valuation multiples in the precious metals sector are at or near all-time lows - the Hecla offer is simply not compelling enough for us to abandon our strategic plan going forward," Pridham said.

The board of directors, with assistance of its legal and financial advisers, reviewed Hecla's offer, determining the offer is "inadequate from a financial point of view to U.S. Silver shareholders," according to a company press release.

U.S. Silver said Hecla's offer is "highly opportunistic," timed to take advantage of a recent period during which silver prices, and the share price of companies in the silver industry, have been at a low point.

Additionally, the company believes Hecla's offer doesn't fully reflect the value of U.S. Silver's current assets and organic growth opportunities. It said a plan to fill the company's mills, which currently are operating at approximately 60 percent capacity, is under way. Achievement of that plan would increase production and reduce cash operating costs.

Hecla's president and CEO, Phillips S. Baker Jr., said Hecla's offer "delivers significant, immediate and certain value and liquidity to U.S. Silver shareholders, whereas the proposed RX transaction delivers significant risks, considerable debt and assets of questionable value."

The Hecla offer, announced July 25, is conditional upon the RX Gold deal not proceeding.

Hecla has said that on July 23, it approached the board of directors of U.S. Silver to discuss an offer. Hecla said no agreement was reached through the discussions.

Given the approaching meetings on the proposed RX Gold transaction, Hecla believed it had to go directly to U.S. Silver shareholders.

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