The bid for Dolly Varden Silver Corp (CVE:DV) by Hecla Mining Company(NYSE:HL) has been terminated. In trying to explain the reasons for the termination, Hecla’s President and CEO Phillips S. Baker, Jr. said that Dolly Varden was undertaking a debt financing facility which would somewhat be expensive for U.S. silver producer to acquire the Vancouver-based explorer.
Hecla further expressed its disappointment in Dolly Varden’s planned dilutive private placement which is likely to propel the acquiring cost by more than 50% which Baker describes as a toxic pill. The results of the bid’s withdrawal were not impressive at all with the biggest hit being Hecla’s decline of 5.1%. However, all is not lost for Hecla. The company has expressed its willingness to hold onto its 15.7% interest in investment with Dolly Varden.
How much more will Dolly Varden feel the withdrawal effects?
While it may seem like Hecla is losing in the latest unfolding, Dolly Varden has not been spared either. Its Micro-cap which is worth $11 million is under siege having fallen 13% on the TSX Venture Exchange. Apparently, it was enjoying a good market match before Hecla threw in its bid which was at a 97% premium to the prevailing share price.
Nevertheless, Dolly Varden’s Director and Interim President who doubles up as the CEO has expressed optimism in the company’s ability to gain a year-long transformation to what she refers to a well-funded junior exploration company. Plans are underway to vindicate the current debt which will give it the business mandate to interact with debt-free peers.
What happens Hecla Mining?
It may be a growing gold producer, but it has to go back to the drawing. According to Ontario Securities Commission, Hecla’s bid for Dolly Varden whose market value has soared 278% was an insider bid that was un-called for. It is now up to the company to meet the expenses of carrying out an independent formal valuation for the sake of its shareholders.