* Hecla says the deal will expand gold production
* Offer price of C$4.75/shr is at 9 pct premium to Aurizon's
* Combined company expected to have market value of about
* Deal likely to close in second quarter of 2013
* Alamos says will not raise offer for Aurizon Mines
* Hecla shares rise 1 pct after market; Aurizon closes up 3
(Adds comments from Alamos statement, updates share movement)
By Bhaswati Mukhopadhyay
March 4 U.S. silver miner Hecla Mining Co
agreed to buy Aurizon Mines Ltd for about C$796
million ($774 million) to ramp up its gold production, topping
an unsuccessful bid by the Canadian company's largest
The deal will give Hecla control of Aurizon's Casa Berardi
mine in Quebec, expected to add 125,000-130,000 ounces of gold
"We are focusing on growing silver production but with the
dearth of quality silver projects and mines we continue to
invest in gold projects," Hecla Chief Executive Phillips Baker
said on a conference call.
"We have taken this transaction to expand gold production."
Hecla has been producing gold for more than 30 years.
Hecla, the second-largest U.S. silver miner by output,
operates two silver mines -- Greens Creek mine in Alaska and
Lucky Friday mine in Idaho -- and has exploration and
pre-development properties in the United States and Mexico.
Hecla's total gold production was 55,496 ounces of gold in
the year ended Dec. 31, 2012.
Baker said Casa Berardi has been on Hecla's radar since 2006
when Aurizon was developing the underground infrastructure to
mine the ore body. He said the Casa Berardi mine has the same
characteristics as Lucky Friday and Greens Creek.
"There is a huge amount of parallels between the two
companies," Baker said in an interview with Reuters on the
sidelines of the PDAC mining convention in Toronto.
"You are talking about companies that are both low volume,
high-value underground mines. The mining techniques that are
used are very similar, the expertise that is needed is very
similar and so there's a lot of opportunities to move both
companies' assets forward in a more efficient, better manner."
Aurizon in January rejected an unsolicited takeover offer of
C$4.65 per share from Alamos Gold Inc, which already
owns more than 16 percent of the company. Alamos's offer expires
on March 5.
Alamos, the largest single shareholder in Aurizon, said it
would not raise its offer and encouraged Aurizon's shareholders
to continue tendering their shares until the deadline.
"The company that would be created by the combination of
Alamos and Aurizon represents far greater value than the
highly-leveraged, hedged, debt-laden, financially constrained
company proposed by the Aurizon board through the Hecla merger,"
Alamos Chief Executive John McCluskey said in a statement late
Hecla shares were up 1 percent at $4.10 after the bell. They
closed at $4.07 on the New York Stock Exchange. Aurizon's stock,
which has gained 28 percent since the Alamos offer in January,
closed up 3 percent at C$4.49 on the Toronto Stock Exchange.
Alamos shares closed about 1 percent higher at C$14.24 on
the Toronto Stock Exchange on Monday.
WHITE KNIGHT OFFER
Hecla's C$4.75-per-share offer to acquire Aurizon represents
a 9 percent premium to Aurizon's Friday close of C$4.35 on the
Toronto Stock Exchange.
"It is a white knight offer. The advantage for Hecla is that
it is a friendly offer. It is a superior offer on a cash basis
-- $514 million versus Alamos's $305 million maximum cash
component. In this market, I suppose, the more the cash the more
certainty of the offer," analyst Steven Butler of Canaccord
Aurizon said last month it was in talks with a number of
"Given Hecla's premium offer as well as cash consideration,
break fee and Hecla's right to match, we don't believe Alamos
will make a counter-offer for Aurizon," analyst Dan Rollins of
RBC Capital Markets said.
The agreement gives Hecla the right to match any competing
offer and requires Aurizon to pay a termination fee of C$27.2
Thomson Reuters StarMine's intrinsic valuation suggests
Aurizon's stock should be trading at C$3.34, compared with the
offer price of C$4.75 and Friday's closing price of C$4.35.
StarMine's model takes into account analyst estimates for
growth, usually over five years, and then models the typical
growth trajectory of companies over a longer period of time.
Hecla said the combined company is expected to have a market
capitalization of about $1.64 billion and will have 150 million
ounces of silver reserves and 2.21 million ounces of gold
Under the deal terms, each holder of Aurizon may elect to
receive either C$4.75 in cash or 0.9953 of a Hecla share.
The transaction, expected to close in the second quarter of
2013, will be fully financed and will not require the approval
of Hecla shareholders.
Hecla, which has been mining precious metals for over 120
years, said it has received a commitment for a $500 million
financing from the Bank of Nova Scotia.
BofA Merrill Lynch was financial adviser to Hecla, while
Cassels Brock & Blackwell LLP was its Canadian counsel.
($1 = 1.0280 Canadian dollars)
(Additional reporting by Julie Gordon in Toronto and Garima
Goel in Bangalore; Editing by Supriya Kurane, Roshni Menon)