Financing is ‘highly dilutive,’ according to letter to shareholders
By Devika Patel
Knoxville, Tenn., July 8 – Dolly Varden Silver Corp. investor Hecla Mining Co. objects to the company’s planned C$6 million private placement of stock. The deal priced on July 5.
Hecla, based in Coeur d'Alene, Idaho, announced in an 8-K filing with the Securities and Exchange Commission that it is starting a takeover bid for all of the company’s outstanding shares not owned by the investor and its affiliates for C$0.69 per share in cash.
In a letter to Dolly Varden shareholders, Hecla stated that the “dilutive private placement ... is not in the interest of all shareholders. Hecla believes that the private placement is an attempt to obstruct Hecla’s premium cash offer. Hecla has asked Dolly Varden’s board of directors to support its offer and refrain from obstructionist tactics.”
The investor also said that it won’t proceed with the takeover bid if the private placement is completed, and it is also applying to the relevant regulatory authorities for an order to stop the placement on the grounds that it is an improper defensive tactic. Hecla stated that the placement could increase the number of Dolly Varden shares “by up to 43% and therefore is highly dilutive. Worse, the deal includes an over-allotment option that Dolly Varden has not publicly disclosed, and that would be even more dilutive, increasing the total number of shares issued by more than 57%.”
Hecla also objected to the broker shares, which are being issued at an average price of C$0.60 per share, which is 15% lower than Hecla’sC$0.69 cash per share bid.
As previously reported, the company said it plans to sell 2,142,857 flow-through common shares at C$0.70 apiece and 7,258,064 common shares at C$0.62 per share. The prices per share are a 9.38% premium and a 3.13% discount, respectively, to the July 4 closing share price of C$0.64.
Proceeds will be used to repay a C$2.5 million loan, eliminating all company debt, for exploration of the Dolly Varden silver property and for working capital purposes.
Based in Vancouver, B.C., Dolly Varden is a resource exploration company focused on the development of the Dolly Varden Silver Mines property in northwestern British Columbia.
| Issuer: | Dolly Varden Silver Corp.
|
| Issue: | Flow-through common shares, common shares
|
| Amount: | C$6 million
|
| Warrants: | No
|
| Underwriters: | Raymond James Ltd. and Paradigm Capital Inc.
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| Pricing date: | July 5
|
| Settlement date: | June 2
|
| Stock symbol: | TSX Venture: DV
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| Stock price: | C$0.64 at close July 4
|
| Market capitalization: | C$11.51 million
|
|
|
| Flow-through stock
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| Amount: | C$1.5 million
|
| Shares: | 2,142,857
|
| Price: | C$0.70
|
|
|
| Common stock
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| Amount: | C$4.5 million
|
| Shares: | 7,258,064
|
| Price: | C$0.62
|
|
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