Why Hecla Mining's Shares Dropped
Mar 4th 2013 5:08PM
Updated Mar 4th 2013 5:12PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Hecla Mining fell as much as 13% today after the company announced an acquisition.
So what: Hecla announced that it's buying Aurizon Mines for $759 million. Aurizon investors will get either C$4.75 per share in cash or 0.9953 shares of Hecla's stock. After the drop, it looks like investors think the cash offer will win out and Hecla will have to add debt to pay for the acquisition.
Now what: If the stock doesn't recover before the acquisition's close, Hecla will need cash, and the Bank of Nova Scotia has committed to $500 million in financing. This would be a big addition of debt, given the company's barely profitable year in 2012. I don't see this acquisition as a reason to buy the stock, and given the amount of debt the company will probably have to add, I would be a seller given the volatility in gold right now.
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