Note 16 - Acquisitions

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Business Combination Disclosure [Text Block]

Note 16:  Acquisitions

Acquisition of Klondex

On July 20, 2018, we acquired all of the issued and outstanding common shares of Klondex for consideration valued at $2.27 per Klondex share (the "Arrangement"). The acquisition resulted in our 100% ownership of three land packages in northern Nevada totaling approximately 110 square miles and containing operating or previously-operating mines with a history of high-grade gold production, along with various other gold properties and two mills. The acquisition has increased our annual gold production, and it has the potential to do so in the future. Under the terms of the Arrangement, each holder of Klondex common shares had the option to receive either (i) $2.47 in cash per Klondex share (the “Cash Alternative”), (ii) 0.6272 of a Hecla share per Klondex share (the “Share Alternative”), or (iii) US$0.8411 in cash and 0.4136 of a Hecla share per Klondex share (the “Combined Alternative”), subject in the case of the Cash Alternative and the Share Alternative to pro-ration based on a maximum cash consideration of $153.2 million and a maximum number of Hecla shares issued of 75,276,176. Klondex shareholders also received shares of a newly formed company which holds the Canadian assets previously owned by Klondex (Havilah Mining Corporation ("Havilah")). Klondex had 180,499,319 issued and outstanding common shares prior to consummation of the Arrangement. An additional 1,549,626 Klondex common shares were issued immediately prior to consummation of the Arrangement related to conversion of in-the-money Klondex options and certain outstanding restricted share units, resulting in a total of 182,048,945 issued and outstanding Klondex common shares at the time of consummation of the Arrangement. In connection with the Arrangement, we also issued an aggregate of 4,136,000 warrants to purchase one share of our common stock (“Hecla Warrants”) to holders of warrants to purchase Klondex common shares. Of the Hecla Warrants, 2,068,000 have an exercise price of $8.02 and expire in April 2032, and 2,068,000 have an exercise price of $1.57 and expire in February 2029. In addition, we settled share-based payment awards held by Klondex directors and employees for cash of $2.0 million. Consideration for the Arrangement was cash of $161.7 million, 75,276,176 shares of our common stock valued at $242.4 million, and issuance of the Hecla Warrants valued at $9.8 million, for total consideration of $413.9 million. The Hecla Warrants were valued using the Black-Scholes model and based on the exercise price and term of the warrants, the price of our common stock at the time of issuance of the warrants, and assumptions for the discount rate and volatility and dividend rate of our common stock. The cash consideration includes $7.0 million for our subscription for common shares of Havilah and $1.5 million for settlement of certain equity compensation instruments.

The following summarizes the allocation of purchase price to the fair value of assets acquired and liabilities assumed as of the date of acquisition (in thousands):

Consideration:
Cash payments	$	161,704
Hecla stock issued (75,276,176 shares at $3.22 per share)		242,389
Hecla warrants issued		9,830
Total consideration	$	413,923
Fair value of net assets acquired:
Assets:
Cash	$	12,874
Accounts receivable		3,453
Inventory - supplies		6,565
Inventory - finished goods, in-process material and stockpiled ore		10,075
Other current assets		2,583
Properties, plants, equipment and mineral interests		510,015
Non-current investments		1,596
Non-current restricted cash and investments		9,504
Total assets		556,665
Liabilities:
Accounts payable and accrued liabilities		17,799
Accrued payroll and related benefits		8,245
Accrued taxes		421
Lease liability		2,080
Debt		35,086
Asset retirement obligation		19,571
Deferred tax liability		59,540
Total liabilities		142,742
Net assets	$	413,923

The allocation of purchase price above was finalized in the second quarter of 2019, with adjustments made in 2019 to the previously-reported preliminary allocation to decrease (i) total consideration, (ii) inventory - finished goods, in-process material and stockpiled ore, (iii) properties, plants, equipment and mineral interests, (iv) accrued payroll and related benefits and (v) deferred tax liability by $0.3 million, $0.2 million, $11.5 million, $2.1 million and $9.8 million, respectively, and increase accounts payable and accrued liabilities by $0.5 million.

The unaudited pro forma financial information below represents the combined results of our operations as if the acquisition had occurred at the beginning of the periods presented. The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have occurred if the acquisition had taken place at the beginning of the periods presented, nor is it indicative of future operating results.

	(unaudited)
	Year Ended December 31,
(in thousands, except per share amounts)	2018
Sales	$	680,261
Net (loss) income		(19,574	)
(Loss) income applicable to common shareholders		(20,126	)
Basic and diluted (loss) income per common share		(0.04	)

The pro forma financial information includes adjustments to eliminate amounts related to the Canadian assets previously owned by Klondex, which were transferred to Havilah and not acquired by us, and costs related to the acquisition.