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Note 16 - Acquisitions | 12 Months Ended
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Dec. 31, 2018
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 Mines Ltd. ("Klondex") for consideration valued at $2.24 per Klondex share (the "Arrangement"). The acquisition resulted in our 100% ownership of three producing gold mines, along with interests in various gold exploration properties, in northern Nevada. The acquisition is expected to increase our annual gold production, gives us ownership of operating gold mines and identified gold reserves and other mineralized material, and provides access to a large land package with known mineralization. Under the terms of the Arrangement, each holder of Klondex common shares had the option to receive either (i) $2.47 in cash (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 $10.2 million, for total consideration of $414.2 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 preliminary 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 |  |  | 10,155 |
Total consideration |  | $ | 414,248 |
Fair value of net assets acquired: |  |  |  |
Assets: |  |  |  |
Cash |  | $ | 12,874 |
Accounts receivable |  |  | 3,453 |
Inventory - supplies |  |  | 6,564 |
Inventory - finished goods, in-process material and stockpiled ore |  |  | 10,302 |
Other current assets |  |  | 2,583 |
Properties, plants, equipment and mineral interests |  |  | 521,495 |
Non-current investments |  |  | 1,596 |
Non-current restricted cash and investments |  |  | 9,504 |
Total assets |  |  | 568,371 |
Liabilities: |  |  |  |
Accounts payable and accrued liabilities |  |  | 17,270 |
Accrued payroll and related benefits |  |  | 10,352 |
Accrued taxes |  |  | 421 |
Lease liability |  |  | 2,080 |
Debt |  |  | 35,086 |
Asset retirement obligation |  |  | 19,571 |
Deferred tax liability |  |  | 69,343 |
Total liabilities |  |  | 154,123 |
Net assets |  | $ | 414,248 |
The allocation of purchase price above is preliminary, as the valuation of certain components of properties, plants, equipment and mineral interests, along with the related deferred tax balances, are under review and subject to change. In the fourth quarter of 2018, we adjusted the previously-reported allocation of purchase price by recognizing increases to the Properties, plants, equipment and mineral interests and Deferred tax liability balances of $19.2 million. Our results for the year ended December 31, 2018 include sales of products of $31.2 million and a net loss of $26.7 million since the acquisition date related to the operations acquired through the Arrangement. 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 |  |  | 2017 |  |  | 2016 |
Sales |  | $ | 680,261 |  |  | $ | 785,859 |  |  | $ | 834,789 |
Net (loss) income |  |  | (19,574 | ) |  |  | (35,203 | ) |  |  | 73,724 |
(Loss) income applicable to common shareholders |  |  | (20,126 | ) |  |  | (35,755 | ) |  |  | 73,172 |
Basic and diluted (loss) income per common share |  |  | (0.04 | ) |  |  | (0.08 | ) |  |  | 0.16 |
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. Acquisition of Mines Management On September 13, 2016, we completed the acquisition of Mines Management and its subsidiaries through the merger of a wholly owned subsidiary of ours with and into Mines Management, pursuant to which we acquired all of the issued and outstanding common stock of Mines Management Inc. for total consideration of $52.1 million. The acquired entities hold 100% ownership of the Montanore project in northwestern Montana, a significant undeveloped silver and copper deposit which we believe provides long-term production growth potential if permitted and developed. Montanore is approximately 10 miles away from our Rock Creek project acquired through our acquisition of Revett Mining Company, Inc. in June 2015. The consideration was comprised of $4.0 million in cash used to fund Mines Management's operating activities prior to completion of the merger and for settlement of outstanding warrants to purchase shares of Mines Management's common stock, and $48.1 million in Hecla common stock. In the merger, each outstanding common share of Mines Management was exchanged for 0.2218 of a share of our common stock. Mines Management had 36,498,625 outstanding common shares and outstanding options to purchase 963,079 shares of Mines Management common stock, resulting in 8,309,006 new shares of Hecla stock issued as consideration. The value of Hecla stock issued as consideration was based upon the closing price at the time of consummation of $5.79 per share. 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 |  | $ | 4,025 |
Hecla stock issued (8,309,006 shares at $5.79 per share) |  |  | 48,109 |
Total consideration |  | $ | 52,134 |
Fair value of net assets acquired: |  |  |  |
Assets: |  |  |  |
Cash |  | $ | 94 |
Properties, plants, equipment and mineral interests |  |  | 74,320 |
Restricted cash |  |  | 1,185 |
Other assets |  |  | 329 |
Total assets |  |  | 75,928 |
Liabilities: |  |  |  |
Accounts payable and accrued liabilities |  |  | 2,357 |
Deferred tax liability |  |  | 20,313 |
Non-current reclamation liability |  |  | 1,124 |
Total liabilities |  |  | 23,794 |
Net assets |  | $ | 52,134 |
The $74.3 million fair value for Properties, plants, equipment, and mineral interests is comprised of $0.8 million for plant and equipment, $0.1 million for land, and $73.4 million for mineral interests. In September 2016, we issued 181,048 shares of our common stock for payment of approximately $1.0 million in acquisition-related costs, which are included in Acquisition costs on our Consolidated Statements of Operations and Comprehensive Income (Loss) . 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) |  | 2016 |
Sales of products |  | $ | 645,957 |
Net income (loss) |  |  | 68,778 |
Income (loss) applicable to common shareholders |  |  | 68,226 |
Basic and diluted income (loss) per common share |  |  | 0.17 |
The unaudited pro forma financial information includes adjustments to 1 ) eliminate acquisition-related costs totaling $4.7 million for the year ended December 31, 2016 which are non-recurring and 2 ) reflect the issuance of Hecla stock as consideration in the acquisition and for payment of acquisition costs. A net loss by the acquired entities since the acquisition date of $32 thousand is included in our net income reported for the year ended December 31, 2016. Takeover Bid for Dolly Varden Silver Corporation On June 27, 2016, we announced a takeover bid for all of the outstanding shares of Dolly Varden Silver Corporation ("Dolly Varden") not owned by us and our affiliates for cash of CAD$0.69 per share. Dolly Varden owns 100% of the Dolly Varden historic silver property in northwestern British Columbia, Canada. Our wholly owned subsidiary owns 4,478,087 Dolly Varden shares and warrants to purchase 1,351,762 Dolly Varden shares, representing approximately 18.5% of Dolly Varden's shares outstanding on a partially diluted basis. Based on Dolly Varden's outstanding shares and options and warrants to acquire Dolly Varden shares, and excluding shares and warrants held by us and our affiliates, total consideration would have been approximately CAD$13.6 million. In late July 2016, we withdrew the bid due to the failure of a required condition precedent to its consummation.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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