Hecla sells non-core assets

Denver — Hecla Mining (HL-N) has agreed to sell its ball clay and kaolin division to Toronto’s Zemex (ZMX-T) for US$68 million.

The Coeur d’Alene, Idaho-based miner will use the proceeds to pay down bank debt totalling US$55 million due in April and focus on its core business of mining precious metals.

The transaction, which is expected to close before the new year, comes at a good time for Hecla, considering that the sale price of the Kentucky-Tennessee Clay division is twice the market capitalization of the entire company. Prior to the transaction, Hecla had a market capitalization of less than US$34 million.

“We believe some investors did not give us full value in the past for our industrial minerals subsidiaries,” says Hecla Chairman Arthur Brown.

K-T Clay had total sales of US$51.6 million in 1999 and is the largest producer of ball clay in North America, marketing its product mainly to ceramic manufacturers. Zemex believes the acquisition is a good fit, as it supplies different products to many of the same customers.

Hecla also has a subsidiary in the feldspar business, and is in negotiations to sell it to an unnamed interested party.

In the past five years, Hecla has increased silver production fourfold, to 7.6 million oz. in 1999. For the current year, output is pegged at more than 8 million oz. silver.

“We believe the fundamentals of supply and demand, and silver’s current deficit situation is bringing us closer to the time when we may see a sustained increase in the price of silver,” Brown says.