Americas Gold and Silver Corp. President and CEO Darren Blasutti said the company is interested in a potential purchase of the Hecla Mining Co. silver, lead and zinc mine, which has struggled with a two-year labor strike, as a part of an expansion plan, though Hecla said the asset is not on the market.
Formerly known as Americas Silver, the company rebranded earlier this month and announced a strategic joint venture with Eric Sprott, a Canadian billionaire and long-time gold bull, that recapitalizes the company's Galena Complex in the Silver Valley of northwestern Idaho. On the sidelines of the Denver Gold Forum, Blasutti told S&P Global Market Intelligence that with the recent collaboration with Sprott, the company has the opportunity to "change our fate in the Silver Valley."
"I think the area has to be consolidated in order to be able to, not reduce the cost of miners, but to be able to reduce the overhead and [administrative costs] and all the stuff that comes with having to manage all of those areas," Blasutti said. "So, you know from Bunker Hill on the far west side to Lucky Friday on the far east side, if that whole trend was consolidated, we'd find more workers working there, not less, less overhead and more profitability."
Workers at Hecla's Lucky Friday silver mine in Idaho have been on strike since March 2017, though limited silver and lead production is being performed by salaried staff. Workers at the mine are part of United Steelworkers Local 5114, the same union that represents Americas' workers at Galena.
"Ultimately, we would like to buy Lucky Friday, and we'd like to buy Sunshine, but we've got to do it in a way that makes sense for everybody," Blasutti said. "But ultimately, yeah, we want to grow our business, and we definitely think being in the United States is a great jurisdiction."
On a May conference call, Hecla President and CEO Phillips Baker said the company came to the table to discuss options with the union but noted the issue was "binary" and a "difficult one to come to a compromise." Mike Westerlund, vice president of investor relations at Hecla, told S&P Global Market Intelligence on Sept. 18 that the Lucky Friday mine is "not for sale."
"The mine has operated for more than 75 years and has decades of future mine life," Westerlund said in an email. "In 2020 we expect to test the Remote Vein Miner, a continuous mining machine that cuts the rock rather than drilling and blasting. While we negotiate with the union we expect limited production to continue."
Blasutti said the Toronto-based company would be looking for growth opportunities in low-risk jurisdictions. Other top priorities include screening for economical purchases that offer Americas' shareholders at least a 15% after-tax return under long-term price forecasts. The company is not looking for early-stage exploration projects but instead is watching for opportunities to finance a development asset, fixing an operating mine or otherwise growing the business.
"I, no doubt, have visions of grandeur," Blasutti said. "I think with our operating capabilities we can consolidate the district. ... We want precious metal growth, we want returns for our shareholders, and we want to do it in countries that are safe."
Americas' recently announced joint venture with Sprott is expected to allow the company to increase development, modernize infrastructure, purchase new mining equipment and target exploration below current operating areas. Sprott committed up to US$20 million to fund capital improvements and operations for the first year to earn a 40% interest in the Galena Complex.
Americas is kicking in an additional US$5 million to fund further capital improvements in 2020. Americas and Sprott are counting on discovering more silver resources at better grades along with extensions of existing veins and at depth.
"Further, with the only operating mine in the Silver Valley, the joint venture will be well-positioned to take advantage of any consolidation opportunities which may evolve in the district," the company said in a Sept. 9 news release.
Through a period of lower prices for silver and limited capital availability, Americas had spent relatively minimal funds on maintaining and developing the complex while the company is allocating capital to restart its Relief Canyon mine in Nevada. The Relief Canyon mine is expected to begin producing gold in the fourth quarter and will significantly weight the company's portfolio toward gold and increase its overall precious metal production by about 500% by 2021.
