ATAC enters LOI with Hecla after shunning Victoria Gold takeover bid

ATAC Resources (TSXV: ATC) (OTCQB: ATADF) is now set to be sold to Hecla Mining Company (NYSE: HL) in a deal valued at $31 million after rejecting a $25 million offer from Victoria Gold (TSX: VGCX) earlier this month.

On Tuesday, ATAC and Hecla entered into a non-binding letter of intent (LOI) for a proposed business combination, which would see the latter acquire the Rackla and Connaught projects located in Yukon, Canada. Hecla is the largest silver producer in the US, and is currently developing a mine in Yukon's Keno Hill silver district.

The Rackla property – ATAC's main asset – comprises two separate projects (Rau and Nadaleen), each with a distinct type of gold occurrences. The Rau project hosts the advanced-stage Tiger gold deposit containing measured and indicated resources of 4.5 million tonnes grading 3.19 g/t for 464,000 oz.

A 2020 preliminary economic assessment (PEA) outlined an annual output of 45,000 oz. for the Tiger deposit, giving the Rau project a pre-tax net present value (at 5%) of $118.2 million and a 54.5% internal rate of return.

The Nadaleen project hosts a group of Carlins-style targets, the most advanced being Osiris, with an indicated resource of 5.5 million tonnes grading at 4.12 g/t for 732,000 oz. and inferred resource of 9.4 million tonnes grading 3.47 g/t for 1 million oz.

The Connaught property, another precious metals asset being added to Hecla's portfolio, is located 65 km west of Dawson City. The project has historically been explored as a high-grade silver-lead-zinc-copper-gold vein prospect modelled after mines in the Keno Hill district.

Under the proposed transaction, Hecla would acquire all of ATAC's issued and outstanding shares for $0.14 each, payable in Hecla common stock, overtaking the $0.12-a-share offer made by Victoria Gold in January 2023.

Shares of ATAC surged 42% by noon Toronto time to trade at $0.14 following news of the Hecla LOI. This gives the company a market value of approximately $28.4 million.

"We believe the potential transaction will provide significant value to ATAC shareholders. Hecla is an ideal acquirer for the Rackla gold property, given its adjacent Keno Hill mining project and demonstrated commitment to the Yukon and its communities," stated ATAC president and CEO Graham Downs in a news release.

Hecla also intends to make a $2 million strategic investment into a new exploration company that would hold the remaining copper-focused assets of ATAC, which include the Idaho Creek, Catch, Rosy and PIL projects. Hecla would have a right of first refusal to acquire all of the spinout company's assets, as well as a number of units equivalent to 19.9% of said company's equity.

"The spinout of a new copper-focused exploration company provides additional value to shareholders. With the foundation of our existing copper assets," said Downs, adding that it is "well positioned" to aggressively explore for copper – a key critical metal – throughout BC and Yukon.

The implied equity capitalization of the spinout is about $10.1 million, including the $2 million investment by Hecla, with the remaining $8.1 million value going to ATAC shareholders.