KLDX Klondex Mines Ltd. (delisted)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )

Filed by the Registrant                                 [X]

Filed by a Party other than the Registrant [   ]

Check the appropriate box:

KLONDEX MINES LTD.
(Name of Registrant as Specified in its Charter)

N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

In connection with the mailing of the definitive proxy statement of Klondex Mines Ltd. (the “Company”) and the solicitation of proxies with respect to the proposals set forth in the definitive proxy statement, the following telephone solicitation script was prepared for use by the Company’s proxy solicitation agent, D.F. King & Co., Inc., with shareholders of the Company after the time of the mailing of the definitive proxy statement.

2

 
PROXY SOLICITATION SCRIPT
KLONDEX MINES LTD.
Annual & Special Meeting of Securityholders (Canadian Holder Script)

CORPORATE PROXY FACT SHEET FOR: KLONDEX MINES LTD.

What are Securityholders being asked to vote on?

What is happening?

At the Meeting, Klondex Securityholders will be asked, among other things, to consider and vote on a special resolution (the “Arrangement Resolution”) approving a statutory plan of arrangement (the “Plan of Arrangement”) pursuant to Section 288 of the Business Corporations Act (British Columbia) (the “Arrangement”), subject to the terms and conditions of an arrangement agreement dated March 16, 2018 entered into among Klondex, Hecla Mining Company (“Hecla”) and 1156291 B.C. Unlimited Liability Company (“Hecla Acquisition Subco”), a wholly-owned subsidiary of Hecla, as amended by an amending agreement dated June 4, 2018 (collectively, the “Arrangement Agreement”).

Under the terms of the Arrangement Agreement, Hecla Acquisition Subco will acquire all of the outstanding Klondex Shares (including Klondex Shares issued to holders of In-the-Money Klondex Options and Klondex RSUs pursuant to the Arrangement), and Klondex Shareholders will receive, for each Klondex Share, consideration as set out in the Plan of Arrangement (the “Arrangement Consideration”) consisting of: (i) the equivalent of US$2.47 in either cash, shares of Hecla common stock (“Hecla Shares”), or a combination of cash and Hecla Shares (the “Hecla Consideration”); plus (ii) 0.125 of a share (the “Havilah Shares”) of Havilah Mining Corporation (“Havilah”), a new company formed to hold Klondex’s Canadian assets.

Who are the Securityholders referred to in the proposal?

The annual and special meeting (the “Meeting”) has been scheduled for the holders (“Klondex Shareholders”) of common shares (“Klondex Shares”) in the capital of Klondex Mines Ltd. (“Klondex” or the “Company”), holders of Klondex Options (“Klondex Optionholders”), holders of Klondex Restricted Share Units (“Klondex RSU Holders”) and holders of Klondex Deferred Share Units (“Klondex DSU Holders), (collectively, the “Klondex Securityholders”).

What will Shareholders receive in the Arrangement?

Under the Arrangement, Klondex Shareholders will be entitled to receive, for each Klondex Share held: (i) the Hecla Consideration and (ii) the Havilah Consideration, consisting of 0.125 of a Havilah Share (after giving effect to the Havilah Share Consolidation). References to Klondex Shareholders include holders of In-the-Money Klondex Options and Klondex RSUs who receive Klondex Shares pursuant to the Arrangement.

What does the Hecla Consideration consist of?

Klondex Shareholders, Klondex Optionholders and Klondex RSU Holders may elect to receive, for each Klondex Share, either:

Can Securityholders expect to receive upon completion of the Arrangement the same amount they choose upon election for either the Cash, Share, or Combination Consideration?

The Cash Consideration and the Share Consideration are subject to proration.

What does the Havilah Consideration consist of?

Under the Arrangement, Klondex Shareholders will be entitled to receive, for each Klondex Share held, the Havilah Consideration, consisting of 0.125 of a Havilah Share.

Upon completion of the Arrangement, Havilah will hold all of the legal and beneficial right, title and interest in Klondex’s Canadian assets, including True North and the Bison Manitoba properties, as well as additional Manitoba and Ontario mineral interests.

Klondex will transfer all of its entire legal and beneficial right, title and interest in and to the Havilah Property to Havilah in consideration for the Havilah Shares, following which the Havilah Shares will be to former Klondex Shareholders.

Additionally, Hecla will subscribe for Havilah Shares in the aggregate amount of US$7,000,000, such cash consideration to be contributed to the stated capital account of Havilah. On completion of the Arrangement, former Klondex Shareholders will own approximately 86.54% of Havilah and Hecla will own approximately 13.46% of Havilah.

After completion of the Arrangement, the business and operations of Havilah will be managed and operated as a stand-alone corporation. The principal executive office of Havilah will be located at 1055 West Hastings Street, Suite 2200, Vancouver, British Columbia, V6E 2E9.

Will Havilah shares be publicly listed?

It is a condition to the completion of the Arrangement that one of the TSX, the TSXV or the Canadian Securities Exchange conditionally approve the listing of the Havilah Shares to be distributed under the Arrangement.

Havilah has applied to have the Havilah Shares listed on the TSXV. Listing is subject to the approval of the TSXV in accordance with its original listing requirements. The TSXV has not conditionally approved the listing of the Havilah Shares on the TSXV and there is no assurance that the TSXV will approve the listing application. There is no present intention to list Havilah Shares for trading on any national securities exchange in the United States.

Will the Klondex Shares continue to be listed on the TSX and the NYSE American after the Arrangement?

No. The Klondex Shares will be de-listed from the TSX and the NYSE American when the Arrangement is completed.

How will the Arrangement benefit Securityholders?

The Klondex Board reviewed and considered a significant amount of information and considered a number of factors relating to the Arrangement. The following is a summary of principal reasons for the unanimous recommendation of the Klondex Board that Klondex Securityholders vote FOR the Arrangement Resolution:

• Significant Premium. The Hecla Consideration represents a value of US$2.47 per Klondex Share, which represents a premium of approximately 59% based on the 30-day VWAP of the Klondex Shares on the NYSE American on March 16, 2018, the last trading day prior to the announcement of the Arrangement, and a premium of approximately 72% based on the closing price of Klondex Shares on the NYSE American on March 16, 2018. In addition to the Hecla Consideration, Klondex Shareholders will also receive 0.125 of a Havilah Share for each Klondex Share held.

• Meaningful Ownership in a Stronger Combined Company that Can Better Maximize the Value of Klondex Assets. The Arrangement will provide Klondex Shareholders who receive Hecla Shares in connection with the Arrangement with exposure to a diversified precious metals producer with operating mines in Québec, Alaska, Idaho, Mexico and Nevada that has a proven track record of successfully acquiring and optimizing underground assets, has a broader asset and commodity base delivering cash flow diversification and risk mitigation and superior financial strength and flexibility, with a lower cost of capital, to support development and exploration programs at the Fire Creek Mine, Hollister Mine and Midas Mine. It is expected that upon completion of the Arrangement, existing stockholders of Hecla and former Klondex Shareholders will own approximately 83.8% and 16.2%, respectively, of the outstanding Hecla Shares.

• Alternatives Considered. The Independent Committee and the Klondex Board considered the financing options and other potential alternatives and strategies available to Klondex if it did not enter into the Arrangement Agreement and continued with a stand-alone plan, the financial condition of Klondex, the fact that none of the potential investors that had been contacted by Klondex’s financial advisors appeared to be interested in making a strategic investment in Klondex in the near-term, that discussions with these counterparties were not progressing quickly and that none of these entities had expressed an interest in acquiring all of Klondex, and determined that entering into the Arrangement Agreement was the best alternative for Klondex Securityholders and in the best interest of Klondex.

• Enhanced Liquidity. The Hecla Shares receivable under the Arrangement will provide Klondex Shareholders with enhanced liquidity compared to Klondex Shares. The Hecla Shares are listed on the NYSE, and Hecla has significantly greater balance sheet strength, market capitalization and trading liquidity than Klondex. As at March 16, 2018, Hecla’s market capitalization was US$1.5 billion and Klondex’s was US$259 million, while Hecla’s average daily trading value during 2017 was US$29.1 million on the NYSE, whereas Klondex’s was US$10.3 million on the NYSE American.

• Ownership of Havilah Shares. Klondex’s Canadian assets, including True North, the Bison Manitoba properties as well as additional Ontario and Manitoba mineral interests, will be transferred to Havilah and Klondex Shareholders will receive Havilah Shares pursuant to the Arrangement. In addition, Hecla will subscribe for US$7,000,000 of Havilah Shares, representing a 13.46% interest in the outstanding common shares of Havilah, providing important capital for Havilah. The Havilah Shares provide Klondex Shareholders with continued exposure to Klondex’s Canadian assets. It is a condition to the completion of the Arrangement that one of the TSX, TSXV or the Canadian Securities Exchange conditionally approve the listing of the Havilah Shares to be distributed under the Arrangement.

What will I receive under the Arrangement if I am a Klondex Option, RSU or DSU Holder?

Under the Arrangement:

Each holder of In-the-Money Klondex Options and/or Klondex RSUs who, pursuant to the Arrangement, receives Klondex Shares in exchange for their In-the-Money Klondex Options or Klondex RSUs, as applicable, will, pursuant to the Arrangement, be entitled to receive the Hecla Consideration and the Havilah Consideration for each such Klondex Share to the same extent as Klondex Shareholders (including making an election as to which form of Hecla Consideration they wish to receive).

Each Performance RSU will be settled by a cash payment to the holder thereof on the Effective Date of the Arrangement of an amount determined by Hecla to be properly due to such holder based on the terms of such Performance RSU.

What will happen if the Arrangement is not approved by Securityholders?

Klondex Securityholders will be asked to consider, and if thought advisable, to approve the Arrangement Resolution. In order for the Arrangement to become effective, as provided in the Interim Order and by the BCBCA, the Arrangement Resolution must be approved by: (a) at least two-thirds (66 2⁄3%) of the votes cast on the Arrangement Resolution at the Meeting by Klondex Shareholders, present in person or represented by proxy and entitled to vote at the Meeting; and (b) at least two-thirds (66 2⁄3%) of the votes cast at the Meeting by Klondex Securityholders voting together as a single class, present in person or represented by proxy and entitled to vote at the Meeting above. If Kondex securityholders do not approve the Arrangement Resolution the Arrangement will not be completed.

Who is Hecla?

Hecla is a U.S.-based precious and base metals mining company engaged in the exploration, acquisition, development, production and marketing of silver, gold, lead and zinc. In business since 1891, Hecla is among the oldest U.S.-based precious metals mining companies and one of the lowest-cost primary silver producers in North America.

Hecla produces both metal concentrates, which it sells to smelters and brokers, and unrefined gold and silver precipitate and bullion bars (doré), which are sold as precipitate and doré, or are further refined before sale, to refiners and precious metals traders. Hecla has producing precious metals mining operations in Alaska, Idaho, Québec and Durango, Mexico and additional development and exploration projects in Alaska, Idaho, Canada and Mexico.

The Hecla Shares are listed for trading on the NYSE under the trading symbol “HL”. The principal executive office of Hecla is located at 6500 North Mineral Drive, Suite 200, Coeur d’Alene, Idaho, 83815-9408, United States of America.

Are Shareholders entitled to Dissent Rights?

The Interim Order and Plan of Arrangement provides Registered Klondex Shareholders with Dissent Rights in connection with the Arrangement.

What are the Canadian income tax consequences of the Arrangement?

Information is contained within section 17 of the Circular. Klondex Shareholders should consult their own tax advisors with respect to their particular circumstances. In addition, holders of Options, RSUs and DSUs should consult their own tax advisors with respect to their particular circumstances.

What are the U.S. federal income tax consequences of the Arrangement?

Information is contained within section 18 of the Circular. Klondex Securityholders should consult their own tax advisors with respect to their particular circumstances.

Should Securityholders send in the Election Document(s) now?

Yes. It is recommended that: (a) all Registered Klondex Shareholders complete, sign and return the Letter of Transmittal and Election Form (printed on white paper), together with accompanying Klondex Share certificate(s) or DRS Statement, to the Depositary as soon as possible; and (b) all registered holders of Klondex Options and Klondex RSUs complete, sign and return the Option/RSU Election Form (printed on grey paper) to the Depositary as soon as possible.

To make a valid election as to the form of Hecla Consideration you wish to receive, you must sign and return the applicable Election Document(s) to the Depositary prior to the July 10, 2018 Election Deadline.

Klondex Mines Ltd. (AMEX:KLDX)
Historical Stock Chart
From Apr 2024 to May 2024

Klondex Mines Ltd. (AMEX:KLDX)
Historical Stock Chart
From May 2023 to May 2024