Hecla to sell Quebec gold mine to Orezone, focus on silver

[Ben Graham]

Hecla Mining (NYSE: HL) agreed to sell its Casa Berardi gold mine in Quebec and a clutch of nearby exploration properties to Orezone Gold (TSX: ORE) for up to $593 million to focus on its existing silver operations.

The transaction is expected to close in this quarter, subject to certain conditions, Hecla said Monday in a statement. The price tag includes $160 million in cash due upon closing, about 65.7 million Orezone common shares, deferred cash considerations and future royalty payments.

Selling Casa Berardi will allow Hecla to redeploy cash to advance silver projects in Canada and the United States. For Orezone, the addition of a Canadian asset will allow the developer to diversify away from West Africa.

“With two years of operations left (open pit and stockpile reprocessing) before a 4-5 year permitting hiatus, Casa Berardi we think was a corporate distraction,” National Bank Financial mining analyst Alex Terentiew wrote in a note. Hecla “will instead divert proceeds from the sale into its own development portfolio, with a focus on bringing new, high-grade gold and silver production online in Nevada,” he added.

Declining grade

Before last year, Hecla had planned to stop underground mining at Casa Berardi by mid-2025 and shift to surface-only mining given the declining ore grade and high production costs. Record gold prices forced a rethink, allowing underground mining to continue.

Priorities for Hecla include its flagship Greens Creek property in Alaska and a ramp-up of the Keno Hill mine in the Yukon, CEO Rob Krcmarov said in the statement.

Casa Berardi has a long operating history, with a track record of resource replacement since 1988. It has produced over 3.2 million oz. of gold so far and continues to deliver meaningful production and cash flow.

Hecla forecast cumulative free cash flow of $425 million from Casa Berardi over 2026 and 2027 at a gold price of $5,000 per ounce.

‘Lengthy permitting’

As of the end of 2024, Casa Berardi held 14.4 million proven and probable tonnes grading 2.79 grams gold per tonne for contained metal of 1.3 million ounces. It also held 2.4 million inferred tonnes grading 6.01 grams gold for contained metal of 500,000 inferred ounces.

It’s expected to produce 83,000 to 91,000 oz. this year, compared with a five-year average of 106,100 ounces.

Casa Berardi “no longer fits the company’s long‑term vision, and therefore a sale of the asset captures value upfront that would otherwise require a lengthy permitting timeline before new open pits begin production,” Scotia Capital mining analyst Eric Winmill said in a note. “The sale also reduces both technical and management distraction, enabling Hecla to focus on its operating high‑grade silver mines in safe jurisdictions.”

Orezone will use a new $100 million gold stream with Franco Nevada (TSX, NYSE: FNV) to pay for the upfront cash portion of the acquisition. It has agreed to deliver to Franco-Nevada 1,625 oz. of gold per quarter during the first five years, after which the stream percentage will be 5% of gold production. Orezone will receive a cash payment representing 20% of the spot gold price for each ounce delivered to Franco-Nevada.

Exploration opportunities

Vancouver-based Orezone said it’s identified several opportunities to increase production over time and extend the mine life. These include maintaining and extending ongoing underground operations and evaluating an expansion of current and future open pits. It also plans to invest in exploration to maximize Casa Berardi’s potential.

The property offers “significant” exploration upside with several well-established mineralized zones open at depth and along strike, in addition to new zones of high-grade mineralization identified outside of existing resources and reserves, Orezone said in a separate statement.

The property’s exploration tenements cover 37 km of strike along the Casa Berardi fault, which hosts the potential for multiple satellite deposits to the main operation, Orezone said. Limited exploration along this primary regional trend has identified several zones of mineralization, the most advanced of which is the Lac Germain prospect, about 7 km east of the Casa Berardi mill.

Hecla shares fell 9.2% to $27.12 in US trading Tuesday afternoon, giving the company a market value of $18.2 billion. Orezone rose 1.3% to C$2.82 in Toronto, valuing the company at about C$1.7 billion ($1.3 billion).