Cannabis companies raised $4 billion in 2018 compared to $217 million by mining companies
Last spring, Vancouver-based Hecla Mining Company’s chief executive Philip Baker Jr. announced a $600 million deal to purchase three gold mines in Nevada at a 59 per cent premium.
Baker assured investors his company conducted extensive due diligence to justify the hefty price tag. “There isn’t anyone on the planet who knows this asset better than us,” he told the Financial Post.
About one year later, Hecla has initiated “a comprehensive review” after running into a flurry of problems in Nevada, including “unacceptable” costs, lower than expected production, problems expanding the mine life, excessive water in one mine and other issues. The mines produced 10,000 ounces of gold in the first quarter, down from the 162,000 annual production estimate given at the time of the purchase.
A Hecla spokesman said the review would take “a period of weeks or even a month or two,” and added that the excessive water was an issue that the company did not anticipate.
Multiple analysts have downgraded Hecla, raising questions about how it will refinance $500 million in unsecured debt, due in 2021 if bond ratings agency were to review its credit.