Denver —
The November agreement, according to which Zemex was to buy the subsidiary for US$68 million in cash, was expected to close by Jan. 18.
Hecla says Zemex tried to reduce the purchase price in last-minute negotiations, while, at the same time, misrepresenting its ability to obtain sufficient funding. The Idaho-based silver miner intends to hold Zemex responsible for all damages as a consequence of its alleged failure to honour the agreement.
Zemex responded by saying that before the closing date, Hecla informed the company of a significant deterioration in K.T. Clay’s operating results. Zemex then offered to renegotiate the contract based on the new results.
“We are very surprised by Hecla’s attempt to turn K-T Clay’s adverse operating results into a breach of contract suit,” says Zemex President Richard Lister.
Zemex is still interested in K-T Clay, but only at a price it believes fairly reflects its value.
The setback does not change Hecla’s plan to sell K-T Clay. “If Zemex does not fulfil its obligations to us, we will be seeking other interested parties,” says Hecla Chairman Arthur Brown.
Hecla expects to use proceeds from the sale to pay down US$55 million in bank debt that comes due in April. In the meantime, Hecla expects to begin discussions with its creditors about possible alternatives to restructuring the debt.
Hecla’s difficulty in closing the K-T Clay transaction has not deterred the company from its intention to sell another industrial minerals subsidiary, K-T Feldspar, though the company may decide to repackage K-T Feldspar in with K-T Clay, says spokeswoman Vicki Veltkamp.
Industrial minerals represented 55% of Hecla’s revenue in 1999. However, the company now intends to focus on its core business — precious metals mining — by liquidating the industrial minerals segments.
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