Coeur d’Alene-based Hecla Mining Co. has rescinded a $12 million takeover bid for Dolly Varden Silver Corp., alleging the Canadian mining company employed a “poison pill” strategy to raise the purchase price by more than half.

The British Columbia Securities Commission and the Ontario Securities Commission denied Hecla’s request to stop Dolly Varden from completing a private placement offering submitted after Hecla announced its takeover bid.

Hecla Mining President and CEO Phillips S. Baker says in a press release, “We’re disappointed with Dolly Varden’s expensive debt financing, followed by its planned dilutive private placement that effectively acts as a poison pill, raising the cost of acquiring Dolly Varden by more than 50 percent.”

Poison pill tactics periodically are used by companies targeted for takeover and that want to make the acquisition less attractive.

Hecla’s abandoned purchase attempt was for all outstanding shares of Dolly Varden not currently owned by Hecla or its affiliates.

Hecla last month said the takeover bid was prompted by its dissatisfaction with a recent loan arrangement made by Dolly Varden’s board of directors to pay back Hecla after it loaned the Canadian mining company money to stay in business in 2015.

In the press release, Baker goes on to say, “We’re disappointed that the securities commissions’ decisions take away the ability of existing shareholders to choose our premium bid, effectively forcing their continued ownership of Dolly Varden.”

Both commissions agreed with Dolly Varden’s argument that Hecla’s unsolicited bid was an insider bid. The commissions said Hecla would need to obtain and disseminate to Dolly Varden’s shareholders—at its own expense—an independent formal valuation in order to proceed with acquiring the Vancouver, British Columbia-based mining reserve.

Dolly Varden interim president and CEO Rosie Moore said in a separate press release, “We now look forward to completing our year-long transformation of Dolly Varden into a well-funded junior exploration company with an exciting project.”

On June 13, Dolly Varden announced on its website it had secured term loans with three lenders that would provide $2.5 million to the company. Approximately $2.1 million of the proceeds were going to be used to repay Hecla and another lender.

Baker says Hecla will continue to invest in Dolly Varden and maintain its almost 16 percent interest in the company. 

Dolly Varden is involved in exploring and developing silver projects in British Columbia.