Executives
Jim Sabala - SVP & CFO, Hecla Mining Company
Phil Baker - President and CEO, Hecla Mining Company
George Paspalas - President and CEO
Larry Radford - VP, Operations, Hecla Mining Company
Mike Westerlund - VP, Investor Relations, Hecla Mining Company
Dean McDonald - VP, Exploration
Analysts
Heiko Ihle - Euro Pacific Capital
Jorge Beristain - Deutsche Bank
Paolo Lostritto - National Bank Financial
John Bridges - JPMorgan
Anita Soni - Credit Suisse
Aurizon Mines Ltd. (AZK) Hecla Agreement to Acquire Aurizon Conference March 4, 2013 9:00 AM ET
Operator
Good day, ladies and gentlemen, and welcome to the Hecla Mining Company's Agreement to Acquire Aurizon Mines Conference Call. My name is Darcel and I will be your operator for today. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions)
I would now like to turn the conference over to your host for today Mr. Jim Sabala. Please proceed, sir.
Jim Sabala
Thank you, operator and hello everyone. This is Jim Sabala, Hecla's Senior Vice President and Chief Financial Officer. Thank you for joining us for Hecla's conference call on the Aurizon acquisition. Our news release that was issued this morning before market open and today's presentation are available on each of Hecla's and Aurizon's websites.
On today's call, we have Phil Baker, Hecla's President and Chief Executive Officer; we also have George Paspalas, Aurizon's President and Chief Executive Officer on the call and myself.
Before we begin I want to remind you that any forward-looking statements made today by the participants in today's call come under the Private Securities Litigation Reform Act as shown on Slide 2. Such statements include projections and goals which are likely to involve risks detailed in our Form 10-K and in the forward-looking disclaimer included in the release and at the beginning of the presentation. These risks could cause results to differ from those projected in the forward-looking statements.
In addition, in our filings with the Securities and Exchange Commission, we're only allowed to disclose mineral deposits that we can economically and legally extract or produce. Investors are cautioned about our use of terms such as measured, indicated and inferred resources and we urge you to consider the disclosures that we make in our SEC filings.
I would now turn the call over to Phil. Phil?
Phil Baker
Yes, thanks, Jim and good morning, everyone. And I also just wanted to introduce our new Vice President of Investor Relations, Mike Westerlund. He is also on the with us.
I'm really pleased to announce an agreement between Hecla and Aurizon for a plan of arrangement in which Hecla will acquire the common of shares of Aurizon in a deal worth $800 million Canadian. We're very comfortable with the transaction that we're going to enter into.
This deal brings together two high quality portfolios of silver and gold mines and exploration projects that are located in mine-friendly jurisdictions. The new company will have significant reserves and resources, significant cash flow resources and we believe significant growth as we further develop the existing mines and are rapidly advancing predevelopment and exploration projects.
I want to spend a few minutes telling you why we're so excited about this transaction for our shareholders, Aurizon shareholders and both companies' miners as well.
Before I begin I want to give you a little history on the transaction. Casa Berardi has been on Hecla's radar since 2006 when Aurizon was developing the underground infrastructure to mine the ore body. We entered into an agreement to do due diligence, we visited the mine, they visited our mines. David Hall, who is the CEO at the time, he and I went underground together at both Casa and the Lucky Friday. We made an offer, but we did not come to an agreement. Since then we've maintained contact between the two companies looking for the right time to put the companies together. In fact just this past December I met with George and we agreed that after the Lucky Friday and Casa were operational we would revisit putting the companies together.
Why this interest? We see many of the same characteristics of Casa that has our own Lucky Friday and Greens Creek. Large land positions, known mineral districts, strong operations, long mine life, low costs, small tonnage, high-value underground mine, a talented capable workforce and a supportive community. So when the hostile bid by Alamos Gold for Aurizon was announced, George called me and we started working on this transaction.
Now I'd like to ask George to talk about the history of the transaction from his perspective.
George Paspalas
Thanks, Phil and good morning, everybody. As Phil mentioned previously we met in December last year and reflected on the similarities between our companies. We are underground miners. Our assets are in very good mining jurisdictions and we have excellent people running and supporting our operations.
We reflected on the opportunity each company could face in the future. The potential to realize significant value enhancement once the Lucky Friday mine was restarted for Hecla, particularly the significant recapitalization program that was almost completed and have a potentially myriad -- the beneficial effect, we 're expecting once the transition period was completed at Casa Berardi and the mine returned back to historical operating rates.
This past November, we had announced that 2013 would be a transition year, where we would prioritize the development and commissioning of Zones 118 and 123 and complete the deepening of the hoist shaft at Casa Berardi. We felt it was time to make a strategic decision to focus on establishing the infrastructure required to set the mine up for the next 10 years and more of operations. This resulted in a lower production for 2012 than we've seen for a number of years. Our share price suffered as a result and traded down to a 52-week low prior to Christmas.
Then on January 14, 2013, we received the unsolicited bid from Alamos Gold for all of the outstanding shares of Aurizon. The directors of Aurizon unanimously determined that the Alamos bid was inadequate and did not realize the true value of the company. And we initiated a process to explore value maximizing alternatives. As part of that process it made sense to me to call up Phil and bring forward our pre-Christmas conversation. The result is today's announcement and we believe that this is a positive outcome of our Boards work for our company and our shareholders.
Our agreement with Hecla represents immediate value today and upside for tomorrow. We will get into the financial details shortly, but suffice to say that the transaction offers a premium of 39% to Aurizon's share price on the last day prior to the hostile offer, with the opportunity for shareholders to receive the consideration in cash Hecla's shares or a combination of both. And Importantly, it offers a good strategic fit and exposure to what we believe is a bright future. The Board has therefore unanimously recommended that Aurizon shareholders vote to approve the Hecla agreement.
Back to you, Phil.
Phil Baker
Thanks, George. Now on slide 4, you will see a summary of why this transaction makes sense. We're building a leading North American precious metals producer and this acquisition is consistent with our growth strategy. We like Aurizon, the Casa Berardi project, we like where it is located in a stable jurisdiction Quebec, which continues to be ranked one of the best mining jurisdictions in the world according to the Fraser Institute. We also like its long reserve life and its exploration and development potential. We are both seasoned underground miners and have similar culture and focus on safety and efficient operations.
Let me take you through the transaction now. So, I go to Slide 5. The $4.75 Canadian per share offer that we made today represents a 9% premium based on Aurizon's closing share price on the TSX on March 1st, and a 39% premium based on the close of January 11. This is a superior offer that represents a 12% premium to the Alamos Gold offer. Because it's clearly a superior offer its unanimously recommended by Aurizon's Board of Directors.
There is no financing condition, Hecla has sufficient cash and committed financing in place to acquire Aurizon. There is a right to match as well as a break fee under certain circumstances which will protect Hecla's offer. There will be an Aurizon shareholders' meeting to approve the arrangement and complete the transaction which is expected in Q2 and minimum of 66% and two-thirds approval is needed for this to pass.
So what are the biggest benefits of the transaction, if you go to slide 6. For Hecla's shareholders of which I'm one, we exchange only 18% of our equity. The minimum dilution we could do with a three-year loan facility in exchange for a third producing mine, more precious metals exposure, a big increase in gold reserves and resources, additional stable free cash flow that increases our ability to grow in the future. It's an acquisition that both today's and consensus prices we think will generate double-digit pre-tax returns for us.
One comment about future growth. We are focusing on growing silver production but with the dearth of quality silver projects and mines we have continue to invest in gold projects. Just to look at our junior exploration program as an example of this. And we have taken this transaction to expand gold production, a metal we have produced for more than 30 years. This acquisition will allow us in the future to take on bigger silver projects, generating strong returns adding meaningful quality growth and complimenting our existing portfolio of world class mines.
I'm going to let George talk about the benefits that to Aurizon's shareholders, George?
George Paspalas
Thanks, Phil. Simply put this transaction provides Aurizon shareholders with more value and a better fit. Aurizon shareholders get a higher premium with a greater value certainty and an opportunity to participate in further upside in three long life, low cost mines in excellent jurisdictions in the new company.
[Growing] from being a single asset producer has been a strategic objective for a few years at Aurizon this acquisition achieves that objective. And Hecla has a proven track record with a number of high quality low cost, long life precious metal assets. The share consideration in the offer provides access to what will be a precious metal producer with operations in great mining jurisdictions.
Our shareholders value the certainty that comes with the exposure to producing assets in favorable jurisdictions and that will continue with this arrangement with Hecla. Hecla is a proven underground miner with 120 years of proven ability. And the Hecla common stock is traded only NYSE and is highly liquid. We believe it is important to their shareholders will be able to continue to participate in the ownership of the combined entity.
Going forward, there is going to be a great opportunity to develop and move our people around to share knowledge and gain experience, something we were not able to do with a single operating asset we see this as an opportunity to further enhance shareholder value into the future. We believe this is a positive outcome for our shareholders.
Back to you, Phil.
Phil Baker
Thanks George. Slide 7, the new company will be a low cost producer with an enterprise value of about $1.8 billion Canadian and an anticipated market cap in access of $1.6 billion Canadian and strong silver and gold production and reserves.
In 2012 the combine company will produce 6.4 million ounces of silver at a cash cost of $270 Canadian and a 192,000 ounces gold at a cash cost of $700 Canadian per ounce. On a silver equivalent basis we would produce about 16 million ounces at a cost of about $10 Canadian per ounce and on a gold equivalent basis we would have produced about 320,000 ounces at cost of around $500 Canadian per ounce. The Combined company has a 150 million ounces of silver reserves and 2.2 million ounces of gold reserves.
Slide 8 shows the combine company will have projects in three of the top 6 mining jurisdictions in the world. George has something that really resonated with the you when we were talking back in December why don't you talk about the jurisdictional play and then give an overview of Aurizon.
George Paspalas
Sure, Phil. The jurisdictional aspects of the transaction are very appealing. This transaction brings together three good operating assets with long mine lives. That combined into a single entity that to my mind represents one of the more coveted jurisdictional packages in the industry.
Quebec, the silver valley in Idaho and Alaska, our old jurisdictions that have a deep mining history and a proven mining areas in terms of regulation, awareness and accessibility to mining people. We're now on slide 9, Aurizon is an intermediate gold producer with projects in Quebec. The flagship project is Casa Berardi and the underground gold mine which has been operating successfully since 2006.
Casa Berardi produced almost a 137,000 ounces of gold in 2012 and has enabled Aurizon to build an enviable balance sheet to fund exploration and project development opportunities. As well Aurizon has a portfolio of promising early stage projects and investment in the province and we have recently reported encouraging exploration results in these areas. I will also say that we have an extremely talented and committed group of people and they are a vital part of the success we have achieved as a company.
Moving to slide 10, Casa Berardi has approximately 1.5 million ounces of gold reserves with substantial resources underneath that. Casa is a high grade operation and is looking to expand production with the shaft deepening project and paste back-fill. One of the highlights of the Casa Berardi has been the in-mine exploration success.
We started to mining up in 2006 with 6 years of mine life. And here we are now in 2013, and we have 10 years of future mine life in reserves and a lot of potential to increase adding resources. And we have drill targets are that in-mine or adjacent to the production facility, that will enhance the potential to increase our mine life of Casa Berardi.
Casa has a consistent track record and what we believe is a bright future. Now, Back to you, Phil.
Phil Baker
Thanks, George. So why do the deal? Slide 11. It adds 125,000 to 130,000 ounces of gold production this year. It's accretive on all measures including NAV and cash flow as well as gold reserves and resources. It generates double-digit pretax unlevered returns at today and consensus gold prices. It is a win-win for both sets of shareholders because it allows them to diversify their holdings into additional long-life, low-cost operating mines. It adds long terms gold production in a mining friendly jurisdiction and increases our growth profile.
Slide 12 shows the growth potential of Hecla silver production, where we are expecting to produce 15 million ounces of silver a year by 2017 and Aurizon's gold production, which could benefit from the shaft sinking project in future open pit plans. And we believe our ability to grow our pre-development projects will benefit from adding Aurizon more revenue, more cash flow and expertise to apply to these projects.
Slide 13, let's look at the combination of the long life assets from a silver and gold equivalent point of view, on a silver equivalent basis we expect the 2013 production to be about 18.5 million ounces and from a gold equivalent point of view we expect it to be about 345,000 ounces.
Slide 14, we are creating a leading Americas focus precious metals company, with 120 year commitment to silver in 2013 pro-forma revenues we expect 38% from silver, 39% from gold, 14% zinc and 19% from lead. Revenues from precious metals will grow to a total of over 75%. Our current plans have silver revenues growing relative to gold is the Lucky Friday improve development projects coming into production.
Slide 15, the new Hecla pro-forma with 192,000 ounces of gold production leapfrogged several of our peers and on slide 16 from a silver equivalent production perspective, these are 2012 numbers you can see a jump in production to 16 million or 19 million ounces if you consider what Lucky Friday would have had, had it been operating in 2012.
Slide 17, in conclusion this has been a transaction we have considered for quite a while, and both management teams are convinced this is a right deal for both companies and their shareholders. We'd like the assets and how going forward we will have three long lived low-cost gold and silver mines, we liked locations and the team of people, this deal increases our gold production substantially, generating additional cash flow and sets the stage for faster growth in the future.
George is there anything you want to add?
George Paspalas
I'd just like to add that the Aurizon shares, your view that this transaction is win-win for both sets of shareholders. It has the full support of Aurizon Board and we encourage Aurizon's shareholders to vote their shares in favor of the Hecla offer and receive certainty of value today. Any shareholders who have tended Alamos offer and wish to withdraw their shares may do so by contacting our information agent Georgeson. Georgeson can also provide information assistance to shareholders who wish to vote for the Hecla offer.
Now, that's all from me.
Phil Baker
Okay. Thanks, George and with that we'll open the lines for questions.
Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Keiko Ihle. Please proceed. Good morning, guys, and congratulations.
Heiko Ihle - Euro Pacific Capital
Good morning guys and congratulations.
Phil Baker
Good morning, Heiko.
Heiko Ihle - Euro Pacific Capital
So given the non-solicitation covenant that you guys agreed on and I guess this question is primarily for George. Would you be willing or able even to have Alamos come and visit Casa Berardi at this time. I guess, what I am saying is there is a potential for them to submit any sort of friendly deal or is that just completely off the table?
George Paspalas
Look, Heiko, we have a fiduciary duty to our company, but we need to act in the contractual arrangement that we have with Hecla.
Heiko Ihle - Euro Pacific Capital
So the answer is they can't come.
George Paspalas
The answer is that there are contractual arrangements here which are -- will be available publicly that describe how we move forward.
Heiko Ihle - Euro Pacific Capital
Got it and then can you maybe provide some more color on the $27.2 million Canadian termination fee, assuming something in all sports to come forward. You know, when this is getting paid, what percentage is getting paid. I don't mention and they are you know only expenses or I guess maybe just provide a little bit more color?
George Paspalas
The $27 million Canadian break fee is a break fee payable to Hecla's should another bid come that is actually accepted by the Aurizon Board.
Heiko Ihle - Euro Pacific Capital
Okay and its paid in full regardless of the circumstances?
George Paspalas
It's paid in full in right of an accepted competing bid.
Heiko Ihle - Euro Pacific Capital
Got it, thank you.
George Paspalas
Thank you, Heiko.
Operator
And your next question comes from the line of [Ron Meyers]. Please proceed.
Unidentified Analyst
Good morning. George, correct me if I am wrong, but there was a headline out on one of the news services last week that you actually had some kind of conversations with Alamos. Is that correct?
George Paspalas
Yeah Ron, there had been some dialogue with Alamos during this process. I mean, one of the commitments that we made is as we go through the process that we are engaged on we would [wish you] every avenue.
Unidentified Analyst
Were they given any access, prior to this, prior to today?
George Paspalas
Yes, they were.
Unidentified Analyst
Okay, the next question is a number of shareholders locked up - a number of your shareholders locked up with Alamos. Do you know whether this, whether the terms of the transaction announced today free them from that obligation and allow them to support this transaction?
George Paspalas
No, I am not sure Ron. I mean, that's something you probably need to talk to those particular shareholders about.
Unidentified Analyst
Okay, thank you. Congratulations.
George Paspalas
Thanks for your call.
Operator
(Operator Instructions) Your next question comes from the line of Jorge Beristain. Please proceed.
Jorge Beristain - Deutsche Bank
Good morning, my question is more for Phil. You mentioned some of your accretion potential of the deal. And could you just comment as to what interest rate you are paying on the debt and secondly why you chose to potentially issue up to about 19% more equity obviously in this environment, the more debt you would do, the more accretive a deal would be.
Phil Baker
Sure, I am going to let Jim jump in, but we had a balancing between the amount of equity we would do and the terms of a financing and this we thought was the right balance. I think it's about one-third equity, two-thirds debt and its we think this is a pretty robust acquisition with double-digit returns for us on unlevered basis. So Jim, why don't you give some details on the financing itself.
Jim Sabala
Sure. I will give you some more, just so you have it all. The total package is $500 million Canadian and it consists of the three-year term loan, a revolving facility with a three-year term, and $100 million Canadian short-term cash bridge facility. We would expect the interest rate will be from 300 to 450 basis points above LIBOR depending on leverage ratios or the debt level to EBITDA post transaction.
Jorge Beristain - Deutsche Bank
Thank you. I guess just another question for Phil. In terms of the strategy of the Company, how do you feel Hecla would be positioned now as a company in the sense that you are not going to be majority silver, you are not going to be majority gold. Where do you see your future comp being and secondly do you believe that as a company you have the management bench to manage both operations in Quebec and potentially a front in Mexico over the next few years.
Phil Baker
Sure. In terms of where we are going with this mix of assets is really quite consistent with where we have been. If you think about Hecla over the course of the last 30 years, we've been both a gold and silver producer. You think about our acquisition strategy it has been both gold and silver. So that has not changed, we think that there are gold assets Casa Berardi that are skill set, that we have focused attention on and you have seen that in our exploration investment, junior exploration program. But we also think that overtime there will be new high quality silver assets and we think the fact that we have added Casa Berardi and strengthened our operating platform will make it easier to acquire those assets in the future.
So we're going to be a company that's going to fall into two the categories. We have in the past and we think we will do that in the future and it gives us quite a bit of flexibility to pick up the best quality assets that will generate the best returns. And within…
Jorge Beristain - Deutsche Bank
I am sorry in terms of your management bench you think that that you're able to effectively manage now and operation expand three countries.
Phil Baker
I think we can. Number one is we are talking about mining activities that are really consistent across all of the properties. It is mining methods that are very similar. So there is going to be a lot of overlap in our technical people their ability to look at ever - really three or four different locations that we're located in. We've also had been in Mexico we have the team there that has been in existence for I guess almost next year will be 20 years. So we are prepared to grow in Mexico. We certainly will have to add additional people to the mix, but we have the infrastructure to place people into for this growth.
Jorge Beristain - Deutsche Bank
Okay, thank you.
Operator
And your next question comes from the line of Paolo Lostritto. Please proceed.
Paolo Lostritto - National Bank Financial
Hi, good morning guys.
Phil Baker
Hi there.
Paolo Lostritto - National Bank Financial
May this question is more towards Phil. Can you give us a sense of the gold and silver price you guys used to determine the accretion?
Phil Baker
Look we used all sorts of prices, but certainly we were one of the levels that we used was $1500 Canadian gold.
Paolo Lostritto - National Bank Financial
Okay. And then there is a number of JVs and exploration properties within the portfolio that Aurizon has. Just trying to get a sense of how you value those and how it fits strategically to the offer?
Phil Baker
Well look we looked at all of their assets. We sort of broke them apart. We wanted to make sure that this project could or this acquisition could carry Casa Berardi could carry this acquisition, could carry the, give us the returns that we are looking for and so that was our primary focus. We do view the other assets that Aurizon has as being interesting and one that we would want to spend time evaluating and looking at how we mine successfully move forward, but it was not the fundamental driver to our analysis. The primary driver was Casa Berardi.
Paolo Lostritto - National Bank Financial
All right, thank you.
Operator
And your next question comes from the line of John Bridges. Please proceed.
John Bridges - JPMorgan
Hi Phil.
Phil Baker
Hi, John.
John Bridges - JPMorgan
George, Jim, everybody. Yeah, love the concept adding another mine to the mix and increasing the base, the precious metals component. But you know looking at your current mines you've got long life expectancy there with a reasonably high confidence level. Casa Berardi has had its ups and downs now, George, you're saying there's about 10 years there. But has Casa changed its characteristic or how much confidence that you have in that 10 years and maybe further beyond that? Thank you.
Phil Baker
John, we have a high degree of confidence with respect to the next 10 years and we have a fair degree of confidence beyond that. We like this exploration ground. We think this is of the same order as our existing assets that we have. We think that as we spend time and money we are going to continue to expand the mine life and put ourselves in a position to increase throughput through that mill. I think the mill is rated for 2800 tons a day and they are only producing 2000 ton. So we can have some success finding more mineralization and figuring out how that accesses that mineralization. I mean, basically the same sort of analysis and work that we are doing at Lucky Friday. If we can do that at Casa Berardi we have already got a mill that we can fill and further improve what we think are excellent economics.
George Paspalas
John if I can contribute here as well, we have had substantial mine life increase in Casa Berardi and that's purely through in-mine exploration success adjacent to where we're mining. We know we have a lot of potential on the property and we have hardly touched that area in terms of drilling away from the shaft. So we've got more measured and indicated resource than we have reserves. Our conversion rate historically at Casa Berardi is very high, so I will agree with Phil I really believe that the potential for a lot longer future at Casa Berardi is there.
Phil Baker
Yeah and when we start looking at this in 2006, we've continued to follow it and it is has done nothing but exceed the expectations that we had in 2006. So we are very enthusiastic over the future of Casa Berardi.
John Bridges - JPMorgan
Okay, great. I look forward to seeing one of these days. I know it's very well known to a Canadian contingent, but it's not particularly well know down south.
Phil Baker
Okay, thanks John.
John Bridges - JPMorgan
Thank you.
Operator
And your next question comes from the line of Anita Soni. Please proceed.
Anita Soni - Credit Suisse
Hi, good morning guys. My question is respect to the amount of due diligence that Hecla has done in the last, I guess 6 weeks, since Aurizon or sorry - since Alamos put in their bid. Can you just talk about that, I mean this is really a, rather a large transaction of Hecla perspective and I am just wondering how much, you know, the rise in assets?
Phil Baker
Sure, as I mentioned just a moment ago, we first had had a continuing dialogue with Aurizon following expensive due diligence in the past and we have actually had since 2006 we had one other due diligence session at roughly 2010 I think. So then we started due diligence again at the beginning of this year and we had people on site, it was a whole team of people and we had extensive access to the data base of Aurizon. Frankly this asset we know as well as any asset that we don't know, is our guess is how I would characterize it. It's - we have a great deal of respect for the team that works it at Aurizon. These guys are professional miners and we have a great deal of confidence in the mine plans that they had put together. And so we are very comfortable with the transaction that we are going to enter into - that we have entered into.
Anita Soni - Credit Suisse
Sure, and can you talk about the types of technical synergies that you think you could bring to the table with the Lucky Friday mine and Casa Berardi?
Phil Baker
Look it's - the technical synergies really come from mining engineers working together on the same types of operations. So it's really we've got some expertise in rock mechanics and ventilation in the management of shaft construction. Those are things that we bring to the table. They bring knowledge of mill production that generates [Doray] which we do not have. Everything we do is a concentrate and so we think there is the ability to overlap and improve both the Company's assets.
Anita Soni - Credit Suisse
And last, the ramp that you are talking about from they're not filling the mill at 2000 tons a day and the capacity has 2800. What kind of a ramp do you think you would see over the next three to four years I guess?
Phil Baker
Look, we are not anticipating any material change to their plans at this point. I'm just pointing it out as an opportunity and something that we will focus tension on it.
Anita Soni - Credit Suisse
All right, so then where do you see the accretion for your company, where are the opportunities for Hecla here?
Phil Baker
Well look the opportunity is multifold. I mean first you have some expertise, operating expertise that we can bring in as they are developing the shaft. We have quite a bit of shaft expertise that we have developed over the last five years now. I think that's going to help because they are constructing that shaft themselves. We also have expertise that where we think we can in dealing with just great control. If there's anything we spend a lot of time doing. It's managing our great control. We think we have expertise that can help, but having said that these guys are very confident miners. So we're not dealing at as something that we have to make some major changes to and the deal is accretive on that basis. We don't have to come fix something in order to make it accretive, but we do see the potential for further improvements to the model.
Anita Soni - Credit Suisse
All right, thank you.
Operator
(Operator Instructions) Your next question comes from the line of [Daniel Trump]. Please proceed.
Unidentified Analyst
Hi gentlemen any requirement under the debt facility to hedge production for the short-term or long-term?
Phil Baker
Yeah, there is a requirement that we earned the hedging, it's -- we have it six months before we are obligated to do that and that's 300,000 ounces of production.
Unidentified Analyst
Gold or silver.
Phil Baker
Gold.
Unidentified Analyst
Thank you.
Phil Baker
Actually, it's actually an amount of revenue. so could end up being less than that number of ounces, but conceptually that's the range that we're looking.
Operator
And your next question comes from the line of Anita Soni. Please proceed.
Anita Soni - Credit Suisse
Just want to clarify. Did you just say that the debt requires 300,000 ounces of gold hedging?
Phil Baker
That's right.
Anita Soni - Credit Suisse
And what terms will that be under?
Phil Baker
Well there is - it's actually not 300,000 ounces of gold hedging it's actually a dollar amount of revenue that we need to protect.
Anita Soni - Credit Suisse
Okay, and what - over what time frame and dollar amount per…
Phil Baker
It's over three years and it's a $150 million Canadian over - per year over three years.
Anita Soni - Credit Suisse
Over three years.
Phil Baker
Jim anything you want to add to that.
Jim Sabala
No, that's you've summarized it.
Phil Baker
Great thanks.
Anita Soni - Credit Suisse
Okay, and what form do you envision that taking at this point?
Phil Baker
Yeah, at this point we would enter into forwards and but look we will examine the market when the time comes.
Anita Soni - Credit Suisse
Okay and you don't have to kick that in until six months from now.
Phil Baker
Six months still after closing.
Anita Soni - Credit Suisse
So, six months or after close. Okay thank you.
Operator
There are no further questions at this time. I will now turn the call over to Phil for closing remarks.
Phil Baker
Okay, George is there anything you want to say in closing and…
George Paspalas
I think it's pretty well covered. Phil, thank you very much.
Phil Baker
Okay. Thanks everyone for being on the call and certainly if you have any questions please feel free to give Mike Westerlund to call for us and the folks at Aurizon I guess Jenifer and George and you can call me as well. Thanks everyone, you have a good day.
Operator
Ladies and gentlemen that concludes today's conference. Thank you for your participation. You may now disconnect have a great day.
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