Hecla Mining Co. (NYSE: HL) is seeing its shares clipped hard this morning due to an acquisition it is making. The company will spend close to $800 million to acquire Aurizon Mines Ltd. (NYSEMKT: AZK). It is not uncommon for an acquirer to see its shares drop when it spends up for an acquisition. What is different about this deal is that Hecla has had enough mine problems that you wonder why investors are not cheering some mine diversification efforts.

Hecla said that it has received a $500 million financing commitment from The Bank of Nova Scotia and there is no financing condition in the acquisition. As such, the transaction will be fully financed, but one note here is that the deal will not require the approval of Hecla shareholders.

As part of the deal, Aurizon shareholders will receive $4.75 (Canadian dollars) per share, or they can choose to accept 0.9953 of a Hecla share per share they own. The deal is subject to caps on each election: maximum cash consideration of $513,631,193 (Canadian dollars) and a maximum number of Hecla shares issued of 57,000,000. On this matter Hecla said:

Assuming that all Shareholders elected either the Cash Alternative or the Share Alternative, each Shareholder would be entitled to receive CAD$3.11 in cash and 0.34462 of a Hecla share for each Aurizon common share.

Hecla’s goal is to create long-life, high-grade, low-cost mines in some of the best mining jurisdictions in the world. The three properties have in common what Hecla says are “strong exploration potential on very large and contiguous land positions as well as locations near communities that are supportive to mining.”

The reaction is taking a bite out of Hecla shares, sending it down 10% to $4.17 against a 52-week range of $3.70 to $6.94. Hecla’s market cap is about $1.3 billion. Sometimes investors think that diversification comes with too high of a price. That seems to be the case here.

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