Off The Wire
Silvercorp Metals agrees to acquire Guyana Goldfields
Silvercorp is a Canadian company producing silver, lead and zinc from mines in China. Guyana Goldfields, also based in Canada, is focused on the exploration, development and operation of gold deposits in Guyana, South America. The company’s flagship mine is the Aurora gold mine, which reached commercial production at the start of 2016.
“This transaction will create a new globally diversified precious-metals producer with the addition of Aurora to our growing asset portfolio,” said Rui Feng, chairman and chief executive officer of Silvercorp.
“We believe this is a rare opportunity to leverage our underground mining expertise and strong balance sheet to unlock value for all shareholders through the development of the Aurora underground project as well as aggressive exploration programs in a proven gold district.”
Under the agreement, Guyana Goldfields shareholders will have the option to receive, for each of their shares, either C$0.60 in cash or 0.1195 of a Silvercorp common share, with the latter valued at C$0.60 based on the volume-weighted average price for Silvercorp shares in the 20 trading days ending Friday. This will be subject to a maximum cash consideration of C$33.2 million.
The figure of C$0.60 per share represents a 71% premium to the 20-day volume-weighted average price of Guyana Goldfields as of Friday’s close of trading, the companies said. The implied equity value of the transaction is approximately C$105 million, the companies said.
If all Guyana Goldfields shareholders were to opt for cash, then the consideration for each share will consist of C$0.20 in cash and 0.0796 of a Silvercorp common share, valued at C$0.40 based on the volume-weighted average price for Silvercorp common shares over the 20 days ending Friday.
Alan Pangbourne, president and CEO of Guyana Goldfields, said the transaction provides his company’s shareholders with an “immediate and significant upfront premium and exposure to a geographically diverse mid-tier precious metal company.” The deal also calls for a loan from Silvercorp to fund expenditures at the Aurora underground project during the period before closing of the transaction.
The transaction was unanimously approved by he board of directors of each company and is is subject to approval by two-thirds of Guyana Goldfields shareholders at a special meeting officials aim to hold by the end of June.