Vancouver, Canada-based Silvercorp today revealed it will acquire Guyana Goldfields in a cash and stock deal worth CN$105 million (US$75 million).
A leading producer of silver, lead and zinc, SilverCorp revealed that it will offer Guyana Goldfields’ shareholders the option to receive CN$0.60 per share in cash or 0.1195 of its common share for maximum cash consideration of CN$33.2 million (US$24m).
The offer represents a 71 per cent premium to the 20-day volume-weighted average price of Guyana Goldfields’ shares as of Friday’s close.
“This transaction will create a new globally diversified precious-metals producer with the addition of Aurora to our growing asset portfolio,” Chairman and Chief Executive Officer of Silvercorp Rui Feng stated.
“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.”
Approved unanimously by the board of directors of both companies, the transaction is subject to approval by two-thirds of Guyana Goldfields shareholders at a special meeting, which the company aims to convene before the end of June.
According to President and CEO of Guyana Goldfields Alan Pangbourne, 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.”
Headquartered in Canada, Guyana Goldfields is focused on the exploration, development and operation of gold deposits in Guyana. The company’s flagship mine, Aurora, reached commercial production at the start of 2016.
Just last year, however, the company reported poor performance at the Aurora mine, with the amount of gold in proven and probable reserves at Aurora declining by almost 1.7 million ounces. This created a shock in the market and Guyana Goldfields’ share price has steadily declined since then.
So far this year, the share price is down 39 per cent, last trading at CN$0.42 Canadian cents on Friday. This makes the gold-mining company’s current market capitalisation CN$73 million, about half the CN$167 million it was a year ago.
It is for this reason that the agreement includes the provision of a loan, whereby Silvercorp will lend Guyana Goldfields up to CN$15 million to cover expenditures at the Aurora underground project up to the closing of the transaction.
In the meantime, the Government of Guyana has welcomed the announcement of the acquisition.
“As one of two large Gold Mining operations, Guyana Goldfields Inc. has contributed significantly, despite its internal and other difficulties, to annual gold declarations, and the Guyanese economy, by extension. Therefore, the Government welcomes this investment that is expected to put the company in a more stable financial position to continue its operations and fulfill its obligations to its shareholders and the Government and people of Guyana,” a statement from the country’s Ministry of Natural Resources outlined.
The statement further indicated that the Government will undertake due diligence exercises, as required by the laws of Guyana, to ensure observance of legal compliance with the proposed transfer of interests. It will also ensure that the agreement adequately addresses matters pertaining to workers’ rights, among other important obligations.