In a news release, Silvercorp Metals Inc. (SVM:TSX; SVM:NYSE) and Guyana Goldfields Inc. (GUY:TSX) announced that the two companies have entered into a definitive agreement whereby Silvercorp Metals will acquire all of the issued and outstanding shares of Guyana Goldfields by way of a plan of arrangement under the Canada Business Corporations Act. The firms stated that "the transaction will create a diversified precious metals producer with two profitable underground silver mining operations in China and a gold mining operation in Guyana with a strong balance sheet to fund growth opportunities."
According to the terms of the transaction, Guyana Goldfields' shareholders will have the option to receive CA$0.60 in cash or 0.1195 Silvercorp common share for each Guyana Goldfields share held. The firms noted that the offer is subject to a maximum cash consideration of CA$33.2 million and in the event that all Guyana Goldfields shareholders elect to receive cash, consideration for each share would then consist of CA$0.20 in cash and 0.0796 of a Silvercorp common share. The companies advised that the implied equity value of the transaction is approximately CA$105 million and that the CA$0.60 price per share represents a 71% premium to the 20-day volume weighted average price of Guyana Goldfields as of the close of trading on April 24, 2020.
Upon execution of the Arrangement Agreement, the two firms will simultaneously enter into an interim loan agreement where Silvercorp will lend Guyana Goldfields up to US$15 million to fund ongoing operations at the Aurora Underground project, working capital and general corporate needs.
Silvercorp believes that its strong balance sheet and robust cash flow profile will provide the necessary capital to develop the Aurora Underground project and pursue further potential M&A opportunities and that the combined entity would have an attractive growth pipeline that includes the BYP gold project in China and the Aurora Underground project in Guyana.
Silvercorp Metals' CEO Rui Feng commented, "This transaction will create a new globally diversified precious metals producer with the addition of Aurora to our growing asset portfolio. 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."
Guyana Goldfields President and CEO Alan Pangbourne remarked, "This transaction provides our shareholders with an immediate and significant upfront premium and exposure to a geographically diverse mid-tier precious metal company. With a strong operating history, solid balance sheet and significant underground experience, Silvercorp's management team is well-positioned to fund and continue to advance the underground project at Aurora."
The companies stated that the Arrangement Agreement has already been unanimously approved by both the Board of Directors of Guyana Goldfields and the Board of Directors of Silvercorp. The companies advised that the Transaction is subject to the approval of 66⅔% of votes cast by Guyana Goldfields shareholders along with other customary closing conditions and regulatory approvals including approvals from the Toronto and NYSE American exchanges.
Silvercorp Metals, a mining company headquartered in Vancouver, is focused on producing silver, lead and zinc metals in concentrates from mines in China.
Guyana Goldfields is a Toronto-based gold producer that is engaged in exploring, developing and operating gold mining deposits in Guyana.
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