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Silvercorp Metals strikes amended deal to buy mid-tier producer Guyana Goldfields

Aurora reached commercial production in 2016 and the deal creates a diversified precious metals producer with two profitable underground mines in China and a gold operation in Guyana.

Silvercorp Metals Inc -
The amendment was agreed following Guyana Goldfields receiving an unsolicited all-cash proposal from a third party

Silvercorp Metals Inc (NSYEAMERICAN:SVM) (TSX:SVM) has amended its previously announced agreement with producer Guyana Goldfields Inc (TSE:GUY), which runs the Aurora gold mine in the South American country, valuing the latter company at around C$227 million.

Under the upgraded terms, each Guyana Goldfields shareholder will now receive C$0.25 in cash and 0.1849 of a Silvercorp share, for a total consideration of C$1.30 per share, based on the volume-weighted average price for Silvercorp shares for the five trading days to May 14.

The amendment was agreed after Guyana Goldfields received an unsolicited all-cash proposal from a third party, Silvercorp said.

READ: Silvercorp Metals surpasses fiscal 2020 production guidance despite pandemic shutdown

"After accounting for Silvercorp’s existing shares, the cash consideration of C$0.25 implies a total cash component of C$39.5 million, and the share consideration of C$1.05 implies a total share component of 29.2 million shares," the firm added in a statement.

On the amended basis, Guyana Goldfields shareholders would own a 14.4% stake in Silvercorp following the deal.

Aurora reached commercial production in January 2016 and the deal creates a diversified precious metals producer with two profitable underground mines in China and a gold operation in Guyana.

It also will boast a strong balance sheet to fund growth, Silvercorp told investors at the end of April.

The amended deal has been unanimously approved by the Guyana Goldfields board who recommend that shareholders also vote in favour. It has also been unanimously approved by the Silvercorp board of directors.

"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," Rui Feng, chairman and CEO of Silvercorp said last month.

Silvercorp shares surged 8.6% in New York to US$4.86.

Contact the author at giles@proactiveinvestors.com

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Price: 9.62 CAD

Market: TSX
Market Cap: $1.68 billion

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