Silvercorp Metals and Guyana Goldfields in upgraded pact
Silvercorp Metals Inc and Guyana Goldfields Inc yesterday announced that they have entered into an amending agreement to the deal entered into previously and announced on April 27, 2020, pursuant to which Silvercorp agreed to acquire all of the issued and outstanding shares of Guyana Goldfields by way of a court approved plan of arrangement under the Canada Business Corporations Act.
Guyana Goldfields’ subsidiary AGM runs a largescale gold mine at Aurora in the Cuyuni/Mazaruni and hundreds of workers are expected to be laid off to facilitate a transition from open pit to underground mining.
A release from the companies yesterday said that Pursuant to the terms of the amending agreement, each holder of Guyana Goldfields shares will receive, for each Guyana Goldfields share held, C$0.25 in cash and 0.1849 of a Silvercorp common share, for total consideration of C$1.30 per share (based on the volume weighted average price for Silvercorp common shares for the 5 trading days ended May 14, 2020).
The terms of the amended pact were agreed following receipt by Guyana Goldfields of an unsolicited all-cash proposal from another Canadian mining company, Gran Colombia to acquire Guyana Goldfields.
As of the date of yesterday’s news release, Silvercorp holds 16,549,000 Guyana Goldfields shares, representing 9.48% of the issued and outstanding common shares.
After accounting for Silvercorp’s existing shares, the release said that 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. Based on these considerations, this would translate into existing Guyana Goldfields shareholders owning 14.4% of Silvercorp’s pro forma basic shares outstanding following the transaction.
The release said that the amended agreement has been unanimously approved by the Board of Directors of Guyana Goldfields who recommend that Guyana Goldfields shareholders vote in favour of the transaction. The amended agreement has also been unanimously approved by the Board of Directors of Silvercorp.
Under the terms of the earlier deal, the two companies had agreed that “each holder of Guyana Goldfields shares will have the option to receive, for each Guyana Goldfields share held, C$0.60 in cash or 0.1195 of a Silvercorp common share (valued at C$0.60 based on the volume weighted average price for Silvercorp common shares for the 20 trading days ended April 24, 2020), subject to a maximum cash consideration of C$33.2 million. If all Guyana Goldfields shareholders elect to receive cash, 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 for the 20 trading days ended April 24, 2020). Assuming the maximum cash consideration, existing Guyana Goldfields shareholders will own 7.1% of Silvercorp’s pro forma basic shares outstanding following the Transaction. The consideration of C$0.60 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. The implied equity value of the Transaction is approximately C$105 million”.
On May 13, Guyana Goldfields said it was s no longer considering the buy-out offer from fellow Canada-based gold producer, Gran Colombia Gold Corp.
In a release, Guyana Goldfields said through its office in Toronto, Canada, “that after careful consideration and consultation with its financial and legal advisors, [the company] has unanimously determined to reject the unsolicited proposal announced by Gran Colombia Gold Corp on May 11, 2020 to acquire all of the issued and outstanding common shares of the Company for consideration consisting entirely of Gran Colombia shares.”
Guyana Goldfields then reaffirmed its “unanimous” support for the agreement previously entered into with Silvercorp.
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