Guyana Goldfields gets better offer from current shareholder
-Silvercorp has five days to improve on bid
Canadian gold miner, Guyana Goldfields Inc (GGI) - which runs a large-scale mine in Cuyuni/Mazaruni - is mulling acceptance of a new buyout offer from a foreign-based company. This after inking an agreement of purchase from a Canadian-owned company, Silvercorp.
In a release in Toronto, Canada, yesterday, GGI made the surprise announcement that it has received a “binding proposal” from a foreignbased multinational mining company for the acquisition of all its issued and outstanding common shares not already owned by the new offeror. The release states that the GGI board of directors had “unanimously determined, after consultation with its financial and legal advisors’ that the new offer on the table constitutes what it terms as a “superior proposal” compared to the terms of the arrangement agreement between the Company and Silvercorp Metals Inc dated April 26, and amended on May 16.
According to the terms of the new offer, the Company’s shareholders would receive cash consideration of C$1.85 for each common share, valuing Guyana Goldfields at approximately C$323 million. The new buyer has also agreed to provide the Company with a US$30 million secured loan facility to finance ongoing operations of the Aurora gold mine and to fund other liquidity needs of the Company. Except for the amount of the new loan facility, GGI says that the loan agreement proposed to be entered into between it and the new buyer is substantially similar to the loan agreement between the Company and Silvercorp dated April 26.
GGI disclosed that based on the closing price of the Silvercorp common shares on the Toronto Stock Exchange as of June 3, the new offer represents a premium of approximately 35% to the implied value of the consideration offered pursuant to the Silvercorp Arrangement Agreement. It further explained that except for the consideration being offered, the arrangement agreement that would be entered into with the new buyer is substantially the same as the Silvercorp Arrangement Agreement. Commensurate with the increase in consideration, the proposed arrangement agreement with the unnamed buyer provides for an increase in the termination fee to C$11.3 million, which is payable by the Company to the new buyer “in certain circumstances”. The proposed arrangement agreement with the new buyer also includes a reverse termination fee in the amount of C$11.3 million, which is payable by the new buyer to the Company “in certain other circumstances”.
In accordance with the Silvercorp Arrangement Agreement, the GGI says it has notified Silvercorp that it considers the new offer to be a superior proposal under the Silvercorp Arrangement Agreement and that the five-businessday matching period has commenced, during which Silvercorp has the right, but not the obligation, to propose to amend the terms of the Silvercorp Arrangement Agreement in order for the new offer to no longer to be a superior proposal. This “Matching Period” expires at 4:30 pm on June 10. Further, should Silvercorp decide not to extend a better counteroffer, the Company says it will then move to release further details of the new offer following definitive agreements between it and the new proposed buyer.
Stabroek News had reported in an April 28 article, that Canadian silver miner Silvercorp Metals Inc was buying the Region Seven-based Guyana Goldfields Inc (GGI) in a C$105m deal. According to a press statement from the two companies they had entered into a definitive agreement whereby Silvercorp - with Chinabased silver mining operations - would 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 statement also indicated 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.
However, on May 11, GGI announced the receipt of an unsolicited proposal from another Canadian mining concern - Gran Colombia Gold Corp. to acquire all of the issued and outstanding common shares of the Company at a share exchange ratio of 0.142 Gran Colombia shares for each Company share. But shortly thereafter, on May 13, the GGI board, citing several factors, determined that Gran Columbia’s proposal was not in the best interests of the Company or its shareholders. These factors included the overly complex and highly conditional nature of Gran Columbia’s offer as well as the proposal’s failure to provide the Company with adequate short term liquidity.
The Company’s board also reaffirmed its “unanimous” support previously entered into with Canadian-based Silvercorp Metals Inc which was announced on April 27.
On May 17, the Company announced it had entered into an amending agreement with Silvercorp to amend the arrangement agreement dated April 26, 2020 such that the consideration offered to shareholders of the Company was C$0.25 in cash and 0.1849 of a Silvercorp common share. This after the rejection of an unsolicited all-cash proposal from Gran Colombia to acquire GGI.
GGI also advised shareholders that based on this new development, the annual and special meeting of shareholders of the Company scheduled for June 29, will not proceed on that date and, accordingly, no meeting materials have been mailed to shareholders or filed on SEDAR at this time.
Last month, GGI terminated the services of over 160 employees and planned to continue to reduce its approximately 530-member workforce as it prepares for a takeover by Silvercorp.