Silvercorp is diversifying with the acquisition of fellow-listed Guyana Goldfields, which operates the Aurora gold mine in Guyana.
Silvercorp, which currently produces silver, lead and zinc from mines in China, will buy Guyana Goldcorp at a premium that values the company at C$105-million.
“This transaction provides our shareholders with an immediate and significant upfront premium and exposure to a geographically diverse mid-tier precious metal company,” said Guyana Goldfields president and CEO Alan Pangbourne.
Guyana Goldfields noted that Silvercorp had a strong balance sheet and robust cash flow profile that would provide capital to develop the Aurora underground project.
The merged business would also have the ability to fund exploration programme to test high-priority brownfield and greenfield exploration targets within a 1 200 km2 land package hosted in the highly prospective Guiana Shield Greenstone Belt.
“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 programme in a proven gold district,” commented Silvercorp chairperson and CEO Rui Feng in a statement.
Under the terms of the transaction announced on Monday, Guyana Goldfields shareholders would have the option to receive 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, subject to a maximum cash consideration of C$33.2-million.
If all Guyana Goldfields shareholders elect to receive cash, consideration for each share would 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 shares for the 20 trading days,
Assuming the maximum cash consideration, existing Guyana Goldfields shareholders would own 7.1% of Silvercorp’s pro forma basic shares outstanding following the transaction.
Guyana Goldfields pointed out that the consideration of C$0.60 a share represented a 71% premium to the 20-day volume weighted average price of the company.