Silvercorp Metals Inc. (“Silvercorp”) (TSX/NYSE
American: SVM) and
Guyana Goldfields Inc. (TSX:
GUY) (“Guyana Goldfields”) are pleased to announce that they have
entered into a definitive agreement (the “Arrangement Agreement”)
whereby Silvercorp 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 “Transaction”). 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.
Under the terms of the Transaction, 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.
Concurrently with entering into the Arrangement
Agreement, Silvercorp and Guyana Goldfields have also entered into
a loan agreement, whereby Silvercorp will lend Guyana Goldfields up
to US$15 million (the “Interim Loan Facility”) with a defined use
of proceeds related to ongoing operations at the Aurora Underground
Project, as well as for certain working capital and general
corporate purposes.
Transaction Rationale
- Creates a leading
precious metals producer: Combined company will
benefit from enhanced strategic positioning and greater
diversification, providing the opportunity for a significant
re-rate upon the successful development of the Aurora Underground
Project;
- Strong financial
position: A strong balance sheet and a robust cash flow
profile will provide the capital to develop the Aurora Underground
Project and pursue further potential M&A opportunities;
- An attractive growth
profile: Gold project pipeline includes the BYP gold
project in China and the Aurora underground project in Guyana;
- Exploration
upside: Ability to fund exploration programs to test
numerous, high-priority brownfield and greenfield exploration
targets within a 1,200 km2 land package hosted in the highly
prospective Guiana Shield Greenstone Belt, providing an opportunity
to unlock value from an underexplored land package;
- Significant pro-forma
synergies: The combined company will benefit from
the strong underground mining skill set of a proven management team
and will have the ability to deliver efficiencies at the corporate
level and leverage Guyana Goldfield’s deep experience and network
in Guyana during a transition period, working towards near-term
development; and
- Enhanced capital markets
profile: Bolstering trading liquidity and
shareholder base with a newly diversified asset portfolio, in
addition to the recent inclusion of Silvercorp in major indices
including the VanEck Gold Miners (GDX) and S&P/TSX Composite
Index.
Rui Feng, Chairman and CEO of Silvercorp,
stated:
“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.
We look forward to partnering with the
Government of Guyana to make a successful entry into the region,
leveraging Guyana Goldfield’s existing team and relationships to
ensure a smooth transition and continued development that benefits
all stakeholders.”
Alan Pangbourne, President and CEO of Guyana
Goldfields stated:
“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.”
Benefits for Guyana Goldfields
Shareholders
- Exposure to an immediate premium,
enhanced trading liquidity, and a significant re-rating
opportunity;
- Reduces development risk given
Silvercorp’s track record of operational excellence in underground
mining over the last 15 years;
- Silvercorp’s balance sheet
eliminates the funding risk associated with the Aurora Underground
Project, providing access to Silvercorp’s strong balance sheet and
financing options available to a larger company during these times
of uncertain market conditions; and
- Provision of Interim Loan Facility
to fund expenditures at the Aurora Underground Project during the
period before closing of the Transaction.
Benefits for Silvercorp
Shareholders
- Adds a gold development project to
significantly increase Silvercorp’s precious metals production
profile and exposure to gold;
- Re-rating opportunity due to
enhanced scale, asset diversification, exploration upside, and a
foothold in South America; and
- Cash and share transaction
preserves cash, while minimizing dilution, in order to maintain a
strong balance sheet that will enable the Company to weather
current market conditions and pursue further growth
opportunities.
Board of Directors’
Recommendations
The Arrangement Agreement has been unanimously
approved by the Board of Directors of Guyana Goldfields who
recommends that Guyana Goldfields shareholders vote in favour of
the Transaction. The Board of Directors of Guyana Goldfields has
received a fairness opinion from each of RBC Capital Markets and
Stifel GMP, which state that the consideration to be received by
Guyana Goldfields shareholders pursuant to the Transaction is fair
from a financial point of view, to Guyana Goldfields shareholders
(other than Silvercorp). The Arrangement Agreement has also been
unanimously approved by the Board of Directors of Silvercorp.
Transaction Conditions and
Timing
Full details of the Transaction will be included
in the management information circular of Guyana Goldfields that is
expected to be mailed to Guyana Goldfields’ shareholders by late
May 2020. The Transaction will be effected by way of a
court-approved plan of arrangement under the Canada Business
Corporations Act and will be subject to the approval of 66⅔% of
votes cast by shareholders of Guyana Goldfields at a special
meeting of Guyana Goldfields shareholders expected to be held by
the end of June 2020.
Directors and officers of Guyana Goldfields have
entered into voting support agreements pursuant to which they have
agreed to vote their common shares in favour of the Transaction. In
addition to shareholder and court approvals, the Transaction is
subject to applicable regulatory approvals including TSX and NYSE
American approval and the satisfaction of certain other closing
conditions customary in transactions of this nature.
The Arrangement Agreement provides for, among
other things customary board support and non-solicitation
covenants, with “fiduciary out” provisions that allow Guyana
Goldfields to accept a superior proposal, subject to a “right to
match period” in favour of Silvercorp. The Arrangement Agreement
also provides for a termination fee of C$3.65 million to be paid by
Guyana Goldfields to Silvercorp if the Arrangement Agreement is
terminated in certain specified circumstances, and reimbursement of
expenses for Silvercorp if the Arrangement Agreement is terminated
in certain other specified circumstances.
None of the securities to be issued pursuant to
the Transaction have been or will be registered under the United
States Securities Act of 1933, as amended (the “U.S. Securities
Act”), or any state securities laws, and any securities issuable in
the Transaction are anticipated to be issued in reliance upon
available exemptions from such registration requirements pursuant
to Section 3(a)(10) of the U.S. Securities Act and applicable
exemptions under state securities laws. This press release does not
constitute an offer to sell or the solicitation of an offer to buy
any securities.
Management Team and Board of
Directors
The combined entity will continue to have its
headquarters in Vancouver and detailed integration plans will be
finalized over the next few months.
Advisors and Counsel
Canaccord Genuity Corp. is acting as financial
advisor to Silvercorp and McCarthy Tétrault LLP is acting as
Silvercorp’s legal advisor.
RBC Capital Markets is acting as financial
advisor to Guyana Goldfields and Fasken Martineau DuMoulin LLP is
acting as Guyana Goldfield’s legal advisor.
Conference Call/Webcast
Management will host a joint conference call and
webcast today, at 8:00 am Eastern Time / 5:00 am Pacific Time to
provide further information. Participants are advised to dial
in five minutes prior to the scheduled start time of the call. A
presentation will be made available on both companies’ websites
prior to the webcast. Webcast details:
Date: |
April 27,
2020 at 8:00 am Eastern Time / 5:00 am Pacific Time |
|
|
Toll-free: |
Canada/USA |
1-800-319-4610 |
|
International |
1-604-638-5340 |
|
Hong Kong |
800-930-470 |
|
Conference ID |
10009469 |
Webcast: |
http://services.choruscall.ca/links/silvercorp20200427.html |
About Silvercorp
Silvercorp is a profitable Canadian mining
company producing silver, lead and zinc metals in concentrates from
mines in China. The Company’s goal is to continuously create
healthy returns to shareholders through efficient management,
organic growth and the acquisition of profitable projects.
Silvercorp balances profitability, social and environmental
relationships, employees’ wellbeing, and sustainable
development.
About Guyana Goldfields
Guyana Goldfields Inc. is a Canadian based gold
producer primarily focused on the exploration, development and
operation of gold deposits in Guyana, South America.
For further information
Silvercorp Metals Inc.Lon Shaver Vice
PresidentPhone: (604) 669-9397Toll Free 1(888) 224-1881Email:
investor@silvercorp.caWebsite: www.silvercorp.ca |
Guyana Goldfields Inc.Annie SismanianVice
President, Corporate Finance & Investor RelationsPhone: (416)
933-5495Email: asismanian@guygold.comWebsite: www.guygold.com |
CAUTIONARY DISCLAIMER - FORWARD LOOKING
STATEMENTS
Certain of the statements and information in
this press release constitute “forward-looking statements” within
the meaning of the United States Private Securities Litigation
Reform Act of 1995 and “forward-looking information” within the
meaning of applicable Canadian provincial securities laws. Any
statements or information that express or involve discussions with
respect to predictions, expectations, beliefs, plans, projections,
objectives, assumptions or future events or performance (often, but
not always, using words or phrases such as “expects”, “is
expected”, “anticipates”, “believes”, “plans”, “projects”,
“estimates”, “assumes”, “intends”, “strategies”, “targets”,
“goals”, “forecasts”, “objectives”, “budgets”, “schedules”,
“potential” or variations thereof or stating that certain actions,
events or results “may”, “could”, “would”, “might” or “will” be
taken, occur or be achieved, or the negative of any of these terms
and similar expressions) are not statements of historical fact and
may be forward-looking statements or information.
Forward-looking statements or information relate to, among other
things: the price of silver and other metals; the accuracy of
mineral resource and mineral reserve estimates at the Company’s
material properties; the sufficiency of the Company’s capital to
finance the Company’s operations; estimates of the Company’s
revenues and capital expenditures; estimated production from the
Company’s mines in the Ying Mining District; timing of receipt of
permits and regulatory approvals; availability of funds from
production to finance the Company’s operations; and access to and
availability of funding for future construction, use of proceeds
from any financing and development of the Company’s properties.
Forward-looking statements or information are
subject to a variety of known and unknown risks, uncertainties and
other factors that could cause actual events or results to differ
from those reflected in the forward-looking statements or
information, including, without limitation, risks relating to:
fluctuating commodity prices; calculation of resources, reserves
and mineralization and precious and base metal recovery;
interpretations and assumptions of mineral resource and mineral
reserve estimates; exploration and development programs;
feasibility and engineering reports; permits and licenses; title to
properties; property interests; joint venture partners; acquisition
of commercially mineable mineral rights; financing; recent market
events and conditions; economic factors affecting the Company;
timing, estimated amount, capital and operating expenditures and
economic returns of future production; integration of future
acquisitions into the Company’s existing operations; competition;
operations and political conditions; regulatory environment in
China and Canada; environmental risks; foreign exchange rate
fluctuations; insurance; risks and hazards of mining operations;
key personnel; conflicts of interest; dependence on management;
internal control over financial reporting as per the requirements
of the Sarbanes-Oxley Act; and bringing actions and enforcing
judgments under U.S. securities laws.
This list is not exhaustive of the factors that
may affect any of the Company’s forward-looking statements or
information. Forward-looking statements or information are
statements about the future and are inherently uncertain, and
actual achievements of the Company or other future events or
conditions may differ materially from those reflected in the
forward-looking statements or information due to a variety of
risks, uncertainties and other factors, including, without
limitation, those referred to in the Company’s Annual Information
Form for the year ended March 31, 2019 under the heading “Risk
Factors”. Although the Company has attempted to identify
important factors that could cause actual results to differ
materially, there may be other factors that cause results not to be
as anticipated, estimated, described or intended.
Accordingly, readers should not place undue reliance on
forward-looking statements or information.
The Company’s forward-looking statements and
information are based on the assumptions, beliefs, expectations and
opinions of management as of the date of this press release, and
other than as required by applicable securities laws, the Company
does not assume any obligation to update forward-looking statements
and information if circumstances or management’s assumptions,
beliefs, expectations or opinions should change, or changes in any
other events affecting such statements or information. For
the reasons set forth above, investors should not place undue
reliance on forward-looking statements and information.
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