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April 27 2020

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Canadian silver miner Silvercorp Metals Inc is to acquire the Region Seven-based Guyana Goldfields Inc in a CDN$105m deal.

A press release from the two companies today announced that they have entered into a definitive 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 release said 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.

Over the last two years Guyana Goldfields has encountered a series of problems including a boardroom battle for control of the company, a slump in share value and a slide in production. It has hundreds of workers at its Aurora mine site.

Under the terms of the Transaction, the release said 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”.

Simultaneous with entering into the Arrangement Agreement, Silvercorp and Guyana Goldfields have also entered into a loan pact, 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.

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