…gov’t welcomes new investment

VANCOUVER –BASED Silvercorp Metals Inc has entered a definitive agreement with Guyana Goldfields Inc , which sees the former acquiring the Region Seven- based company in a CDN$105M deal.

According to a release from Guyana Goldfields, 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.” Silvercorp is one of the world’s largest silver-producing firms, with its main business interests based in China.

The move comes at a time when Guyana Goldfields has been experiencing turbulent relations with its shareholders, as regards its management of operations here.
According to Guyana Goldfields, under the terms of the transaction with Silvercorps, each holder of 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 and this is 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 company said.

As part of the financial negotiations between the two firms, Guyana Goldfields said that concurrently with entering into the Arrangement Agreement, the two companies have also entered into a loan agreement, whereby Silvercorp will lend Guyana Goldfields up to US$15 million 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.
Said Rui Feng, Chairman and CEO of Silvercorp: “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 programmes 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.”

On the other hand, 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.”

Guyana Goldfields said that its share will benefit from exposure to an immediate premium, enhanced trading liquidity, and a significant re-rating opportunity.It said that the deal reduces development risk given Silvercorp’s track record of operational excellence in underground mining over the last 15 years.

In addition, it noted that 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.

On Monday afternoon, the Government of Guyana welcomed the news of foreign investment by SilverCorp Metals Inc. It noted that as one of two large gold-mining operations here, the company has contributed significantly, despite its internal and other difficulties, to annual gold declarations, and Guyana’s economy, by extension. “Therefore, the government welcomes this investment that is expected to put the company in a more stable financial position to continue its operations and fulfil its obligations to its shareholders and the Government and people of Guyana.”

According to the government, prior to approval being granted, it will be carrying out the necessary due diligence exercises as required by the laws of Guyana to ensure that there is legal compliance with the proposed transfer of interests, and that matters pertaining to workers’ rights especially, and other important obligations, are satisfactorily addressed.