…reaffirms commitment to transaction with Silvercorp Metals

GUYANA Goldfields Inc., on Wednesday, announced that its board of directors, after careful consideration and consultation with its financial and legal advisers, has unanimously determined to reject the unsolicited proposal announced by Gran Colombia Gold Corp. to acquire all of the issued and outstanding common shares of the company.

In a release, the Guyana Goldfields says the board reaffirms its unanimous support for the transaction previously entered into with Silvercorp Metals Inc. (“Silvercorp”) (TSX/NYSE American: SVM) and announced on April 27, 2020 (the “Silvercorp Transaction”).

The board has determined that Gran Colombia’s proposal is not in the best interests of the company or its shareholders since, among other things, the Gran Colombia’s Proposal (i) is complex and highly conditional in nature, as it is contingent on the concurrent completion of a separate acquisition by Gran Colombia of Gold X Mining Corp., the terms of which have not been disclosed to the company; (ii) requires the approval of the shareholders of each of Gran Colombia, Gold X and the Company, each conditional on the other providing such approval, and (iii) fails to provide the company with adequate short term liquidity, given the C$3.65 million break fee that would be payable to Silvercorp, upon the entering into of a transaction agreement with Gran Colombia and the increased ongoing costs to the company associated with a delayed closing date relative to the Silvercorp Transaction.

The board also acknowledges that, based on current trading prices, the Gran Colombia Proposal represents a premium to the agreed price under the Silvercorp Transaction; however, the board is of the view that such premium does not sufficiently compensate the company’s shareholders for the increased risk associated with the Gran Colombia Proposal.
Guyana Goldfields said it is committed to completing the transaction with Silvercorp. Under the terms of the arrangement agreement dated April 26, 2020 entered into with Silvercorp (the “Arrangement Agreement”), Silvercorp has agreed to acquire all of the issued and outstanding shares of the company by way of a plan of arrangement under the Canada Business Corporations Act. Pursuant to the terms of the Arrangement Agreement, each holder of Guyana Goldfields shares will have the option to receive, for each share held, C$0.60 in cash or 0.1195 of a Silvercorp common share, subject to a maximum cash consideration of C$33.2 million.

The Silvercorp Transaction will provide significant benefits to the company’s shareholders including: Exposure to a significant premium to the company’s April 24, 2020 closing price, enhanced trading liquidity, and a significant re-rating opportunity with a geographically diverse mid-tier precious metals company; Strong management team that is committed to developing the Aurora Underground Project and has a track record of operational excellence in underground mining over the last 15 years; Option to elect to receive cash in the Silvercorp Transaction which provides downside protection;

Elimination of 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 sufficient to fund expenditures of the company and advance the Aurora Underground Project during the period before closing of the Silvercorp Transaction.