SilverCorp loans US$15m to Guyana Goldfields Inc. in acquisition deal

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Aurora Gold Mines (Guyana Goldfields)

With investments in Canada and China, Canadian mining company; SilverCorp Metals plans to inject US$15m into Guyana Goldfields Inc. as part of an acquisition deal.

The agreement for the acquisition was signed on Sunday April 26, 2020. The funds will be in the form of a loan and is intended to support the continuation of the Aurora Underground Mining Project in Guyana.

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.

Under the terms of the agreement, “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”.

The caretaker government said that Guyana Goldfields Inc. has contributed significantly, despite its internal and other difficulties, to annual gold declarations, and the Guyanese 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 fulfill its obligations to its shareholders and the Government and people of Guyana”.

Prior to approval being granted, the Government said 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.