Silvercorp issues takeover offer for OreCorp

Diamond drill rig on the Nyanzaga Hill. (Image by OreCorp).

Canada’s Silvercorp Metals (TSX, NYSE: SVM) entered into a Bid Implementation Deed to acquire, via an off-market takeover offer, all of the shares it doesn’t already own of African gold developer OreCorp (ASX: ORR).

The deal involves consideration of 0.0967 common shares of Silvercorp and A$0.19 cash per OreCorp share, currently equivalent to A$0.589 per OreCorp share.

“We are pleased to adjust our transaction with OreCorp after it became clear that the previously proposed scheme, due to outside interference, was at risk of not completing,” Silvercorp’s chairman and CEO Rui Feng said in a media statement, referring to the November 23 cash offer his company made to OreCorp, which valued OreCorp at A$260 million ($170m).

“Our offer is subject to a very limited number of conditions. Silvercorp obtained the required approval of the Tanzania Fair Competition Commission approximately two months after the application was submitted. Even if an alternative proposal is made, there is uncertainty as to whether it would be successful in receiving similar FCC approval. Accordingly, our offer provides OreCorp shareholders with the opportunity to receive the consideration in a timely manner,” Feng pointed out.

Further details regarding the offer are expected to be provided in Silvercorp’s Bidder’s Statement and OreCorp’s Target’s Statement.

Globally diversified precious metals producer

The executive noted that this transaction aims to create a globally diversified precious metals producer and should provide enhanced trading liquidity, re-rating potential and the opportunity to participate in further upside from the Nyanzaga project in Tanzania and Silvercorp’s existing mining portfolio to shareholders of both companies.

Located approximately 40 kilometres northeast of the Bulyanhulu mine, one of Barrick Gold’s two gold mines in the Lake Victoria Goldfields, the Nyanzaga project could deliver 242,000 ounces of gold per annum over the first 10 years of operations, according to a definitive feasibility study for the asset announced in August 2022. Production could peak at 295,000 ounces per year, at a life-of-mine of 10.7 years minimum.

“The development of the Nyanzaga Project is also subject to regulatory and jurisdiction risks in Tanzania. For example, the Government of Tanzania (through the Treasury Registrar) currently holds a 16% non-dilutable free carried interest in the share capital of Sotta Mining Corporation Limited (SMCL). In addition, the Government of Tanzania has a right to acquire, in total, up to 50% of the share capital of SMCL, determined by the total value of the tax expenditures enjoyed by SMCL,” Silvercorp’s chairman said in the media brief.

“However, relevant legislation also provides that the Government of Tanzania agrees and undertakes that any increase in ownership or economic participation rights by the Government of Tanzania in addition to the 16% free carried interest shares will be by agreement between the parties, and that the Government of Tanzania will not unilaterally seek to increase such ownership or economic participation rights,” Feng emphasized.

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