Silvercorp again hikes takeover offer for OreCorp

Canada’s Silvercorp Metals (TSX: SVM; NYSE: SVM) is boosting its buyout bid for African gold developer OreCorp (ASX: ORR) while competing with Perseus Mining (TSX: PRU; TSX: PRU). 

Silvercorp, a producer with assets in China, increased its offer to A$276.5 million ($249.4 million) from A$260 million Nov. 23, which was itself a bump up from A$230 million in August. Perseus Mining (TSX: PRU; TSX: PRU) on Nov. 27 raised its interest in OreCorp to 19.9% from 15.03%.

Silvercorp’s proposed deal is now for 0.0967 of its common shares and A$0.19 cash per OreCorp share which totals A$0.589 per OreCorp share, Silvercorp said on Wednesday. The Australian company has 429.4 milllion shares outstanding. 

“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 release. “Our offer provides OreCorp shareholders with the opportunity to receive the consideration in a timely manner.”

Vancouver-based Silvercorp is focused on acquiring OreCorp’s Nyanzaga project in Tanzania, which could produce 242,000 oz. gold per a year over its first decade near Barrick Gold’s (TSX: ABX; NYSE: GOLD) Bulyanhulu mine, according to a feasibility study issued in August 2022. Tanzanian authorities have already approved the acquisition, putting it ahead of any other potential bids, Sivercorp said. 

“Our offer is subject to a very limited number of conditions,” Feng said. “Even if an alternative proposal is made, there is uncertainty as to whether it would be successful in receiving similar (government) approval.”

Nyanzaga project

The deal also aims to create a globally diversified precious metals producer, enhanced trading liquidity and re-rating potential, Silvercorp said. 

Nyanzaga, which could reach annual output of 295,000 oz., is about 30 km northeast of Barrick’s Bulyanhulu and 60 km east of AngloGold Ashanti‘s (NYSE:AU) Geita gold mine in the Lake Victoria Goldfields about 1,000 km northwest of the capital, Dar es Salaam. 

The project has an after-tax net present value of US$618million at a 5% discount rate and an internal rate of return of 25% based on a US$1,750 per oz. gold price, according to the feasibility study.

Nyanzaga would cost US$474 million to build including underground development, open pit pre-strip, plant and associated project infrastructure and US$36 million in contingency, Silvercorp said. The government of Tanzania holds a 16% non-dilutable free carried interest in the project. 

Shares in OreCorp closed 0.9% lower at A57¢ apiece on Thursday, valuing the company at A$267.6 million. Silvercorp traded 1% weaker on Thursday morning in Toronto at $3.62, valuing it at $640.7 million.