Silvercorp Metals sweetens offer for Tanzania-focused OreCorp

Silvercorp Metals (TSX: SVM; NYSE: SVM) surprised the market on Thursday by increasing its cash offer for African gold developer OreCorp (ASX: ORR) by A$20 million (US$13 million).

The improved offer follows rumours of that influential shareholders in the takeover target — which include major Western Australian mining actors — are unhappy with the proposed buyout deal.

Silvercorp’s revised bid values OreCorp at A$260 million and the higher A54.3c per share offer represents a 12% premium on Tuesday’s closing price.

The Vancouver-based precious metals producer with assets in China made an initial A$240-million (US$157 million) cash-and-scrip offer or OreCorp in August. It also said it would provide OreCorp with A$28 million (US$18 million) in funding through an equity placement to advance the development of its advanced Nyanzaga gold project in Tanzania.   

The sweetened offer boosts the cash consideration part of the deal by 27% from A15¢ per share to A19¢. The scrip consideration of 0.0967 Silvercorp shares for every OreCorp share remains unchanged, the African company said.

While no reason was given for the move, the revised offer represents a win for OreCorp key shareholders that were not keen to accept the original bid. Liontown Resources (ASX: LTR) chair Tim Goyder, who holds a 5.14% interest in the target company, will pocket $704,000 for stakes valued at US$19 million and US$9.5 million respectively.

Mining veteran Nick Giorgetta, which through its Rollason Pty business owns 10.47% of OreCorp, will receive an an extra US$1.4 million cash.

Predictably, OreCorp board directors are unanimously recommending shareholders to vote in favour of the revised scheme.

Eyes on Tanzania

OreCorp believes that Silvercorp has the balance sheet strength to fund construction and exploration of the Nyanzaga gold project. A feasibility study for the asset, released in August 2022, estimated that the Tanzanian mine could deliver 242,000 oz. of gold per year over the first 10 years of operations, peaking at 295,000 oz. per year.

Nyanzaga is located about 40 km north east of the Bulyanhulu mine, one of Barrick Gold’s (TSX: ABX; NYSE: GOLD) two gold mines in the Lake Victoria Goldfields, which together with the North Mara mine produced 547,000 oz. of gold in 2022.

Silvercorp expects to produce 4,400 to 5,500 oz. of gold, 6.8 to 7.2 million oz. of silver, 70.5 to 73.8 million lb. of lead, and 27.7 to 29.7 million lb. of zinc for its fiscal 2024 ending March 2024.

OreCorp’s shareholders are expected to vote on the deal on Dec. 8. The transaction would create a globally diversified precious metals producer to be listed on Australian, Toronto and New York exchanges.