Gran Colombia Gold Stock Swap Offer Rejected By Guyana Goldfields
Guyana Goldfields Inc. (TSX: GUY) has said that its board of directors has unanimously determined to reject the unsolicited proposal announced by Gran Colombia Gold Corp. (TSX: GCM) made last week to acquire the company in a stock swap. The Board reaffirmed its unanimous support for the transaction previously entered into with Silvercorp Metals Inc. (TSX/NYSE: SVM) and announced on April 27.
Guyana Goldfields’ board says that the Gran Colombia Proposal is not in the best interests of the Company or its shareholders since, among other things, the Gran Colombia Proposal 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. (TSXV: GLDX, OTCQX: SSPXF), the terms of which have not been disclosed to Guyana Goldfields; it 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 it fails to provide Guyana Goldfields with adequate short term liquidity, given the $3.65 million CAD 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 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 prefers completing the Silvercorp deal
Under the terms of the arrangement agreement dated April 26, 2020 entered into with Silvercorp, 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.
Guyana Goldfields’ board says 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 metal 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.
Shareholder Meeting details
The shareholder meeting is scheduled for June 29th, 2020 with a Record Date for shareholders of May 20th, 2020. Full details of the Silvercorp Transaction will be included in the management information circular of Guyana Goldfields that is expected to be mailed to Guyana Goldfields’ shareholders in early June 2020.
Shareholders who have questions regarding the Silvercorp Transaction should contact the company’s strategic shareholder advisor and proxy solicitation agent Kingsdale Advisors at 1-800-775-1986, or collect call outside North America at 416-867-2272, or by e-mail at [email protected].
RBC Capital Markets is acting as financial advisor to Guyana Goldfields and Fasken Martineau DuMoulin LLP is acting as Guyana Goldfields’ legal advisor. Kingsdale Advisors is acting as strategic shareholder and communications advisor and proxy solicitation agent.
Above photo courtesy of Guyana Goldfields, Inc.