Silvercorp Metals (TSX: SVM; NYSE: SVM) has decided not to match a third-party superior bid for Guyana Goldfields (TSX: GUY), and said that if the takeover target terminates an agreement they signed in April, it would have to pay the company $9 million (US$6.7 million).
The Vancouver-headquartered miner, which produces silver, lead and zinc from mines in China, originally offered $105 million (about US$75 million) for Guyana Goldfields. It later improved it to $227 million, as Gran Colombia Gold (TSX: GCM; US-OTC: TPRFF) submitted a separate, rival proposal.
Guyana Goldfields said on June 3 that it had received yet another bid from an unnamed “foreign-based multinational miner.” That offer valued the company at $323 million (US$240 million), which was 35% higher than Silvercorp’s sweetened offer.
The Toronto-based miner gave Silvercorp five business days to match or improve the US$1.85 cash-per-share new bid. It noted, however, that the fresh offer wouldn’t necessarily lead to a termination of the agreement with Silvercorp.
Guyana Goldfields has been under investor pressure due to the poor performance of its only operating mine, Aurora, following a resources review.
The mid-tier gold producer surprised the market in March last year by announcing the amount of gold in proven and probable reserves at Aurora had declined by almost 1.7 million oz., compared to estimates published in 2018.
The news triggered a bitter battle for control of the company led by founder and former chairman Patrick Sheridan, which was settled in April 2019. The deal included the appointment of an interim director and chief executive, who was replaced in January by Alan Pangbourne, Guyana’s current president and CEO.
Shares in the company fell to the lowest since 2008 in October, after the embattled Canadian miner revealed Aurora would fail to meet production guidance. The company added that a mine plan review was underway.
Shares of Guyana Goldfields closed at $1.75 per share on June 10. Over the last year, it has traded in a range of 25¢ and $1.80 per share. It has 175 million common shares outstanding for a $299-million market capitalization.