Gran Colombia Gold (TSX: GCM; US-OTC: TPRFF) has walked away from its proposed acquisition of Guyana Goldfields (TSX: GUY; US-OTC: GUYFF) and terminated its plan of arrangement for a three-way merger with Gold X Mining (TSXV: GLDX; US-OTC: SSPFX).
Gran Colombia had envisioned creating a larger, South America-focused gold producer with operations in Colombia and Guyana and had offered 0.142 of a share for each Guyana Goldfields share, which worked out to a 90¢ per share valuation (for an implied overall valuation of about $155 million). Gran Colombia’s offer included a US$15 million loan provision to Guyana Goldfields for ongoing operations at its Aurora underground project.
At the same time, Gran Colombia had signed a definitive business combination agreement to acquire the remaining 81% of Gold X Mining it did not already own through an offer of 0.5 of a Gran Colombia share for each Gold X share, implying a value of $3.17 per share (an implied valuation of about $100 million for the shares it doesn’t own) as of the proposed deal announcement.
The main synergy flagged in Gran Colombia’s proposed deal came from leveraging planned mining capacity at Gold X Mining’s Toroparu gold development project in western Guyana with the nearby processing infrastructure at Guyana Goldfields’ Aurora mine and mill complex.
Gran Colombia produces gold from two operations in Colombia, its wholly owned Segovia underground mine, and through its 74% ownership in Caldas Gold (TSXV: CGC), which operates the Marmato mine. Last year, Segovia produced 214,241 oz. gold and Marmato 25,750 ounces.
Guyana Goldfields had rebuffed Gran Colombia’s unsolicited proposal on May 13 and reaffirmed its support of an earlier takeover offer from Silvercorp Metals (TSX: SVM; NYSE-AM: SVM) of 60¢ in cash, or 0.1195 of a Silvercorp common share, for each of its shares, subject to a maximum cash consideration of $33.2 million (for an implied overall valuation of about $105 million).
Silvercorp Metals and Guyana Goldfields later amended that agreement on May 17. Under the new agreement, each shareholder of Guyana Goldfields will receive 25¢ in cash and 0.1849 of a Silvercorp common share, for total consideration of $1.30 per share.
Silvercorp currently holds about 16.55 million common shares of Guyana Goldfields, or about 9.5% of the company.
Guyana Goldfields’ Aurora mine has experienced operational challenges over the past couple years, as it has fallen short of achieving its targeted open-pit mining rates and saw contained gold in proven and probable reserves at Aurora slashed 43% just over a year ago.
While it has been in the process of transitioning from open pit to underground operations, the company announced in March that its Aurora underground development program was temporarily suspended due to COVID-19 related travel restrictions in and out of Guyana, which also resulted in delays in the next phase of mine development. Guyana Goldfields said they expect ore feed sources at Aurora to be depleted this quarter and anticipated at least a quarter of care and maintenance, with no further open-pit production this year.
The Aurora mine produced 124,200 oz. gold in 2019 at an all-in sustaining costs (AISCs) of US$1,490 per ounce.