Vancouver-based Silvercorp Metals Inc. (TSX: SVM) (NYSE American: SVM) and the Australian firm OreCorp Limited (ASX: ORR) have signed an agreement where Silvercorp will acquire all the ordinary shares of OreCorp not already held by Silvercorp or its associates.
The deal was announced on Tuesday and will be done through an Australian scheme of arrangement, subject to various conditions. The agreement aims to create a diversified precious metals company with a market cap of US$630 million.
OreCorp shareholders will receive A$0.15 in cash and 0.0967 of a Silvercorp common share for each OreCorp share held, valuing each OreCorp Share at A$0.60.
The agreement also includes Silvercorp providing OreCorp with approximately A$28 million in funding to advance the development of its Nyanzaga Gold Project in Tanzania.
Nyanzaga is located southwest of the city of Mwanza. It holds a Special Mining Licence (SML) spanning 23.4 kilometer square, which includes the Nyanzaga and Kilimani deposits along with several exploration opportunities.
As per the Tanzanian Mining Act, the Tanzanian Government possesses a 16 per cent non-contributory stake in Sotta Mining Corporation Limited, a branch of OreCorp Limited that holds the license.
“Under the leadership of her excellency, President Samia Suluhu Hassan, Tanzania is becoming an attractive place for foreign investment. We look forward to partnering with the Government of Tanzania and leveraging OreCorp’s existing team and relationships to ensure a successful development that benefits all stakeholders,” Silvercorp chairman Rui Feng said.
Orecorp stock went up on Tuesday by 5.21 per cent to $0.50 on the Australian Stock Exchange while Silvercorp’s stock dropped almost by the same amount at 5.83 per cent to $3.64 on the Toronto Stock Exchange.
Nyanzaga project. Map via OreCorp
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Under the agreement, a price of A$0.60 was suggested for each OreCorp share which is a 41.7 per cent increase compared to the 20-day VWAP of OreCorp’s shares on the ASX up to Aug. 4, 2023.
This places OreCorp’s value at roughly A$242 million when considering all potential shares. After the deal is put into action, current OreCorp shareholders will possess 17.8 per cent of Silvercorp’s available common shares, taking into account all potential shares.
The transaction is subject to various conditions, including approval from the Federal Court of Australia, the Tanzanian Fair Competition Commission and other customary conditions. Silvercorp has also agreed to apply for admission to the Australian Securities Exchange (ASX) official list.
Both the OreCorp and Silvercorp Boards have unanimously approved the transaction. OreCorp’s Board recommends that its shareholders vote in favor of the deal, while Silvercorp’s Board has also given its nod for the transaction.
“This transaction provides our shareholders with an immediate and significant upfront premium and exposure to a geographically diverse mid-tier precious metals company,” OreCorp CEO Henk Diederichs said.
“With a strong operating history, solid balance sheet and significant mine building and operational experience, Silvercorp’s management team is well-positioned to fund and advance Nyanzaga into commercial production.”
Mining contributes to over 50 per cent of Tanzania’s total export which a significant portion comes from gold. The country boasts gold reserves of 10 million ounces, generating revenue exceeding a billion USD.
Other Canadian companies operating in Tanzania include Barrick Gold ( TSX: ABX) (NYSE: GOLD) which operates the Bulyanhulu mine in northwest Tanzania. In 2019, Barrick Gold also started a joint venture with the Tanzania government Twiga Minerals to oversee asset management in the country.
The Geita gold mine is considered one of the largest mines in the country and its owned by AngloGold Ashanti Limited (JSE: ANG) (NYSE: AU). Shanta Gold (AIM: SHG) also operates the New Luika gold mine in southwest Tanzania.
