Canadian TSX and NYSE-listed Silvercorp Metals [NYSE:SVM] announced today in a joint presentation that it has signed a binding implementation deed with Orecorp [ASX:ORR] to acquire all the shares not already held at an implied value of 60 cents per share.
OreCorp is a WA-based exploration and development company known for its multi-million-ounce Gold Project Nyanzaga in northwest Tanzania, which is still under development.
Shares are up by 12.64% today as investors are excited by the prospects of further capital for the site’s development.
The company has seen a volatile year of trading as it focuses on developing the site. OreCorp had initially targeted 2024 for the first delivery of gold but now expects production to start in the second half of 2025.
Shares are only up by 2.08% in the past 12 months, approximately 13.8% lower than the broader mining sector.
Source: Tradingview
Silvercorp diversifies while Nyanzaga expands
In a joint announcement today, Silvercorp has agreed to acquire all remaining shares of OreCorp for 15 cents in cash and 0.0967 Silvercorp shares for every OreCorp share.
The deal will have an implied value of 60 cents per OreCorp share, representing a 41.7% premium to OreCorp’s 20-day average trading value since 4 August.
The deal would combine the companies into a larger $630 million market cap miner that is to be listed on the Australian, Toronto, and New York share markets.
This would be the second major acquisition for Silvercorp this year, as it also made a $44 million bid for Celsius Resources back in May, which owns a Filipino-based copper-gold project.
As part of the deal, Silvercorp would also provide OreCorp with $28 million in funding through an equity placement to advance the development of its Nyanzaga Gold Project.
OreCorp holds an 84% interest in the Nyanzaga Gold Project in partnership with the Government of Tanzania, which holds the remaining stake and the mining license.
Source: ORR
The project has a current production target of 2.83 million ounces of gold over the mine’s proposed lifetime of 10 years at an all-in-sustaining cost (AISC) of US$954 per ounce.
Production estimates of 242Koz of gold over the mine’s 10 years would see a payback period of 3.7 years for the project.
OreCorp CEO Henk Diederichs said today’s offer ‘provides our shareholders with an immediate and significant upfront premium and exposure to a geographically diverse mid-tier precious metals company’.
Silvercorp Chairman and CEO Dr Rui Feng said:
‘This transaction will create a new globally diversified precious metals producer. We believe this is a rare opportunity to leverage our technical expertise and strong balance sheet to unlock value for all shareholders by bringing Nyanzaga into commercial production by H2 2025.’
With the board’s support, the deal will now await shareholder approval and regulatory approval in Australia and Tanzania.
Outlook for the merger and future company
The merger of these three companies indicates that the larger Silvercorp intends to diversify away from China.
The Canadian-based metals company had previously only operated mines throughout China focused on silver, lead, and zinc.
With the proposed acquisition of OreCorp and Celsius, the newly merged company will hold globally diversified assets.
This will reduce Silvercorp’s exposure to the whims of the Chinese economy, which has seen its share price fall 59% in the past three years as it faced lockdown-related problems and slowing demand.
For OreCorp, the merger will provide the company with the much-needed capital runway to ensure the development of the Nyanzaga continues without issue.
The Project has a clear upside to both companies as its low AISC of US$954 per ounce highlights.
With the support and partnership of the Tanzanian government, the mine should continue without any regulatory hurdles.
Overall, the move is likely to be one investors should watch as the companies develop their new strategy moving forward.
Window of opportunity
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Regards,
Fat Tail Commodities
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