“The board of OreCorp carefully considered the proposal over the weekend with its advisers and notified Perseus that it was not considered to be a superior proposal” to Silvercorp’s Dec. 27 bid, OreCorp said on Monday in a release.
Perth, Australia-based Perseus’s offer values OreCorp at A$258 million, 4% more than Silvercorp’s offer and would give shareholders more cash, Perseus said.
“This offer is demonstrably superior to the Silvercorp takeover in terms of price based on recent Silvercorp trading and in terms of consideration certainty, being all cash,” Perseus executive chairman and CEO Jeff Quartermaine said in a release. “It would ensure that OreCorp’s shareholders receive full value and certainty for their shares.”
Perseus and Silvercorp are vying for OreCorp’s Nyanzaga project in Tanzania near Barrick Gold’s (TSX: ABX; NYSE: GOLD) Bulyanhulu mine. Nyanzaga would cost $474 million to build and produce 242,000 oz. gold per year over its first decade, according to a feasibility study issued in August 2022. Both bidders, who have been competing for OreCorp at least since August, claim Tanzanian authorities are ready to approve their offers.
While Perseus is bidding less than Silvercorp’s nominal proposal of A$276.5 million, Silvercorp shares slid to C$3.11 each on Friday from C$3.66 on Dec. 26, reducing its offer.
East vs West
Perseus, which has a stock market value of A$2.5 billion and owns 19.9% of OreCorp, produced 535,000 oz. of gold last year from three gold mines in West Africa, Yaouré and Sissingué in Côte d’Ivoire and Edikan in Ghana. It’s preparing to develop the Meyas Sand gold project in Sudan.
Silvercorp, with assets in China and a market value of about C$550 million, last year produced 1.8 million silver-equivalent oz. (including mostly silver and 1,342 oz. gold), 7.4 million lb. zinc and 16.8 million lb. lead.
Nyanzaga, which could reach annual output of 295,000 oz., is about 30 km northeast of Barrick’s Bulyanhulu and 60 km east of AngloGold Ashanti‘s (NYSE:AU) Geita gold mine. They’re in the Lake Victoria Goldfields about 1,000 km northwest of the capital, Dar es Salaam.
The project has an after-tax net present value of $618 million at a 5% discount rate and an internal rate of return of 25% based on a $1,750 per oz. gold price, according to the feasibility study. The government of Tanzania holds a 16% non-dilutable free carried interest in the project.
Africa know-how
Perseus knocked Silvercorp, saying it lacked experience in Africa and enough funding to develop Nyanzaga, adding risk to shareholders and dilution with equity raisings. Silvercorp’s stewardship could potentially involve costly debt or royalty deals that could require collateral and complicate financing. It could see a reduced Nyanzaga project and lower returns, Perseus said.
“Perseus has put this new offer directly to OreCorp shareholders on the basis that it represents a compelling opportunity,” Quartermaine said. “Perseus has the financial capacity, technical expertise, and in-country relationships required to optimally develop OreCorp’s Nyanzaga.”
Last month, Silvercorp said it’s well-positioned to fund and immediately move to advance Nyanzaga towards commercial production.
“This transaction aims to create a globally diversified precious metals producer, and will provide enhanced trading liquidity, re-rating potential and the opportunity to participate in further upside from the Nyanzaga project and Silvercorp’s existing mining portfolio,” the company said.
“Silvercorp has designed, permitted and constructed multiple mining and processing facilities, requiring it to establish and maintain constructive relationships with diverse stakeholders, including communities, regulators and various levels of government.”
Shares in OreCorp closed 4.7% higher at A56¢ apiece on Monday, valuing the company at A$258.1 million. Silvercorp traded 4.2% stronger on Monday morning in Toronto at C$3.24, valuing it at C$573.6 million. Perseus shares were unchanged at C$1.54 apiece.