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Silvercorp Metals’ (TSX/NYSE-A: SVM) bid for Australia-based OreCorp Limited (ASX: ORR) is surging ahead as its share price picks up momentum, leaving no doubt that its offer provides superior value to OreCorp shareholders versus a competing offer from Perseus (PRU).
Simple economics tell investors that the Silvercorp offer presents more value. The bid for all of the ordinary shares in OreCorp that Silvercorp does not already own offers OreCorp shareholders 0.0967 common shares of Silvercorp and A$0.19 cash per OreCorp share.
Figure 1 shows that as of March 13 market close, Silvercorp’s offer presents a sizeable advantage over the Perseus bid. With a 19% boost in SVM stock this month, Silvercorp’s offer sits at A$0.61 per share as of March 15, representing a 10% lift over PRU’s A$0.55 bid.
Liquidity is a non-issue with Silvercorp shares, so there is no advantage in Perseus’s all-cash offer.
Silvercorp is also in an ideal position to maximize the value of OreCorp’s existing assets. Immediately upon announcing a friendly transaction with OreCorp on August 6th, 2023, Silvercorp invested A$28 million in OreCorp to advance development of the Nyanzaga Gold Project in Tanzania.
OreCorp shareholders stand to see a substantial boost from Silvercorp’s asset diversification that comes with the merger. Silvercorp is currently trading at a significant discount compared to its peers because the company’s assets are all in one country (China).
Bringing OreCorp’s gold assets into the SVM portfolio immediately brings to reality a “1 + 1 = 3” scenario.
“Our offer is superior financially today, as well as in the future for the tremendous upside,” explains Silvercorp president Lon Shaver.
“The OreCorp board saw a great fit between our two companies when we first presented an offer, and we have adjusted the terms to ensure that OreCorp shareholders understand there is no question that Silvercorp’s bid provides more value.”
Meanwhile, Perseus has dragged its feet on its takeover attempt, extending its offer expiry to April 19.
This delay could be a signal that approval of the Perseus offer by the Tanzanian government is not as imminent as promised. The Tanzanian government has already approved Silvercorp’s offer.
Regardless, a prolonged corporate battle erodes value for OreCorp shareholders. The Nyanzaga advancement needs to continue, which requires funding, and a prolonged battle may delay production start-up timing.
Silvercorp’s share price has moved up sharply in March, reflecting the company’s strong position in a buoyant market for miners of precious metals. OreCorp shareholders, who could have accepted the Silvercorp offer in December, are sitting on the sidelines while they consider an inferior offer.
“The sooner the OreCorp shareholders accept our offer, the sooner they start benefitting from a rising market,” Shaver says. “These delays are also postponing the growth in value that comes with the advancement of the Nyanzaga Gold Project.”
Silvercorp kept in place a key stipulation to help protect OreCorp shareholders. The 50.1% minimum acceptance condition – in the event this condition is not met, Silvercorp will return all shares tendered already back to OreCorp shareholders when the Silvercorp Offer closes.
With a financial advantage (10% higher than Perseus’ offer), clear path forward, and clarity of intentions, Silvercorp’s offer maximizes value for OreCorp shareholders on a timely basis.
Current delays only postpone the benefits from capitalizing on the rising market and growth opportunities for the Nyanzaga Gold Project.
For more information about Silvercorp’s projects, please visit silvercorpmetals.com/welcome
(Disclaimer: The Market Online was soliciting Silvercorp a a client at the time this article was written by the company’s Canadian team.)
