Sierra Metals Sees Alpayana Launch Hostile Takeover Bid At $0.85 A Share
Sierra Metals (TSX: SMT) has become the target of a hostile takeover by Alpayana S.A.C. The miner has seen Alpayana issue an all-cash offer to shareholders in a bid to acquire majority ownership in the company.
Alpayana has offered $0.85 per share to shareholders of Sierra, a figure that represents a 26% premium to the 30 day volume weighted average price of the company, and a 10% premium over the $0.77 closing price of Sierra on December 13. Alpayana describes the offer as allowing “shareholders to monetize the current value of Sierra with a premium rather than continuing to be exposed to the structural stand-alone risks associated with the hurdles that Sierra faces.”
In attempting to convince shareholders to tender their shares to the offer, Alpayana has described Sierra as having continued structural problems, which includes a lack of scale, high production costs, a large debt load, and high expenses relative to revenue. The firm also highlighted Sierra’s US$150 million in accumulated losses over the last ten years of operations, while presenting its offer as means for shareholders to redeploy capital in “more viable alternatives.”
At the same time, Alpayana has suggested that despite these issues, it has the capital and resources required to eliminate high corporate expenses and debt yield faced by Sierra, while its existing mining platform is believed to provide economies of scale to the operation.
For context, Sierra Metals currently operates the Yauricocha copper mine in Peru and the Bolivar copper mine in Mexico. For 2025, Yauricocha is expected to produce at an all-in sustaining cost in the range of $2.91 to $3.11 per pound of copper equivalent, while Bolivar expects to produce at an AISC in the range of $3.45 to $3.62 per copper equivalent pound.
The offer by Alpayana is said to be subject to the company seeing at least 50% of the fully diluted shares of the company being tendered under the offer, and the determination that no material adverse effect exists in the opinion of Alpayana.
Sierra for its part has stated that shareholders holding more than 50% of the common shares of the company have stated that the offer is inadequate and that they do not intend to support the transaction. The company also adopted a shareholder rights plan on Monday, which enables holders of the rights to purchase additional common shares at a 50% discount to the prevailing market price in the event of a takeover attempt.
Sierra Metals last traded at $0.83 on the TSX.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.
