Silvercorp Metals (TSX: SVM) and Adventus Mining (TSXV: ADZN) have announced an agreement that will see Silvercorp acquire all issued and outstanding common shares of Adventus. .
The agreement will see each holder of Adventus common shares receive 0.1015 of one Silvercorp common share in exchange for each Adventus Share. This exchange ratio, based on the 20-day volume-weighted average prices of Silvercorp shares on the Toronto Stock Exchange as of April 25, 2024, implies consideration of $0.50 per Adventus Share, representing a premium of 31% over the same period.
The implied equity value of the transaction stands at approximately $200 million on a fully-diluted in-the-money basis. Upon closing, existing Silvercorp and Adventus shareholders will own approximately 81.6% and 18.4%, respectively, of Silvercorp shares outstanding on a fully-diluted in-the-money basis.
The transaction follows Adventus acquiring Luminex Resources earlier this year, establishing a copper-gold developer within Ecuador. That transaction saw Ross Beaty become a 13% shareholder of Adventus.
The strategic rationale for Silvercorp behind the acquisition is underlined by the potential consolidated asset portfolio, which encompasses exposure to China and Ecuador, increased gold exposure, and essential metals such as silver, copper, lead, and zinc crucial for a low-carbon future.
Of particular significance is the addition of the high-margin, advanced El Domo project, owned 75% by Adventus, which is expected to significantly enhance Silvercorp’s near-term production profile.
The El Domo project, located in central Ecuador, is an advanced high-grade copper-gold project with promising operational metrics and robust economics. With a 10-year mine life, the project boasts proven and probable mineral reserves of 6.5 million tonnes at 1.93% Cu, 2.52 g/t Au, 2.49% Zn, 45.7 g/t Ag, and 0.25% Pb. Initial capital costs are estimated at US$248 million, with attractive financial metrics including an after-tax internal rate of return of 32% and a net present value (8%) of US$259 million.
The board of directors of Adventus has unanimously approved the transaction and recommends that Adventus shareholders vote in favor of it at the special meeting. Additionally, key stakeholders including directors, senior officers of Adventus, Ross Beaty, and Wheaton Precious Metals, representing approximately 23% of the Adventus shares, have entered into voting support agreements with Silvercorp.
In addition, Salazar Resources, Adventus’s partner in the El Domo project, has also entered into an agreement with Silvercorp whereby they have indicated they will support the transaction.
Silvercorp CEO Dr. Rui Feng expressed enthusiasm about the transaction, stating, “This transaction will create a new globally diversified green metals producer.” He emphasized the opportunity to leverage technical expertise and strong balance sheets to unlock value, particularly through the construction of the El Domo project.
Christian Kargl-Simard, CEO of Adventus, echoed Feng’s sentiments, highlighting that “combining the companies positions us well to deliver on El Domo and our other projects.”
Silvercorp and Adventus have also agreed on an investment deal alongside the transaction where Silvercorp will buy 67,441,217 shares of Adventus at $0.38 per share, totaling about $25.6 million. This investment will give Silvercorp around 15% ownership of Adventus. The money raised from this investment will be used for several purposes: paying off debts to Trafigura Pte Ltd. and Altius Resources, covering expenses for the El Domo project, and managing general operating costs, including those related to the ongoing transaction.
The transaction is expected to be completed in the third quarter of 2024, subject to customary closing conditions and regulatory approvals.
Silvercorp Metals last traded at $4.84 on the TSX while Adventus Mining last traded at $0.42 on the TSXV.
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.
