Guyana Goldfields gives preference to the $74m transaction with Canadian precious metals company Silvercorp over the proposal from Gran Colombia Gold

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Guyana Goldfields rejects acquisition proposal from Gran Colombia. (Credit: PublicDomainPictures from Pixabay)

Guyana Goldfields has turned down a takeover proposal from rival Canadian gold miner Gran Colombia Gold on the grounds that the offer is highly conditional and is not in the best interests of its shareholders.

The company, which is mainly focused on the exploration, development, and operation of gold deposits in Guyana, said that it will remain committed to the last month’s CAD105m ($74.44m) transaction it signed with Canadian precious metals company Silvercorp.

Guyana Goldfields, which owns the producing Aurora Gold Mine in Guyana, has been offered 0.142 of Gran Colombia Gold’s shares in exchange for each of its shares, valued at CAD0.9 ($0.64). On the other hand, the company was offered CAD0.6 ($0.43) in cash or 0.1195 of Silvercorp’s common shares for each of its shares.

Gran Colombia Gold plans to merge with Gold X Mining and Guyana Goldfields

Guyana Goldfields’ board of directors ruled the proposal from Gran Colombia Gold to be complex. The proposal is also subject to the concurrent completion of a separate acquisition by Gran Colombia Gold of another Canadian gold mining firm Gold X Mining.

Earlier this week, Gran Colombia Gold signed a deal with Gold X Mining to acquire the remaining 81% in the latter which it previously didn’t own at CAD3.17 ($2.25) per share in an all-stock deal.

Gran Colombia Gold has planned a merger with Gold X Mining and Guyana Goldfields with a goal to create an emerging Latin American-focussed intermediate gold producer.

The board of Guyana Goldfields concluded that based on the present trading prices, the proposal from Gran Colombia Gold represents a premium to the agreed price under the transaction with Silvercorp. However, the company’s board found that such premium does not compensate the shareholders enough for the increased risk pertaining to the Gran Colombia Gold’s proposal.

Guyana Goldfields said that the Silvercorp transaction offers elimination of the funding risk pertaining to its Aurora Underground Project in Guyana. The deal also said to give the company access to the strong balance sheet of Silvercorp and the financing options available to a larger firm amid uncertain market conditions.

Silvercorp took up the deal with a goal to create a diversified precious metals producer with two profitable underground silver mining operations in China and a gold mining operation in Guyana with a strong balance sheet to finance growth opportunities.