Guyana Goldfields rejects Gran Colombia buyout proposal

Guyana Goldfields Inc on Wednesday announced that its board of directors after careful consideration and consultation with its financial and legal advisors, has unanimously determined to reject the unsolicited proposal announced by Gran Colombia Gold Corp.

The company on May 11 had made a pitch to Goldfields by proposing to buy all its issued shares.
According to Guyana Goldfields, its Board has since reaffirmed its unanimous support for the transaction previously entered into with Silvercorp Metals Inc.
In a statement on Wednesday, Guyana Goldfields said that its board has “determined that the Gran Colombia Proposal is not in the best interests of the Company or its shareholders since, among other things, the Gran Colombia Proposal (i) is complex and highly conditional in nature as it is contingent on the concurrent completion of a separate acquisition by Gran Colombia of Gold X Mining Corp. The terms of which have not been disclosed to the Company; (ii) requires the approval of the shareholders of each of Gran Colombia, Gold X and the Company, each conditional on the other providing such approval, and (iii) fails to provide the Company with adequate short term liquidity, given the C$3.65 million break fee that would be payable to Silvercorp upon the entering into of a transaction agreement with Gran Colombia and the increased ongoing costs to the Company associated with a delayed closing date relative to the Silvercorp Transaction. The Board acknowledges that, based on current trading prices, the Gran Colombia Proposal represents a premium to the agreed price under the Silvercorp Transaction; however, the Board is of the view that such premium does not sufficiently compensate the Company’s shareholders for the increased risk associated with the Gran Colombia Proposal.”
In a statement on Tuesday, Gran Colombia did not hesitate to call its offer a better one that Silvercorp, the company revealed that it has already approached Goldfields.
According to Gran Columbia, which already has underground gold operations in Columbia, there are several benefits to such a transaction. Back in April, it was announced that Silvercorp, also Canadian, could provide Goldfields with interim loans of up to $15 million as part of its deal.
This loan would have, among other things, funded Goldfield’s underground operation and other operational costs. Gran Columbia made a similar offer.
All of this comes on the same day that Guyana Goldfields announced it would be making large scale layoffs of its staff at the Aurora Gold Mine. Goldfields had blamed COVID-19 and financially-related challenges for its decision.
This was communicated in a letter from Goldfields Chief Executive Officer Alan Pangbourne, dated May 11, 2020. In defence of the decision, Pangbourne cited issues with COVID-19 and other difficulties over the past few months.
“… with great regret I am writing to all employees to inform you that we will be reducing the size of AGM’s workforce. This reduction in the workforce will take place at all levels including both national and expatriate employees as the company will transition its mining operation into a state of care and maintenance for an undetermined period,” the CEO’s letter to employees had stated.
Guyana Goldfields has had a roller coaster past year, with former CEO Scott Caldwell resigning and a shareholder’s dispute. They have also had to contend with workers striking due to concerns over their severance.