Alpayana launches Sierra Metals takeover bid
Peruvian miner Alpayana S.A.C. has launched a formal all-cash offer to acquire all of the issued and outstanding shares of Sierra Metals Inc. [SMT-TSX, BVL] through its newly-formed Canadian subsidiary.
The offer to purchase, circular and related documents were mailed to Sierra Metals shareholders on December 30, 2024, and the offer commenced the same day. Under the terms of the offer, shareholders who tender their common shares will receive 85 cents in cash for each common share.
In a press release, Alpayana said the offer represents a significant premium of approximately 26% to the 30-day volume weighted average trading price of 67.6 cents per common share on the Toronto Stock Exchange over the 30 trading days ended December 13, 2024 (being the last trading day prior to the announcement of Alpayana’s intention to make the offer) and a 10% premium based on the closing price of 77 cents per share on the TSX on December 13, 2024. The offer is open for acceptance until 5:00 p.m Toronto time on April 14, 2025, unless the offer is extended, accelerated or withdrawn by Alpayana Canada.
Alpayana said the offer allows shareholders to monetize the current value of Sierra Metals with a premium rather than continuing to be exposed to the structural standalone risks associated with the hurdles that Sierra Metals faces.
Sierra Metals continued structural problems, including lack of scale, high production costs, high expensive debt load and high corporate expenses relative to revenues, make the shareholders highly vulnerable to foreseeable challenges in the Latin American debt markets, when access to additional capital is likely to be difficult. After approximately US$150 million in accumulated net losses over the past 10 years, shareholders are encouraged to take advantage of this unique opportunity, allowing for redeployment of capital in more viable alternatives.
For Alpayana, despite the listed challenges, it views the acquisition of Sierra Metals as an attractive opportunity as Alpayana has the resources available to eliminate the high corporate expenses and the high yield debt, inject fresh capital to support the capital expenditures required to support the company’s growth, and cover the working capital shortfall. Alpayana also anticipates that its existing mining platform will be better suited to take advantage of economies of scale in advancing the asset.
News that the offer has been launched after Sierra said the majority of its shareholders have committed not to tender their shares in the event that Alpayana formalized the offer.
It came after the close of trading on December 30, 2024, when Sierra shares closed at 83 cents. The shares trade in a 52-week range of of $1.05 and 61 cents.
Alpayana is a Peruvian mining group that specializes in underground mining, producing zinc, lead, copper and silver. The company has four mining units in the central highlands of Peru and posts annual revenue of over US$500 million.
Sierra Metals is focused on copper production with additional base and precious metals credits at the Yauricocha polymetallic mine in Peru and the Bolivar copper mine in Mexico.