Alpayana boosts hostile bid for Sierra Metals by 31%

Peruvian miner Alpayana sweetened its hostile takeover bid for Sierra Metals (TSX: SMT) by 31% after the Canadian company rejected its initial salvo. The stock surged.Alpayana is now offering C$1.11 for each Sierra share instead of the C$0.85 offer it made in December, according to a statement issued late Wednesday. The new bid, which values Sierra at about C$235 million, is valid until 5 p.m. Toronto time on April 25. Alpayana called the revised price “best and final.”Family-owned Alpayana has been operating mines in Peru for over 38 years. The company, which has no debt and more than $500 million in annual revenue, says it’s “uniquely positioned” to cut costs at Sierra and “eliminate” its debt, which stood at $96.3 million as of Dec. 31, up from $78.5 million a year earlier. Alpayana’s controlling shareholders are minority investors in Minera Corona, Sierra’s Peruvian unit.As the operator of two copper mines in Peru and Mexico, Sierra is “entering into a hostile macroeconomic and local and international political environment with a vulnerable balance sheet and lack of scale,” Alpayana said.“Sierra has high levels of expensive debt, a large working capital shortfall, an unpaid $56.1 million obligation to its publicly traded Minera Corona unit and high corporate expenses, along with being one of the highest cost per pound copper producers in the industry,” Alpayana said. “Given Sierra’s thin margins, it is vulnerable to withstanding any potential unexpected production, labour, social, political, regulatory and/or macro challenges.”Net worthCorona “does not appear to have the net worth to spin off the Sierra obligation and Sierra does not appear to have the cash flows to repay Corona unless Sierra issues additional capital,” Alpayana added. “If the offer expires, Sierra will be asked to repay the obligation to Corona at fair market terms.”Sierra shares jumped 8.9% to C$0.86 – below the revised offer price – in late morning trading in Toronto Thursday. More than 987,000 shares changed hands in the first two hours of trading, about seven times the full-day volume of the past three months.In a statement, Sierra acknowledged Alpayana’s press release and advised shareholders to take no action until its board of directors issues a recommendation on the new bid’s merits.“Sierra continues to be committed to its long-term strategy of ensuring the company delivers superior long-term value to all its shareholders and stakeholders,” it said. “Sierra continues to actively pursue negotiations with third parties that are in the process of reviewing Sierra’s confidential information with a view to surfacing additional alternatives.”Tender conditionAlpayana said it’s waiving a condition requiring two-thirds of Sierra shares to be tendered to the offer, as well as other conditions related to the financial metrics set out in the Canadian company’s 2024 financial statements. Alpayana owns no shares of Sierra.If the offer succeeds, Alpayana will undertake efforts to acquire all of Sierra’s shares. It will also launch a tender offer for Corona’s shares “at a fair price,” as required under Peruvian securities laws.Alpayana says it has already obtained Mexican and Peruvian regulatory approvals to acquire Sierra.Earnings increaseSierra CEO Ernesto Balarezo told The Northern Miner earlier this week that the company is targeting a 10-fold earnings increase in earnings before interest, tax, amortization and depreciation (EBITDA) this year compared with 2022. Sierra has attracted potential “white knight” investors after rejecting Alpayana’s unsolicited bid, he added.EBITDA could rise to $130 million this year versus $13 million three years ago and $74 million in 2024, Balarezo said in the interview. Sierra has cut costs by increasing mill capacity at Bolivar in Mexico by 2.5 times and nearly double at Peru’s Yauricocha, while higher copper and gold prices have also helped widen margins.BMO, which Sierra hired as financial advisors to contend with the offer, has brought prospective investors who support the company’s efforts, Balarezo said. The executive took over in 2023 after joining from Gold Fields (NYSE, JSE: GFI), where he worked as chief operating officer in the Americas. Sierra lifted Bolivar’s mill operation to 5,000 tonnes per day (tpd) from 2,000 tpd, and Yauricocha to 3,700 tpd from 2,000 tpd.Questions raisedA restatement last week of publicly released quarterly financial statements for the last two years “raises questions concerning the reliability of Sierra’s 2025 guidance,” Alpayana also said.Fourth-quarter results included a net adjustment to increase cost of sales and reduce inventory by about $2.5 million related to 2023 and by $7.8 million related to the previous quarters of 2024, Sierra said March 27. Previously reported 2024 quarterly results were adjusted accordingly.Weiter zum vollständigen Artikel bei Mining.com Weiter zum vollständigen Artikel bei Mining.com