Silvercorp Metals targets Philippines copper with Celsius Resources merger move

Canadian precious metals miner Silvercorp Metals (TSX: SVM, NYSE: SVM) has launched an approximately $56 million merger bid for Philippines copper mine developer Celsius Resources (ASX: CLA, AIM: CLA).

The pair have entered into a non-binding term sheet and a binding subscription agreement which will see the Canadian-based mining company acquire all outstanding Celsius shares at a fixed price of $0.03 per share in exchange for a consideration comprising 90% Silvercorp shares plus 10% cash.

The implied value of the proposed acquisition is approximately $56 million.

Copper upside

Silvercorp chairman and chief executive officer, Dr Rui Feng, said the addition of Celsius’ MCB project to the company’s portfolio aligns with its strategic objectives of diversifying, while also benefitting from copper’s strong fundamentals.

“We believe this is a rare opportunity to leverage our underground mining expertise and financial strength to unlock value for all shareholders through the development of the MCB project, as well as aggressive exploration programs in the Pacific Rim Metallogenic Belt, one of the most important porphyry copper-gold belts in the world.”

A separate binding subscription agreement will provide $5 million in interim funding for the development of the Maalinao-Caigutan-Biyog copper-gold project (MCB project) on Luzon island in the Philippines.

Asian focus

The proposed merger provides an opportunity to create an interesting combination of Asian and South East Asian assets.

Silvercorp has been conducting underground silver, lead, zinc mining operations in China for 17 years.

It has produced more than 85 million ounces of silver and one billion pounds of lead and zinc in that time and is forecasting production of between 6.8 and 7.2 million ounces in fiscal 2024.

Celsius’ primary recent focus has been on development of the MCB project located north of Manila.

A maiden JORC compliant MCB mineral resource estimate was reported in 2021 comprising 313.8 million tonnes at 0.48% copper and 0.15 g/t gold for 1.5 million tonnes of contained copper and 1.47 million ounces of gold.

The company also operates the exploration level Sagay Copper project in the northern part of Negros Island in the Visayan region of the Philippines.

Other assets include a 95% interest in the Opuwo Cobalt project in northern Namibia and mining interests at the Hann River, Cullarin West and Abednegno Hill projects in Australia.

New impetus

Celsius executive chairman, Julito Sarmiento, said Silvercorp’s participation will provide impetus for the development of Celsius’ mineral assets, particularly the flagship MCB copper-gold project.

He added that the proposal is a strong and favourable endorsement of the Philippines’ minerals industry and will also provides Celsius shareholders with ownership in a new SpinCo, created to continue to advance the Sagay and Opuwo projects.

Silvercorp has agreed to potentially invest $4 million in SpinCo, which is carrying a post-financed market capitalisation value of $30 million.

The two parties will now finalise due diligence and seek regulatory and shareholder approvals, with a target of the execution of a definitive agreement in late-June 2023.