Orecorp and Silvercorp Merge to Create a Major New Gold Producer

Australian gold explorer Orecorp and Canadian silver miner Silvercorp have announced a merger to create a sizable new precious metals producer. The deal offers benefits for both sets of shareholders and has the potential to deliver significant value. Here's why this merged company could be a compelling investment opportunity.

The Merger Deal

• Silvercorp has agreed to fully acquire Orecorp via a scheme of arrangement, valuing Orecorp at AUD $205 million.
• Orecorp shareholders will receive 15 cents per share in cash plus 1 Silvercorp share for every 10 Orecorp shares held. This implies a price of 60 cents per Orecorp share.
• Upon completion, Orecorp shareholders will own 17.8% of the merged entity.
• Silvercorp has also agreed to provide interim funding to Orecorp of AUD $28 million through a share placement.

Transformational Scale and Diversification

• The deal brings together Silvercorp's producing silver mines in China with Orecorp's flagship Nianzaga gold project in Tanzania.
• It creates a geographically diversified precious metals producer with extended mine lives.
• The combined company will have 2.6 million ounces of gold reserves and 116 million ounces of silver equivalent reserves.
• It will boast a resource base of 7.4 million ounces of gold and 178 million ounces of silver equivalent.
• This deal transforms Silvercorp into a multi-asset, mid-tier precious metals producer with output nearing 300,000 gold equivalent ounces per year.

World-Class Nianzaga Gold Project

• Nianzaga is located in the prolific Lake Victoria Goldfields region of Tanzania.
• Orecorp recently completed a Definitive Feasibility Study on Nianzaga, defining reserves of 2.6 million ounces of gold.
• Initial production is projected at 230,000 ounces of gold per year over a 10.7 year mine life.
• All-in sustaining costs are an ultra-low USD $954 per ounce, supporting robust project economics.
• The project has outstanding exploration upside and district-scale potential.
• Silvercorp plans to fast-track development, with the first production possible in 2025.

Financial Strength for Development

• The merged company will have a market capitalization near USD $630 million and no debt.
• It will hold over USD $170 million in cash to fund Nianzaga's development.
• Silvercorp has a proven track record of mine development and operational excellence.
• Orecorp shareholders gain access to Silvercorp's balance sheet strength.

An Attractive Precious Metals Investment

• The merged company offers investors high leverage to the gold and silver prices.
• Nianzaga could more than double profits if gold rises to USD $2,000 per ounce.
• Exploration success could substantially grow resources and extend mine lives.
• The merger brings increased scale, diversification and financial strength.
• Silvercorp's base silver production provides steady cash flow to support growth.

The merged Orecorp-Silvercorp company may represent a potentially attractive investment opportunity

Diversification - The combined company offers exposure to both gold and silver production from assets located in Africa and China. This provides diversification across commodities and jurisdictions.

Growth Potential - The flagship Nianzaga gold project could significantly boost the company's overall production profile once developed. Exploration upside across the portfolio also provides growth potential.

Strong Financial Position - The merged entity will have an impressive cash balance of over $170 million and no debt. This provides the financial capacity to fund Nianzaga's development.

Proven Operator - Silvercorp has an extensive track record of successfully developing and operating mines. This experience helps derisk Nianzaga's construction.

Attractive Valuation - Orecorp shareholders gain a reasonable premium while retaining exposure to Nianzaga's upside. Silvercorp's valuation looks attractive relative to peers.

Leverage to Prices - With Nianzaga's low costs, the company offers exceptional leverage to any increases in the gold or silver price.

The merged company brings together the strengths of both Orecorp and Silvercorp to create a well-funded, diversified precious metals producer with sound growth prospects. For investors seeking leverage to gold and silver, it could represent an appealing investment opportunity. The merger deal makes strategic sense and has the ingredients for value creation. It brings together complementary precious metals assets under a single well-funded entity. For Orecorp shareholders, it provides an attractive premium, funding to advance Nianzaga, and ongoing exposure to the project's upside. For Silvercorp investors, Nianzaga delivers production growth, geographic diversification, and increased leverage to the gold price. With sound financials, operational expertise, and exploration potential, the merged company looks poised to create significant value for shareholders. This deal could mark the creation of an exciting new mid-tier gold and silver producer.