Sierra Metals Inc. [SMT-TSX, BVL] shares edged higher Wednesday after its board of directors told shareholders of the company to reject an all-cash takeover bid from Peruvian miner Alpayana S.A.C., worth 85 cents per share.
The board has offered that advice following careful consideration, and receipt of unanimous recommendations from a special committee of its independent directors, and after consultation with its financial and legal advisers.
“Alpayana is offering to buy your common shares at a price that undervalues the company and is well below where prior transactions of a similar nature have transacted,’’ said Miguel Aramburu, Chair of the Board.
On Wednesday, Sierra Metals shares traded above the offer price after rising 1.16% or $0.01 to 87 cents. The shares trade in a 52-week range 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 Bolivar copper mine in Mexico.
“Sierra owns two thriving copper-producing mines in proven jurisdictions,’’ Aramburu said. “The company has increased production significantly at both the Yauricocha and Bolivar mines and expects to continue to grow mineral resources and production in 2025,’’ he said. “As a result, the company is positioned to deliver improvements in its operational results and create meaningful shareholder value by a significant increase in EBITDA (earnings before interest, tax, depreciation and amortization).”
Meanwhile, the company is expecting to generate approximately US$130 million of EBITDA in 2025. It said this represents significant year-over-year growth in EBITDA from US$72 million in 2024 (expected) and US$50 million in 2023, representing an approximate 80% increase relative to 2024 (expected) EBITDA, and an approximate 158% increase relative to 2023 EBITDA.
The increase is expected to be driven by increased production at both Yauricocha and Bolivar and careful management of costs. While the company does not typically provide EBITDA guidance, the board determined that the information is essential to shareholders in the unique circumstances of a hostile bid. “The EBITDA project provides support for the board’s recommendation to reject the hostile bid,’’ the company said.
The Alpayana 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.
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.
