Silver Lake Resources (ASX:SLR) continues to try and grab the attention of St Barbara with yet another offer for SBM’s Leonora gold mining assets in WA’s goldfields.
Silver Lake said it had revised its offer for St Barbara Leonora assets to address concerns St Barbara had expressed that the buyout financing is subject to due diligence.
The implied value of the proposal is $A718 million, comprising $A370 million in cash and 327.1 million Silver Lake shares worth $A348 million (down $4 million since the May 19 announcement, as is the total value of the offer).
Silver Lake said Taurus Mining Finance Fund No 2 LP has approved a $US150 million credit facility for the acquisition and it is subject only to legal due diligence and execution of definitive documentation.
St Barbara has rejected Silver Lake multiple times in favour of a $A600 million proposal from Leonora rival Genesis Minerals.
Last week, gold miner St Barbara said it would not further engage with Silver Lake, even after the company raised the cash component of its offer by $A44 million.
St Barbara said Silver Lake’s offer was non-binding and “unacceptably conditional” compared to the fully documented, financed and shareholder-backed binding Genesis proposal.
St Barbara Leonora assets involved in the deal include the Gwalia underground mine and processing plant, and nearby development opportunities.
St Barbara said on Wednesday it had received Silver Lake’s latest proposal.
Silver Lake says that “if the St Barbara board listens to its major shareholders and grants due diligence access to Silver Lake on or before 5 June 2023, there is still time for Silver Lake to complete those enquiries in order to be able to progress the Silver Lake Proposal to the binding offer stage before St Barbara shareholders are required to vote on the Genesis Proposal.”
However, if the St Barbara board continues to decline to engage with Silver Lake, St Barbara shareholders will have no option but to vote against the Genesis Proposal at the upcoming extraordinary general meeting of St Barbara “shareholders on 20 June 2023 if they want the St Barbara board to embark on a more robust price discovery process for the sale of St Barbara’s flagship Leonora assets.”
Silver Lake said it had left its proposal open until June 30 2023, so as to provide comfort that Silver Lake remains ready and willing to engage on those terms should the Genesis Proposal not proceed.
Silver Lake shares fell 1.8% to $1.04, while St Barbara shares ended steady at 54 cents.
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Later however, St Barbara revealed a huge jump in the cost of a bond it is required to lodge in Canada by authorities to cover the cost of reclaiming work for its Touquoy mine in Nova Scotia.
St Barbara’s statement, issued after trading closed at 4pm, revealed the cost of the bond had jumped from $C41 million to a new figure of $C80 million.
“As stated in St Barbara’s announcement on 17 April 2023 regarding the sale of St Barbara’s Leonora Assets to Genesis Minerals, St Barbara currently has a C$41 million Reclamation Security Bond at Atlantic, which is supported by Letters of Credit from syndicate banks.
“In the announcement, St Barbara identified potential for the quantum of the Bond to increase materially to approximately C$70 million, with the face value of the Bond likely needing to be cash backed.
“The Submission has now been completed by an external consultant, in line with NSECC and DNRR requirements, and submitted on schedule on 30 May 2023. The revised Bond is calculated to be C$80 million (an increase of ~C$39 million). St Barbara anticipates that NSECC (Nova Scotia Department of Environment and Climate Change) and DNRR (Department of Natural Resources and Renewables) will now review the Submission with discussions to follow.
“Should NSECC and DNRR accept the Reclamation Security Estimate, St Barbara will be required to provide a bank guarantee, or bank guarantees, for the additional Bond of ~C$39 million. As a result, St Barbara will be required to source an additional ~A$43 million (C$39 million) to provide cash backing for the bank guarantees.
“As discussed in St Barbara’s announcement of 17 April 2023, the increased funding requirements arising from this increased Bond and the Gwalia underperformance, together with the expected breach of St Barbara’s existing banking covenants (interest cover ratio) at 30 June 2023, meant that it was likely that St Barbara would have been required to pay down a significant portion of its senior debt facilities.
“The agreement announced with Genesis Minerals Limited on 17 April 2023 in respect of the sale of St Barbara’s Leonora Assets will however enable St Barbara to extinguish all senior debt and lease liabilities and is expected to provide a pro-forma cash balance of $197 million. St Barbara intends that the pro-forma cash balance of $197 million will be, in part, applied to provide cash backing for the full C$80 million Bond proposed in the Submission.”
The upshot of this news is that Silver Lake will have to find more money to add to the $A370 million cash component of its offer – possibly around $A40 million more).
One way or another, this news will no doubt spark a reaction from Silver Lake.