Silvercorp Metals Inc. (TSX: SVM) (NYSE American: SVM) has signed a Share Purchase Agreement with Chaarat Gold Holdings Limited and a Cooperation Agreement with the National Investment Agency under the President of the Kyrgyz Republic to acquire a 70% interest in Chaarat ZAAV CJSC for $162 million in cash. ZAAV holds the fully permitted Tulkubash and Kyzyltash gold projects and surrounding exploration licenses in the Tian Shan region of the Kyrgyz Republic. Upon closing, ZAAV will be converted into a joint venture company with Kyrgyzaltyn, where Silvercorp will hold a 70% operating interest and Kyrgyzaltyn a 30% free-carried interest.
The acquisition positions Silvercorp to expand its footprint in Central Asia, a region known for significant gold deposits. The Tulkubash and Kyzyltash projects are fully permitted, reducing development risk and allowing for a streamlined path to production. Under the agreements, the National Investment Agency will receive $70 million in staged payments tied to government waivers and license extensions, while Chaarat will receive $92 million conditional on receipt of the Kyrgyz Government waiver, which has now been issued. This waiver allows Silvercorp to proceed toward closing, underscoring the government's support for the transaction.
This deal is important for Silvercorp as it diversifies its asset base beyond its core operations in China. The company, known for producing silver, gold, lead, and zinc with a long history of profitability, aims to create shareholder value through generating free cash flow from long-life mines, organic growth via drilling, and strategic mergers and acquisitions. The acquisition of the Kyrgyz gold projects aligns with this strategy by adding high-quality, permitted assets with significant upside potential.
The joint venture structure with Kyrgyzaltyn, a state-owned entity, provides Silvercorp with local expertise and government backing, which is crucial for operating in the Kyrgyz Republic. The free-carried interest for Kyrgyzaltyn means Silvercorp will fund development while the state partner benefits without upfront costs, fostering a cooperative relationship. The $162 million cash consideration reflects the value of the permitted projects and the strategic importance of entering the Kyrgyz mining sector.
Silvercorp's move comes at a time when gold prices remain robust, and demand for safe-haven assets is high. The Tulkubash and Kyzyltash projects have the potential to contribute significantly to Silvercorp's production profile, enhancing its position as a mid-tier precious metals producer. Investors will be watching for updates on the closing timeline and any further developments regarding the projects' development plans.
For more details, the full press release is available at https://ibn.fm/Xz2rU. Additional information about Silvercorp can be found in the company's newsroom at https://ibn.fm/SVM.
