Sierra Metals Board of Directors Rejects Alpayana’s Hostile Bid; Hostile Bid’s Inadequate Offer Price Fails to Recognize Sierra Metals’ Value and Growth Potential
Sierra Metals (SMTSF) Board of Directors has unanimously rejected Alpayana's unsolicited all-cash takeover bid of C$0.85 per share, deeming it inadequate and undervalued. The Board highlighted that shareholders representing over 50% of outstanding shares have already indicated they won't support the hostile bid.
The company projects significant growth with EBITDA expected to reach US$130 million in 2025, representing an 80% increase from 2024's expected US$72 million and a 158% rise from 2023's US$50 million. This growth is driven by increased production at both Yauricocha and Bolivar mines.
The Board emphasizes that the hostile bid fails to recognize Sierra's strategic value as a copper producer in proven mining jurisdictions, with the company's anticipated net debt/2025E EBITDA ratio of 0.6x below the industry median of 0.8x. BMO Capital Markets has provided an opinion stating the bid is financially inadequate for shareholders.
Sierra Metals (SMTSF) ha respinto all'unanimità l'offerta non sollecitata di acquisizione in contante di Alpayana, pari a C$0,85 per azione, giudicandola inadeguata e sottovalutata. Il Consiglio ha sottolineato che gli azionisti che rappresentano oltre il 50% delle azioni in circolazione hanno già indicato che non supporteranno l'offerta ostile.
L'azienda prevede una crescita significativa con l'EBITDA previsto a raggiungere 130 milioni di dollari USA nel 2025, rappresentando un aumento dell'80% rispetto ai 72 milioni di dollari USA attesi per il 2024 e un incremento del 158% rispetto ai 50 milioni di dollari USA del 2023. Questa crescita è stimolata da un aumento della produzione sia nelle miniere di Yauricocha che di Bolivar.
Il Consiglio sottolinea che l'offerta ostile non riconosce il valore strategico di Sierra come produttore di rame in giurisdizioni minerarie consolidate, con un rapporto previsto di debito netto/EBITDA 2025E di 0,6x, inferiore alla mediana del settore di 0,8x. BMO Capital Markets ha fornito un parere che afferma che l'offerta è finanziariamente inadeguata per gli azionisti.
Sierra Metals (SMTSF) ha rechazado por unanimidad la oferta hostil por parte de Alpayana de adquisición en efectivo de C$0,85 por acción, considerándola inadecuada y subvaluada. La Junta destacó que los accionistas que representan más del 50% de las acciones en circulación ya han indicado que no apoyarán la oferta hostil.
La empresa proyecta un crecimiento significativo con un EBITDA que se espera alcance los 130 millones de dólares estadounidenses en 2025, lo que representa un aumento del 80% en comparación con los 72 millones de dólares estadounidenses esperados para 2024 y un aumento del 158% desde los 50 millones de dólares estadounidenses de 2023. Este crecimiento se impulsa por el aumento de la producción en las minas de Yauricocha y Bolivar.
La Junta enfatiza que la oferta hostil no reconoce el valor estratégico de Sierra como productor de cobre en jurisdicciones mineras probadas, con una relación proyectada de deuda neta/EBITDA 2025E de 0,6x, por debajo de la mediana industrial de 0,8x. BMO Capital Markets ha proporcionado una opinión afirmando que la oferta es financieramente inadecuada para los accionistas.
시에라 메탈스 (SMTSF) 이사회는 알파야나의 주당 C$0.85에 대한 비공식 현금 인수 제안을 만장일치로 거부하고, 이를 부적절하고 저평가된 것으로 간주했습니다. 이사회는 발행된 주식의 50% 이상을 대표하는 주주들이 이미 적대적 제안을 지지하지 않을 것이라고 밝혔습니다.
회사는 2025년 EBITDA가 1억 3천만 달러에 이를 것으로 예상하며, 이는 2024년 예상 7천 2백만 달러에서 80% 증가하고 2023년 5천만 달러와 비교하여 158% 증가한 수치입니다. 이러한 성장은 Yauricocha 및 Bolivar 광산에서의 생산 증가에 의해 촉진됩니다.
이사회는 이러한 적대적 제안이 입증된 광업 관할권에서 구리 생산자로서 시에라의 전략적 가치를 인식하지 못하고 있음을 강조하며, 회사의 예상 순부채/2025년 EBITDA 비율이 0.6배로 업계 중앙값인 0.8배보다 낮다고 말했습니다. BMO 캐피탈 마켓은 이 제안이 주주에게 재정적으로 부적절하다는 의견을 제시했습니다.
Sierra Metals (SMTSF) a rejeté à l'unanimité l'offre publique d'achat non sollicitée d'Alpayana à C$0,85 par action, la qualifiant d'inadéquate et sous-évaluée. Le Conseil a souligné que des actionnaires représentant plus de 50 % des actions en circulation ont déjà indiqué qu'ils ne soutiendront pas l'offre hostile.
L'entreprise prévoit une croissance significative avec un EBITDA attendu d'atteindre 130 millions de dollars américains en 2025, ce qui représente une augmentation de 80 % par rapport aux 72 millions de dollars américains prévus pour 2024 et une hausse de 158 % par rapport aux 50 millions de dollars américains de 2023. Cette croissance est soutenue par une augmentation de la production dans les mines de Yauricocha et de Bolivar.
Le Conseil souligne que l'offre hostile ne reconnaît pas la valeur stratégique de Sierra en tant que producteur de cuivre dans des juridictions minières éprouvées, avec un ratio de dette nette/EBITDA 2025E prévu à 0,6x, inférieur à la médiane de l'industrie de 0,8x. BMO Capital Markets a donné un avis indiquant que l'offre est financièrement inadéquate pour les actionnaires.
Sierra Metals (SMTSF) hat das unaufgeforderte Übernahmeangebot von Alpayana in Höhe von 0,85 C$ pro Aktie einstimmig abgelehnt und dabei angemerkt, dass es unzureichend und unterbewertet ist. Der Vorstand hob hervor, dass Aktionäre, die über 50% der ausgegliederten Aktien repräsentieren, bereits signalisiert haben, dass sie das feindliche Angebot nicht unterstützen werden.
Das Unternehmen plant ein erhebliches Wachstum mit einem EBITDA, das 2025 voraussichtlich 130 Millionen US-Dollar erreichen wird, was einem Anstieg von 80% gegenüber den erwarteten 72 Millionen US-Dollar im Jahr 2024 und einem Anstieg von 158% im Vergleich zu 50 Millionen US-Dollar im Jahr 2023 entspricht. Dieses Wachstum wird durch erhöhte Produktionszahlen in den Minen Yauricocha und Bolivar vorangetrieben.
Der Vorstand betont, dass das feindliche Angebot Sierra's strategischen Wert als Kupferproduzent in bewährten Bergbaugebieten nicht anerkennt, mit einem erwarteten Verhältnis von Nettoschulden zu EBITDA 2025E von 0,6x, welches unter dem Median der Branche von 0,8x liegt. BMO Capital Markets hat eine Meinung abgegeben, dass das Angebot finanziell unzureichend für die Aktionäre ist.
- Projected EBITDA growth to US$130M in 2025 (158% increase from 2023)
- Strong shareholder support with >50% rejecting the takeover bid
- Healthy debt profile with net debt/2025E EBITDA ratio of 0.6x (below industry median)
- Increased production capacity at Yauricocha (3,600 tpd) and Bolivar expansion plans to 7,500 tpd
- Persistent selling pressure from Arias Resource Capital affecting share price
- Current debt load requiring refinancing in near future
Board Recommends that Shareholders REJECT the Hostile Bid and TO NOT TENDER THEIR SHARES
All dollar figures are in USD, except share prices noted as “C$” which are in CAD.
The Board unanimously recommends that Sierra shareholders REJECT the Hostile Bid and not tender their Common Shares to the Hostile Bid. Shareholders simply need to TAKE NO ACTION in order to REJECT the Hostile Bid.
Miguel Aramburu, Chair of the Board, commented:
“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. At a time of growing worldwide demand for copper, Sierra owns two thriving copper-producing mines in proven jurisdictions. The Company has increased production significantly at both of the Yauricocha and Bolivar mines and expects to continue to grow mineral resources and production in 2025. As a result, the Company is positioned to deliver improvements in its operational results and create meaningful shareholder value by a significant expected increase in EBITDA.”
Significant Expected EBITDA Increase in 2025
The Company has introduced a projection of approximately
Mr. Aramburu continued, “The Board’s view is that selling your shares at the low price offered by Alpayana would deprive you of significant upside potential in your investment. One need not look further than the collective view of greater than fifty percent of Sierra’s shareholders who have informed the Company that they are aligned with the view of the Board.”
Reasons to Reject Alpayana’s Inadequate Hostile Bid
The basis for the Board's recommendation that shareholders reject the Hostile Bid is set forth in the Sierra Directors' Circular (the “Directors’ Circular”), which was filed today with Canadian securities regulatory authorities, is being mailed to shareholders, and is available on the Company's website and SEDAR+ (www.sedarplus.ca) under the Company’s profile. The reasons for the Board's recommendation include, among other things, the following:
- The Hostile Bid is dead on arrival.
The Hostile Bid has already been rejected by a majority of shareholders, rendering the bid incapable of completion based on its non-waivable condition.
As announced by the Company on December 26, 2024, shareholders holding cumulatively more than
- The Hostile Bid attributes no value to commodity and jurisdiction upside.
The Hostile Bid fails to recognize the strategic value of a copper producing company operating in proven mining jurisdictions.
The price of copper has been increasing due to global demand and tight supply conditions. With new copper supply constrained by the challenges of developing new mines, there has been an increase in valuations of copper-focused equities as well as proposed mergers and acquisitions.
- Shareholders should continue to capture the growth at Sierra.
Sierra has a high-quality portfolio of assets with significant upside potential.
Sierra’s two copper producing assets, the Yauricocha mine in
- Sierra’s plan to create value is working, Shareholders should keep the upside.
The Hostile Bid is opportunistic and clearly timed to deprive Sierra shareholders of a potential near-term uplift in the share price.
In the two years since current management was appointed, Sierra has successfully stabilized, optimized and improved its operations, resulting in a lower cost structure, increased efficiencies, higher production levels and profitability across the Company. The Board believes there is an opportunity for significant share price appreciation in 2025 based on the projected EBITDA growth. Applying the Company’s existing EV / LTM EBITDA3 multiple of 3.6x to the CIBC Capital Market’s 2025 EBITDA estimate of
- Shareholders should ignore the misleading statements and enjoy the fruits of fiscal prudence.
Contrary to Alpayana’s assertion on Sierra’s financial position, the Company has a manageable debt load and is well positioned to de-lever in the near-term.
Sierra’s current debt financing has served its purpose by providing the Company with the time and financial flexibility it required to turn around its operations when management took over just two years ago. Management took actions to improve the debt profile in 2024 through a new credit agreement with enhanced financing terms that also provided
- Alpayana has not made a serious offer to Sierra shareholders.
The Hostile Bid is significantly below implied premiums of precedent transactions.
The Board believes that any change of control transaction should compensate Sierra’s shareholders for the loss of exposure to the future earnings potential of its asset base, while also reflecting the relative undervaluation of the Sierra share price prior to the Hostile Bid announcement. The Hostile Bid price of
- Sierra should not be sold at markdown prices while it continues to grow.
The Hostile Bid is significantly below implied multiples of precedent base metal transactions.
The Hostile Bid price of
- Every alternative to the Hostile Bid promises better value to shareholders.
The standalone case has strong upside potential for shareholders and superior offers or other alternatives have the potential to emerge.
The Board, consistent with its fiduciary duties, continuously reviews and evaluates potential strategic alternatives to maximize shareholders’ value. While the Board believes in the Company’s stand-alone plan and the strength of its long-term strategy, the Board acknowledges that the Hostile Bid may act as a catalyst to uncover additional opportunities or interested parties. Sierra has engaged BMO Capital Markets as its financial adviser to manage a broader strategic review process for Sierra aimed at exploring and considering potential strategic alternative transactions to the Hostile Bid. Should a superior proposal or alternative transactions arise, the Board is fully prepared to evaluate these options and present them transparently to shareholders.
- Do not give away an asset for pennies when it is worth dollars.
Independent Equity Research has agreed with the Board’s assessment that the Hostile Bid is opportunistic and undervalues the Company.
CIBC Capital Markets provided10 periodic, independent, equity research coverage on Sierra. In a recent note titled “Unsolicited Takeover Bid Is Undervalued” dated December 17, 2024 and in response to the Alpayana proposal, analyst Bryce Adams expressed the view that “the offer price undervalues the company, at a time when the company has reported improved production results highlighted by 3,600 tpd throughput rates at Yauricocha in Q4/24 QTD.”
- Shareholders should not grant free cash flows to Alpayana.
Alpayana has a strong strategic imperative to secure Yauricocha for itself and ample ability to pay a significantly higher purchase price if it so chooses.
The acquisition of Sierra would be a large and transformative acquisition for Alpayana, a family-owned Peruvian mining company which has recently embarked on an M&A program to facilitate its growth ambitions. Alpayana would benefit significantly from operational synergies and drastically accelerate its growth plans if it were to acquire Yauricocha. At the Hostile Bid price of
- The Hostile Bid is a free option to Alpayana with unsatisfiable conditions.
The Hostile Bid contains extraordinary conditionality, including certain conditions which cannot be satisfied. This calls into question the seriousness and legitimacy of the Hostile Bid.
The Hostile Bid contains a significant number of conditions (20) which must be satisfied or waived before Alpayana is obligated to take up and pay for any Common Shares tendered. Many of the conditions are not subject to materiality thresholds or reasonableness standards or any other objective criteria, but rather are in Alpayana's sole discretion. Further, certain conditions of the Hostile Bid, including a minimum tender of two-thirds of the outstanding Common Shares and there being no shareholder rights plan adopted by Sierra, cannot be satisfied. As a result, tendering Common Shares to the Hostile Bid may, in effect, constitute the grant to Alpayana of a unilateral and discretionary option to acquire all of the Common Shares at a price that the Board views as inadequate.
- The Hostile Bid is financially inadequate.
Sierra has received an inadequacy opinion from BMO Capital Markets that from a financial point of view the Hostile Bid is not an adequate offer for shareholders.
Sierra’s financial advisor, BMO Capital Markets has delivered an opinion to the Board and the Special Committee, to the effect that, as of the date of the opinion, and based upon and subject to the assumptions, limitations and qualifications contained therein and such other matters as BMO Capital Markets considered relevant, the consideration offered to the shareholders pursuant to the Hostile Bid is inadequate from a financial point of view to the shareholders (other than Alpayana and its affiliates).
Take No Action and Reject Alpayana's Hostile Bid
Sierra shareholders are urged to REJECT the Hostile Bid. To do so, shareholders should TAKE NO ACTION.
Shareholders are encouraged to carefully review the Directors' Circular in its entirety. This document has been mailed to Sierra shareholders and is available on SEDAR+ (www.sedarplus.ca) under the Company’s profile, and on the Company's website (www.SierraMetals.com).
Sierra shareholders who have already tendered their Common Shares to the Hostile Bid and who wish to obtain assistance in withdrawing them are urged to contact their broker or Carson Proxy Advisors, Sierra’s Information Agent and strategic shareholder advisor, by North American toll-free phone at 1-800-530-5189, local and text: 416-751-2066 or by email at info@carsonproxy.com.
Advisors
The Company has engaged BMO Capital Markets as financial advisor, Mintz LLP as Canadian legal counsel, Miranda & Amado Law Firm as Peruvian legal counsel, Carson Proxy Advisors as securityholder communications advisor, and Oakstrom as media relations advisor. The Special Committee of independent directors of the Board has engaged Bennett Jones LLP as legal advisor.
Qualified Persons Statement
Ricardo Salazar Milla (AIG #8551), Corporate Manager – Mineral Resources of Sierra, is a Qualified Person as defined under National Instrument NI 43-101 - Standards of Disclosure for Mineral Projects. Mr. Salazar has reviewed and approved the scientific and technical content of this news release.
About Sierra Metals Inc.
Sierra Metals Inc. is a Canadian mining company focused on copper production with additional base and precious metals by-product credits at its Yauricocha Mine in
Forward-Looking Statements
This news release contains forward-looking information within the meaning of Canadian securities legislation. Forward-looking information relates to future events or the anticipated performance of Sierra and reflect management's expectations or beliefs regarding such future events and anticipated performance based on an assumed set of economic conditions and courses of action. In certain cases, statements that contain forward-looking information can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", "believes" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", or "will be taken", "occur" or "be achieved" or the negative of these words or comparable terminology. Forward-looking information in this news release includes, without limitation, statements regarding: the strategic value of Sierra’s portfolio; management's expectations regarding the Company's future share price, production and growth; management's expectations regarding future EBITDA; future demand for copper; growth of mineral resources; expectations regarding future cash flows; maintenance of production at full capacity in 2025; the ability to manage costs; the exploration potential of the Company's properties; the intention of holders of more than
Forward-looking information is subject to a variety of risks and uncertainties, which could cause actual events or results to differ from those reflected in the forward-looking information, including, without limitation, the risks described under the heading "Risk Factors" in the Company's annual information form dated March 15, 2024 for its fiscal year ended December 31, 2023 and other risks identified in the Company's filings with Canadian securities regulators, which are available at www.sedarplus.ca.
The risk factors referred to above are not an exhaustive list of the factors that may affect any of the Company's forward-looking information. Forward-looking information includes statements about the future and is inherently uncertain, and the Company's actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking information due to a variety of risks, uncertainties and other factors. The Company's statements containing forward-looking information are based on the beliefs, expectations, and opinions of management on the date the statements are made, and the Company does not assume any obligation to update such forward-looking information if circumstances or management's beliefs, expectations or opinions should change, other than as required by applicable law. For the reasons set forth above, one should not place undue reliance on forward-looking information.
Non-IFRS Performance Measures
Certain financial measures and ratios within this news release including "EBITDA", "free cash flow", "net asset value (NAV)", "IRR", "enterprise value to last twelve months EBITDA", "net debt to EBITDA", "P/NAV" and "EV/EBITDA" are not measures or ratios recognized by International Financial Reporting Standards, as issued by the International Accounting Standards Board ("IFRS"). The non-IFRS measures and ratios presented do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be directly comparable to similar measures or ratios presented by other issuers. EBITDA is a non-IFRS measure that represents an indication of the Company’s continuing capacity to generate earnings from operations before taking into account management’s financing decisions and costs of consuming capital assets, which vary according to their vintage, technological currency, and management’s estimate of their useful life. EBITDA comprises revenue less operating expenses before interest expense (income), property, plant and equipment amortization and depletion, and income taxes (and in the case of 2024, 2023 and 2022, excludes the Cusi Mine which was placed on care and maintenance and subsequently sold by the Company). Adjusted EBITDA is calculated as net income, adding back interest, taxes, depreciation, and amortization, and excluding non-recurring, non-operational or non-cash items, which the Company believes is useful for investors to assess a company’s core operational performance without the impact of the capital structure, tax regime, or non-operational items. Free cash flow is calculated as operating cash flow minus capital expenditures, which the Company believes is a useful measure to show how much cash is available after reinvesting in the business, providing insight into other capital allocation priorities. Net asset value (NAV) is calculated as the net present value of future cash flows, discounted at an appropriate discount rate minus liabilities, which is a key valuation metric in mining as it is a proxy for intrinsic value of reserves and resources. Internal Rate of Return (IRR) is the discount rate that sets the net present value of all cash flows from an investment to zero, which the Company believes is a useful measure of profitability of a project, expressed as an annualized percentage return. Enterprise Value to adjusted EBITDA is calculated as enterprise value (market capitalization plus net debt plus minority interest plus preferred equity less cash and cash equivalents) divided by adjusted EBITDA and measures a company’s enterprise value relative to its operational profitability. Net debt to adjusted EBITDA is calculated as total debt minus cash and cash equivalents divided by adjusted EBITDA and indicates a company’s leverage and its capacity to service debt using operational cash flow. Free cash flow / net debt is calculated as free cash flow divided by debt minus cash and cash equivalents and shows how efficiently a company generates cash relative to its debt obligations. Price to Net Asset Value (P/NAV) is calculated as a company’s market capitalization divided by its Net Asset Value and helps investors assess whether a company is trading at a premium or discount relative to its underlying asset value. Investors are cautioned that non-IFRS financial measures and ratios should not be construed as alternatives to other measures of financial performance calculated in accordance with IFRS. The foregoing non-IFRS financial measures and ratios are provided to assist investors with their evaluation of Sierra. Management considers these non-IFRS financial measures to be important indicators in assessing its performance. See the "Non-IFRS Performance Measures" section in Sierra's management's discussion and analysis for the three and nine months ended September 30, 2024 for further information on the definition, calculation and reconciliation of certain non-IFRS financial measures.
Financial Outlook
This news release contains financial outlooks about Sierra's prospective results of operations including, without limitation, anticipated EBITDA for the 12 months ended December 31, 2024 and December 31, 2025, which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth under "Forward-Looking Statements" above. Readers are cautioned that the assumptions used in the preparation of such financial outlooks, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on financial outlooks. Sierra's actual results, performance or achievement could differ materially from those expressed in, or implied by, these financial outlooks. Sierra has included the financial outlooks in order to provide readers with a more complete perspective on Sierra's future operations and such information may not be appropriate for other purposes. Sierra and the Board disclaim any intention or obligation to update or revise any financial outlooks, whether as a result of new information, future events or otherwise, except as required by law.
Third Party Information
This press release includes market and industry data that has been obtained from third party sources, including industry publications. The Company believes that the industry data is accurate and that its estimates and assumptions are reasonable, but there is no assurance as to the accuracy or completeness of this data. Third party sources generally state that the information contained therein has been obtained from sources believed to be reliable, but there is no assurance as to the accuracy or completeness of included information. Although the data is believed to be reliable, the Company has not independently verified any of the data from third party sources referred to in this press release or ascertained the underlying economic assumptions relied upon by such sources. This press release has quoted from a publicly available analyst report of CIBC Capital Markets. Such analyst has not consented to the inclusion of all or any portion of its report in this document. CIBC Capital Markets, the firm employing such analyst, was not an advisor to Sierra as at the date of such analyst report.
1 This is a non-IFRS performance measure and based on the following consensus pricing: 2025 (
2 Reflects EBITDA from continuing operations and excludes the Cusi Mine which was placed on care and maintenance and subsequently sold by the Company.
3 This is a non-IFRS performance measure. Please refer to "Non-IFRS Financial Measures" and "Financial Outlook".
4 This is a non-IFRS performance measure. Please refer to "Non-IFRS Financial Measures" and "Financial Outlook".
5 Trading peers include 29 Metals, Adriatic, Aeris,
6 This is a non-IFRS performance measure. Please refer to "Non-IFRS Financial Measures" and "Financial Outlook".
7 This is a non-IFRS performance measure. Please refer to "Non-IFRS Financial Measures" and "Financial Outlook".
8 Reflects producing copper corporate and asset transactions since 2016.
9 Reflects contested copper corporate transactions over the last 15 years. Contested transactions include transactions that were launched (a) without target board support; (b) with a public release, either formally or informally, without target board support; or (c) where a board-supported deal faced significant shareholder resistance.
10 CIBC Capital Markets suspended coverage of Sierra due to a re-allocation of analyst resources in December 2024.
View source version on businesswire.com: https://www.businesswire.com/news/home/20250114641631/en/
For further information regarding Sierra, please visit www.SierraMetals.com or contact:
Investor Relations
Sierra Metals Inc.
+1 (866) 721-7437
info@sierrametals.com
Securityholder Communications Advisor
Christine Carson
President & CEO
Carson Proxy Advisors
+1 (416) 804-0825
christine@carsonproxy.com
Media Relations
John Vincic
Principal
Oakstrom Advisors
+1 (647) 402-6375
john@oakstrom.com
Source: Sierra Metals Inc.
FAQ
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Why did Sierra Metals' Board reject Alpayana's takeover offer for SMTSF?
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