In a significant development for the Canadian mining sector, Sierra Metals Inc. (TSX: SMT, OTCQX: SMTSF, BVL: SMT) has announced that the majority of its shareholders have rejected Alpayana S.A.C.’s unsolicited takeover bid of C$0.85 per share. This decision comes just days after Alpayana, a private Peruvian mining company, made public its intention to bypass Sierra’s board and present the offer directly to shareholders.
The all-cash offer, which valued Sierra Metals at a 10% premium to its closing price on December 13, 2024, has been deemed inadequate by shareholders holding over 50% of the company’s outstanding common shares. This collective stance effectively blocks Alpayana’s attempt to acquire the TSX-listed miner, signaling a strong vote of confidence in Sierra Metals’ current management and strategy.
Sierra Metals’ CEO, Ernesto Balarezo, expressed satisfaction with the shareholder support, stating, “They have been very clear in their view that the proposed bid price of $0.85 significantly undervalues the Company”. Balarezo emphasized the company’s progress over the past two years and the potential for further value enhancement from ongoing initiatives.
The rejection comes despite Alpayana’s assertion that its offer provided an attractive opportunity for Sierra shareholders to liquidate their investment. Alpayana, boasting annual revenues exceeding $500 million, had positioned its bid as a chance for shareholders to decide the fate of their investment directly.
In response to the takeover attempt, Sierra Metals has assembled a team of advisors, including BMO Capital Markets as financial advisor, Mintz LLP for legal counsel, and Carson Proxy Advisors for communications. Additionally, a special committee of independent directors has retained Bennett Jones as legal advisor to explore strategic options.
This development highlights the challenges faced by mining companies in the current market, where valuations are often contested, and shareholders are increasingly vocal about their expectations for growth and returns. Sierra Metals, with its focus on copper production and additional base and precious metals by-products from mines in Peru and Mexico, appears to have convinced its investors of its standalone potential.
The company’s stock, which has ranged between C$0.61 and C$1.05 over the past year, saw a nearly 12% increase to C$0.86 following Alpayana’s initial offer announcement. This market reaction suggests that investors anticipate either an improved bid or believe in Sierra Metals’ ability to deliver superior returns independently.
As the situation unfolds, Sierra Metals advises its shareholders to take no action while it reviews its options. The mining industry will be watching closely to see whether this rejection leads to an improved offer from Alpayana or if Sierra Metals will pursue alternative strategies to maximize shareholder value in the competitive global mining landscape.
