Adventus-Silvercorp deal to go ahead following favourable court ruling

The proposed acquisition of Adventus Mining (TSXV: ADZN) by Silvercorp Metals (TSX: SVM) (NYSE: SVM) is set to proceed after a favorable court ruling related to Adventus’ flagship project cleared a key hurdle in the deal.

In April, Silvercorp, which has been looking to diversify its precious metals mining business outside of China, agreed to buy Adventus and its 75% interest in the El Domo copper-gold project in Ecuador. The deal was valued at C$200 million ($145m).

However, two months later, the deal was in jeopardy after local groups launched a legal action challenging the consultation process that led to the issuance of the project’s environmental licence.

According to Silvercorp, the lawsuit presented a “material adverse effect” that would block the deal from closing, which Adventus disagreed, as the suit only named the company as a related third party.

Last week, an Ecuadorian court rejected the challenge, finding that the procedures used by government authorities were applicable with mining laws. Following the favorable ruling, Adventus moved toward closing the deal, with a deadline set at July 31 for Silvercorp to do the same on its end.

Silvercorp, despite its previous stance that the legal uncertainties would present an unmet closing condition, announced on Wednesday that it will proceed with the acquisition as planned.

Upon completion, the Vancouver-based miner would take majority ownership of what is one of the highest grade and lowest capital intensity copper-gold projects globally, and the next big mine in Ecuador after Mirador and Lundin’s Fruta del Norte.

A feasibility study published in 2021 envisioned a 10-year operation with average annual production of 10,463 tonnes of copper, or 21,390 tonnes of copper-equivalent. This will be mined from total reserves of 6.5 million tonnes at 1.93% copper, 2.52 g/t gold, 2.49% zinc, 45.7 g/t silver and 0.25% lead.

Under the base-case scenario, the project has an after-tax net present value, discounted at 8%, of $259 million and an internal rate of return of 32%. Initial capital costs were estimated at $248 million, with a payback period of 2.6 years.

Construction of the project, which was scheduled to begin in June, would be fully funded from Silvercorp’s existing cash balance combined with a $175.5 million streaming deal Adventus signed with Wheaton Precious Metals in 2022.

Adventus Mining’s stock surged 18.6% by 12:50 p.m. ET after its announcement that the takeover is set to go through, capitalizing the company at C$229.4 million ($166m).

Meanwhile, Silvercorp Metals was down 2.1% with a market capitalization of C$905.9 million ($656m).