Sierra Metals Board Urges Shareholders to Reject Alpayana's Bid

Sierra Metals Board Urges Shareholders to Reject Alpayana's Bid

Sierra Metals Inc. (TSX: SMT | OTCQX: SMTSF) has made a strong statement regarding the unsolicited takeover bid from Alpayana S.A.C. for C$0.85 per share. The Board of Directors, guided by a special committee of independent directors and supported by financial and legal advice, unanimously recommends that shareholders reject this offer. They emphasize that simply taking no action will effectively nullify the Hostile Bid.

Value Undercut by Hostile Bid

Miguel Aramburu, Chair of the Board, stressed that Alpayana's offer does not reflect the true value of Sierra Metals. "The bid significantly undervalues the Company's potential," he stated. The Board highlighted that with increasing global demand for copper and substantial production increases at Yauricocha and Bolivar mines, Sierra is strategically positioned for growth moving forward.

Projected Growth in EBITDA

The Company has shared a projected EBITDA of approximately US$130 million for the upcoming year, compared to an expected US$72 million in 2024 and US$50 million in 2023. This projection indicates a potential growth rate of around 80% compared to 2024 and an impressive 158% over 2023. This anticipated growth fuels the rationale behind rejecting the low bid from Alpayana.

Strong Backing from Shareholders

With over 50% of shareholders stating their disapproval of the current bid price, the Board believes that Alpayana will struggle to meet the necessary conditions for control acquisition. This significant shareholder alignment reinforces the Board's stance on rejecting the proposal.

Reasons for Rejection

The Board's recommendation is articulated in the Sierra Directors' Circular, released and available for review. Key reasons for this rejection include:

• Hostile Bid Lacks Viability: The majority of shareholders have indicated they view the offer as inadequate.
• Strategic Mineral Value Ignored: The bid fails to recognize the strategic value inherent in copper production within well-established mining jurisdictions.
• Continued Growth at Sierra: With robust maps for exploration and expansion, Sierra retains vast upside potential.
• Timing of the Bid: The Board expresses concern that the offer is timed to capitalize on the Company’s growth trajectory but falls short in valuation.
• Financial Analysis Indicates Inadequacy: Independent analysis has supported Sierra's assessment that the bid price does not reflect fair market value.

Significant Upside Potential for Shareholders

Despite the low offer, Sierra is positioned for risk-mitigated growth. The Yauricocha mine has recently succeeded in operational improvements, setting the stage for increased efficiencies and production levels. The Company’s financial structure remains robust, allowing for strategic refinements and enhanced shareholder returns.

Exploration and Strategic Planning

Sierra has exciting exploration opportunities awaiting in both Peru and Mexico, with significant discovery potential that could further boost shareholder value. With enhanced mining capabilities and strategic foresight, the Board is committed to advancing Sierra’s interests effectively.

Looking Ahead

The Board is adamant that shareholders should retain their shares and ignore misleading statements that may arise from this situation. Engagement with financial advisors indicates that Sierra’s long-term strategy holds much promise. Shareholders are encouraged to participate in this journey of growth and innovation as Sierra continues to explore strategic alternatives beyond the hostile bid.

Frequently Asked Questions

What is the Hostile Bid from Alpayana?

The Hostile Bid is an unsolicited offer from Alpayana S.A.C. to acquire all outstanding common shares of Sierra Metals at C$0.85 per share.

Why does the Board recommend rejecting Alpayana's offer?

The Board believes the offered price undervalues Sierra Metals, particularly given the Company’s growth potential and significant EBITDA projections.

How has the shareholder response been to this bid?

More than 50% of Sierra shareholders have indicated their intention to reject the bid, aligning with the Board's recommendation.

What are the future growth prospects for Sierra Metals?

Sierra Metals expects considerable growth driven by increased production at its mines, alongside new exploration opportunities that could yield additional mineral resources.

What should shareholders do if they have already tendered their shares?

Shareholders who have tendered their shares should contact their brokers or seek assistance from Sierra’s information agent to withdraw their shares from the Hostile Bid.

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