09:02 PM EST, 12/30/2024 (MT Newswires) -- Peruvian mining group Alpayana overnight Monday commenced a formal all-cash offer to buy all of the issued and outstanding common shares of Sierra Metals Inc. ( SMTSF ) for C$0.85 in cash each, although shareholders of the target company had already rejected Alpayana's proposed unsolicited all cash take over bid for the same amount.

It comes after Sierra Metals ( SMTSF ) on Monday adopted a shareholder rights plan, effective immediately, designed to ensure that all of it shareholders are "treated fairly in connection with any take-over bid and to protect against 'creeping bids' for the outstanding common shares of Sierra Metals ( SMTSF ) through purchases exempt from applicable take over-bid rules."

Also, a few days earlier Sierra Metals ( SMTSF ) said shareholders holding more than 50% of its outstanding common shares had each informed the company the proposed $0.85 per share bid price is "inadequate" and that they "do not intend to support the unsolicited bid by Alpayana."

Under the terms of the formal offer detailed Monday night, shareholders who tender their common shares will receive that C$0.85 amount in cash for each common share.

Overnight Monday's statement noted the offer represents a significant premium of approximately 26% to the 30-day volume weighted average trading price of C$0.676 per Common Share on the TSX over the 30 trading days ended December 13, 2024 (being the last trading day prior to the announcement of Alpayana's intention to make the Offer); and a 10% premium based on the closing price of C$0.770 per Common Share on the TSX on December 13, 2024. The Offer is open for acceptance until 5:00 p.m. (Toronto time) on April 14, 2025, unless the Offer is extended, accelerated or withdrawn by Alpayana Canada in accordance with its terms.

Alpayana's statement said: "The offer allows shareholders to monetize the current value of Sierra with a premium rather than continuing to be exposed to the structural stand-alone risks associated with the hurdles that Sierra faces. Sierra's continued structural problems, including lack of scale, high production costs, high expensive debt load and high corporate expenses relative to revenues, make its Shareholders highly vulnerable to foreseeable challenges in the Latin American debt markets, when access to additional capital is likely to be difficult. After approximately US$150 million in accumulated net losses over the last 10 years, shareholders are encouraged to take advantage of this unique opportunity allowing for the redeployment of capital in more viable alternatives."

It added: "For Alpayana, despite the listed challenges, it views the acquisition of Sierra as an attractive opportunity as Alpayana has the resources available to eliminate the high corporate expense, the high yield debt and inject fresh capital to support the capex required to support the company's growth and cover the working capital shortfall. Alpayana also anticipates that its existing mining platform will be better suited to take advantage of economies of scale in advancing the asset."