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The Bidding War For Guyana Goldfields Continues

The Board of Directors of Guyana Goldfields have unanimously determined, after consultation with its financial and legal advisors, that the New Offer constitutes a "Superior Proposal" in accordance with the terms of the arrangement agreement between the Company and Silvercorp Metals Inc. dated April 26, 2020, as amended on May 16, 2020.

Pursuant to the terms of the New Offer, the Company's shareholders would receive cash consideration of C$1.85 for each Common Share, valuing Guyana Goldfields at approximately C$323 million (US$240m). The New Offeror has also agreed to provide the Company with a US$30 million secured loan facility to finance ongoing operations of the Aurora gold mine and to fund other liquidity needs of the Company. Except for the amount of the New Facility, the loan agreement proposed to be entered into between the Company and a wholly-owned subsidiary of the New Offeror is substantially similar to the loan agreement between the Company and Silvercorp dated April 26, 2020. 

Based on the closing price of the Silvercorp common shares on the Toronto Stock Exchange as of June 3, 2020, the Superior Proposal represents a premium of approximately 35% to the implied value of the consideration offered pursuant to the Silvercorp Arrangement Agreement.

Except for the consideration being offered and as described below, the arrangement agreement that would be entered into with the New Offeror is substantially the same as the Silvercorp Arrangement Agreement. Commensurate with the increase in consideration, the proposed arrangement agreement with the New Offeror provides for an increase in the termination fee to C$11.3 million, which is payable by the Company to the New Offeror in certain circumstances. The proposed arrangement agreement with the New Offeror also includes a reverse termination fee in the amount of C$11.3 million, which is payable by the New Offeror to the Company in certain other circumstances.

In accordance with the Silvercorp Arrangement Agreement, the Company has notified Silvercorp that it considers the New Offer to be a Superior Proposal under the Silvercorp Arrangement Agreement and that the five business day matching period (the "Matching Period") has commenced, during which Silvercorp has the right, but not the obligation, to propose to amend the terms of the Silvercorp Arrangement Agreement in order for the New Offer to cease to be a Superior Proposal (the "Match Right"). The Matching Period expires at 4:30 pm (ET) on June 10, 2020.

The NPV6% of the Aurora underground project based on reserves and a long-term $1,625/oz. gold price, is approx. $540m +/- 5% per the life of mine plane [LOM]. As such, it should choose to match the new offer if Silvercorp metals believes in a long-term gold price deck of $1,370/oz or higher. However, if Silvercorp believes in a long-term gold price closer to where it is now, it should be willing to bid as much as US$300m. Using a $1,625/oz. long-term price deck or average long-term price deck, Aurora would still unlock significant value for shareholders.  

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