By Robb M. Stewart

Sierra Metals formerly rejected a hostile takeover bid from privately-held Peruvian miner Alpayana valuing it at roughly 180 million Canadian dollars ($125.3 million) as too low and opportunistic.

The Canadian copper producer said Tuesday it recommended its shareholders reject the all-cash offer of C$0.85 a share, following a unanimous recommendation by a special committee of directors set up to review the approach and after consulting with financial and legal advisors.

Chairman Miguel Aramburu said Alpayana's offer undervalues the company and is well below where similar deals have been priced, and has been pitched directly to shareholders at a time demand for copper is growing worldwide.

"The board's view is that selling your shares at the low price offered by Alpayana would deprive you of significant upside potential in your investment," Aramburu told investors.

Alpayana late last month launched its bid for Sierra through a newly-formed Canadian subsidiary, mailing the offer and related documents to the Canadian company's shareholders. The offer will be open until the evening of April 14, unless extended or withdrawn.

Family-controlled Alpayana, which has operated mines in Peru for about 38 years, said its offer would allow Sierra's shareholders to monetize the value of their investment in a company that has racked up about $150 million in accumulated net losses over a decade. The company, which said it is debt free, pitched a tie-up as an opportunity to eliminate Sierra's high corporate expense, high yield debt and to inject fresh capital to support growth.

In anticipation of a hostile bid, Sierra last month adopted a shareholder-rights plan to fend off Alpayana. Sierra, which operates the Yauricocha Mine in Peru and Bolivar Mine in Mexico, had pledged to review an offer from Alpayana but said investors holding more than half of its shares had already rejected the proposed bid as too low.

Sierra's shares have pulled back slightly in the new year but remain up 22% on a year ago, last closing at C$0.82.

The Canadian company said it has a high-quality portfolio of assets offering significant potential. "With new copper supply constrained by the challenges of developing new mines, there has been an increase in valuations of copper-focused equities as well as proposed mergers and acquisitions," it said.

Sierra said that contrary to what Alpayana claims, its debt load is manageable and it is positioned to reduce debt leverage in the near term. The company is targeting earnings before interest, taxes, depreciation and amortization of $130 million in 2025, up sharply from an anticipated $72 million in 2024 and $50 million the year before.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

January 14, 2025 08:57 ET (13:57 GMT)

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