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Nov 16, 2020

Endeavour Mining to acquire rival Teranga Gold for $2.44 billion

Endeavour Mining to acquire Teranga Gold

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Endeavour Mining Corp., the acquisitive gold producer backed by Egyptian billionaire Naguib Sawiris, agreed to buy Teranga Gold Corp. in the latest deal to reshape the sector.

After Barrick Gold Corp. and Newmont Corp. two years ago created behemoths that dwarf the rest of the industry, other gold miners are trying to consolidate to remain relevant to shareholders. Helped by record gold prices, that’s led to a flurry of deals across the sector as smaller producers beef up their scale.

Endeavour said last week it was discussing a “merger of equals style” deal with Teranga after the talks were first reported by Bloomberg. Endeavour is offering 5.1 per cent premium to Teranga’s closing price on Friday, valuing its equity at C$2.44 billion (US$1.86 billion), according to Bloomberg calculations.

The combined company will produce about 1.5 million ounces of gold a year across West Africa, making it one of the 10 largest producers. It also plans to seek a listing on the London Stock Exchange, a long-term goal of Endeavour Chief Executive Officer Sebastien de Montessus.

London has become a go-to destination for gold-miners in the past year as companies seek to fill the gap left by Randgold Resources Ltd., a former investor favorite that delisted when it was bought by Barrick in a deal that set the tone for low or zero premium combinations in the industry.

Since Randgold left, Yamana Gold Inc. and Wheaton Precious Metals Corp. have both secured listings in London, though unlike Endeavour they have not sought premium listings that make them eligible for the FTSE 100 index.

“The combined entity will become a new senior gold producer and enjoy an improved capital markets profile, underpinned by a healthy balance sheet and strong cash flow capabilities to support a sustainable dividend,” de Montessus said in Monday’s statement.

Endeavour is offering 0.47 of its own shares per Teranga share. That means existing Endeavour and Teranga shareholders will own approximately 66 per cent and 34 per cent, respectively, of the combined company.

La Mancha, the vehicle which Sawiris holds his stake in Endeavour, will invest a further US$200 million into the combined company, leaving it with a 19 per cent stake. Teranga’s biggest shareholders, including Barrick, support the deal.

A successful deal would extend a years-long transformation by Endeavour, which has replaced high-cost mines with two new flagship projects that produce more gold and will operate for much longer. Teranga has assets in Senegal, Burkina Faso and Ivory Coast, including the Massawa project it bought from Barrick.

The deal is expected to close in the first quarter of 2021.