Endeavour Mining is eyeing an entry onto the FTSE 100 after agreeing an all-stock deal to merge with Teranga Mining.
The $1.86bn deal between the two West African-focused gold miners will create a new top 10 senior gold producer with “low production costs and diversification across three countries”, according to a statement by Endeavour.
It added that the new company would become London’s largest listed gold producer, after the FTSE 100 was dealt a major blow last year when Randgold delisted following its acquisition by Barrick Gold.
Sébastien de Montessus, president and CEO of Endeavour, said the merger offers an “attractive opportunity to both sets of shareholders”.
“By combining our complementary assets, we will enhance our strategic position on West Africa’s highly prospective Birimian Greenstone Belt and we will have the ability to deliver material synergies.
“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.”
La Mancha investing $200m into Endeavour and Teranga merger deal
The deal comes at a time when gold prices have surged to record levels, as investors have turned to the commodity amid ongoing disruption to financial markets caused by the coronavirus pandemic.
The merger builds upon Endeavour’s one billion Canadian dollar ($736m) acquisition of rival Semafo back in July, in a deal that created West Africa’s largest gold mining company.
In Africa, Endeavour now operates two mines in Côte d’Ivoire, four mines in Burkina Faso, four potential development projects and a portfolio of exploration assets on the Birimian Greenstone Belt across Burkina Faso, Côte d’Ivoire, Mali and Guinea, with a production profile of over one million ounces at below $900 per ounce.
Teranga’s portfolio consists of two producing gold mines and an attractive growth pipeline in Senegal, Burkina Faso and Côte d’Ivoire, which are expected to produce 533,000 ounces of gold per year at average all-in-sustaining costs of $785 per ounce over the next five years.
De Montessus said Teranga’sWahgnion mine will build on Endeavour’s existing portfolio in Burkina Faso and provide the company with “immediate cash flow”, while the “rapidly advancing” Golden Hill and Afema projects offer “further growth optionality”.
The Massawa project, which Teranga secured Barrick Gold’s 90% stake in last year for $430m, will provide a route into Senagal for Endeavour.
As part of the merger, existing Endeavour and Teranga shareholders will own about 66% and 34%, respectively, of the combined company on a fully diluted in-the-money basis.
Endeavour confirmed it will pay 0.47 of its own shares for each Teranga share at a 5.1% premium to the company’s closing price on the Toronto stock exchange on 13 November.
The miner said it has arranged up to $800m in financing from banks including Citigroup, HSBC, and ING that will be used to consolidate the debts of the two miners.
Endeavour’s largest shareholder, the La Mancha investment vehicle, which is operated by the Egyptian Sawiris family, has committed to invest $200m worth of investment and will hold a 19% share in the company following the merger.
