West Africa-focused Endeavour Mining Corporation is in the process of acquiring Canada’s Semafo in a C$1 billion ($690.7 million) deal that would create one of the world’s top gold producers and the largest gold miners in the region.
The combined group will bring together a portfolio of six mines and produce over 1 million ounces of gold a year, Endeavour chief executive Sebastien de Montessus said recently, making it larger than Newmont Goldcorp, Barrick, and Goldfields in West Africa.
Endeavour plans to buy all of the issued and outstanding shares of the Toronto-listed gold producer. Its shareholders will own about 70 percent of the combined company, with the rest going to Semafo shareholders.
The group will also be seeing improved free float and greater stock liquidity with Endeavour’s top shareholder, La Mancha, expected to reduce its stake from 31 percent to 25 percent in a redistribution of equity as part of the deal. The private gold investment firm will also invest $100 million in the new gold producer, helping its cash position.
The deal comes at a time when mining shares have plummeted due to the coronavirus outbreak, making deals like this more attractive. But de Montessus noted that the timing was not linked to the virus and discussions have been ongoing for 14 months. More so, the pandemic is unlikely to disrupt the planned takeover which is scheduled to close in June.
Semafo shares have fallen in value since last November, when a convoy of employees was attacked near its Boungou mine in eastern Burkina Faso, causing 39 deaths and halting operations at the facility. “After the attack, I think Semafo probably felt that two mines in a consolidating market was not enough and that teaming up with Endeavour was a good way to grow,” said de Montessus.
Benoit Desormeaux, Semafo CEO, is set to become president of the combined group, while its chief financial officer Martin Millette will become the group CFO. “We are very excited about this announcement,” Desormeaux said on a call with investors, reported by Reuters. “For Semafo shareholders this transaction offers the benefits of both an immediate premium, and the chance for a significant re-rating within a combined entity.”
The combined group would have a production cost per ounce of around $900, in the bottom third of the industry cost curve and a leverage ratio of 0.7x net debt to earnings before interest, tax, depreciation and amortization (EBITDA), according to de Montessus.
Endeavour Mining is an intermediate gold producer focused on developing gold mines in the West African region. Listed on the Toronto Stock Exchange, the company has four mines in Burkina Faso, Cote d’Ivoire, Ghana, along with other project development and exploration assets.
