Endeavour Mining may boost U.K. exchange with London stock listing

Endeavour Mining Corp., the biggest gold producer in west Africa, is debating whether to shift its primary share listing to the U.K. as it seeks to tap a new pool of investors.

Chief executive Sébastien de Montessus said the US$4.5 billion Toronto-listed company was assessing whether to move to London or New York in the wake of its merger with rival Semafo Inc.

“We are going to move to one or the other. We are currently assessing which is the most relevant and attractive given our portfolio and locations and also the fit in terms of governance and liquidity,” said Mr. de Montessus in an interview with the Financial Times. “Given that management is based in London, a listing in the U.K. is an option on the table.”

London lost its biggest and most successful gold company last year when Randgold Resources Corp. delisted after being acquired by Barrick Gold Corp.

Most of the producers listed in the U.K. lack the scale to appeal to mainstream investors who are keen to increase their exposure to the sector at a time when gold prices have hit a record high above US$2,000 a troy ounce.

Typically these investors favour gold producers that are able to a pay a dividend.

Only four precious metal companies are listed on the London Stock Exchange with a market value of more than US$4.5 billion — Russian duo Polyus PJSC and Polymetal International Plc., Mexico-focused Fresnillo Plc. and a recent arrival from Canada called Yamana Gold Inc.

South Africa’s Anglogold Ashanti Ltd. has been expected to move to London, but that plan now looks to be on ice following the recent departure of its CEO Kelvin Dushnisky.

One of the attractions of a primary listing in London is that it would make Endeavour eligible for a place in the FTSE 250, giving the company exposure to the large tracker funds that follow the index.

Endeavour’s shift to either the U.K. or the U.S. will be a blow to the Toronto Stock Exchange, which is also in danger of losing Barrick to the New York Stock Exchange.

Endeavour, whose largest shareholder is Egyptian telecoms billionaire Naguib Sawiris, completed its merger with Semafo last month, creating the largest gold producer in west Africa with annual production of about 1 million ounces.

The company now boasts six operating assets, four of them in Burkina Faso, which has been hit by a surge in Islamist violence.

If the gold price remains around US$2,000 an ounce, de Montessus said Endeavour could achieve a net cash position by the end of the year, paving the way for the company to pay a dividend.

“We have a half million ounces of gold to produce in the second half of the year and our all-in sustaining costs will be US$800 to US$850 (an ounce) so this will allow us to generate significant cash flow,” he said. At the end of June, Endeavour’s net cash stood at US$309 million.

De Montessus said the company had no plans to hedge gold production and this would only be considered when it started another big construction phase.

Turning to the outlook, de Montessus said he hoped the industry would not repeat the mistakes of the last bull market in 2011 when gold producers ploughed billions of dollars into new projects and deals, only to come unstuck when prices collapsed.

“Right now what is important is to be extremely disciplined in growing margins, cash flow and being able to provide strong returns to shareholders rather than embarking on a big phase of investment or undisciplined mergers and acquisitions.”