Endeavour deal recasts West African gold industry

Endeavour Mining has agreed to acquire Teranga Gold Corporation in a deal that will reshape the West African gold mining sector and forge one of the biggest producers on the continent, reports David Thomas.

Endeavour, which owns six mines across Burkina Faso and Côte d’Ivoire with production of over 1m ounces per year at below $900 an ounce, will acquire mid-tier Teranga, listed in Toronto, whose two West African mines expect to deliver 530,000 ounces of gold per year at $785 per ounce over the next five years.

The spot price of gold spiked from just over $1,500 per ounce at the beginning of the year to over $2,000 per ounce in August as investors flocked to the traditional safe haven during the coronavirus pandemic. It has cooled to just under $1,800 after positive Covid-19 vaccine trial results.

The deal, estimated by Bloomberg to be worth $1.86bn, will make the combined entity the largest gold producer in Senegal, Côte d’Ivoire and Burkina Faso, as well as a top-10 senior gold producer in the world, according to a statement.

Existing Endeavour and Teranga shareholders will own approximately 66% and 34% of the new entity and Endeavour’s largest shareholder La Mancha – controlled by Egyptian billionaire Naguib Sawiris – will inject $200m to strengthen its balance sheet.

The new entity will seek a second listing on the London Stock Exchange and is targeting entry as a FTSE 100 company in 2021.

Endeavour says the deal will give it access to six West African greenfield projects – Fetekro, Golden Hill, Afema, Kalana, Bantou and Nabanga – and the largest exploration portfolio across the “underexplored” West African Birimian Greenstone Belt.

A new senior gold producer

“This combination 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,” said Sébastien de Montessus, president and CEO of Endeavour.

“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.”

Endeavour says that Sabodala-Massawa, in Senegal, will become a flagship asset alongside the Ity and Houndé mines, while Wahgnion, in Burkina Faso, will immediately add to its production. Golden Hill, an advanced exploration project in Burkina Faso, will act as a satellite operation of Endeavour’s nearby Houndé mine. The company expects to announce strong exploration results at its Afema mine in Côte d’Ivoire in the coming weeks.

Richard Young, president and CEO of Teranga, also welcomed the deal.

“We have taken Teranga from a single asset producer to a low-cost, mid-tier gold producer over the past few years. This combination with Endeavour, strongly supported by our two largest shareholders, allows Teranga shareholders to benefit from an improved valuation as owners of a best-in-class senior gold producer.”