GOLDEN Star Resources today unveiled a potentially transformative transaction that sees Egyptian entrepreneur Naguib Sawiris’ newly created La Mancha investment vehicle inject $125.7m into the Toronto-listed gold producer.
“We are delighted to welcome La Mancha as a long term, strategic investor,” said Sam Coetzer, president and CEO of Golden Star. “We share the vision of building a leading, Africa-focused gold producer and this transformative deal clearly endorses the potential of Golden Star’s assets,” he said in a company statement.
In return for the funds, La Mancha will be issued with about 163.2 million Golden Star common shares, representing approximately 30% of the outstanding share capital. As part of the agreement, La Mancha was agreed not to sell the stake for two years.
Coetzer said the funds will be – in the main – to finance Golden Star’s organic growth options, including accelerating underground development and production at the Wassa Underground Gold Mine and Prestea, another of Golden Star’s Ghana mines.
A portion of the investment, however, will also be allocated to possible future acquisitions as well as for general corporate purposes. “La Mancha has a strong track record of creating sustainable shareholder value and their previous investments demonstrate their ability to identify compelling growth opportunities at an early stage,” said Coetzer.
Sawiris’ best known African gold development is his backing of Endeavour Mining which has grown from a West African minnow into a company with ambitions to produce some 900,000 ounces a year of gold from about 2020. Endeavour Mining recently announced half year results which showed it was on course for production of 555,000 oz to 590,000 oz.
“The transaction also de-risks our balance sheet and lends us a platform to participate actively in the consolidation of the African gold mining industry,” said Coetzer.
Sawiris launched La Mancha in November and appointed Andrew Wray, the former CFO of Acacia Mining, as its CEO. Acacia was the company with which Endeavour Mining had earlier contemplated a merger before pulling out of the transaction. Said Wray: “Our strategic goal is to create value with a long-term, supportive approach to the benefit of all stakeholders”. Sawiris also developed Evolution Mining, an Australian company which has a stake, incidentally, in South African exploration firm, Orion Minerals.
Once the transaction is complete, La Mancha will nominate up to three of its representatives to Golden Star’s board which has also approved the transaction. In conjunction with the deal, Golden Star also intends to consolidate its issued and outstanding shares on a 5:1 ratio.
A special meeting to ratify the investment by Golden Star shareholders has been scheduled for mid-September.
