Centamin may view Endeavour offer with fresh eyes following Rutherford appointment

Jim Rutherford

THE appointment of a new deputy chairman at Centamin might see the Egyptian gold producer become more receptive to the merger proposal submitted by Endeavour Mining, according to a report by RBC Capital Markets.

Centamin announced today that former investment banker, Jim Rutherford, would replace outgoing deputy chairman, Ed Haslam and that the firm’s CFO since 2018, Ross Gerrard, is to be the firm’s interim CEO whilst is seeks a permanent replacement for Andrew Pardey.

Rutherford, who currently serves on the board of Anglo American as a non-executive director, will become chairman of Centamin at the end of 2020, replacing Josef El-Raghy, the current chairman who announced his intention to step down in early 2019.

El-Raghy made no mention of Endeavour’s merger proposal, made public on December 3 after previously failing to engage Centamin in talks. Instead he said the board’s focus “… remains on supporting management to further improve … operational performance and drive value-creating opportunities”.

Pardey will step down from the company with immediate effect. After steering the company to some stand-out performances, the last two years of his four year tenure as CEO have been dominated by under-performance of the firm’s single asset, Sukari, situated in Egypt.

RBC Capital Markets said in a commentary today that it hoped the appointment of Rutherford signalled the firm’s intention to look at Endeavour’s all-share merger proposal with fresh eyes. “We hope that a fresh perspective could help encourage Centamin’s board to engage with Endeavour around the recent potential for an all-share offer for Centamin.”

It added that investors were increasingly sceptical of single-asset gold companies, preferring less risky diverse companies with assets in several different jurisdictions. “We await further news on potential appointments, most likely in early 2020,” it said.

Centamin rejected Endeavour’s merger proposal because its shareholders would own 47% of the combined unit, but contribute 100% of the free cash flow and dividend distributions, based on historic performance.

“The board strongly believes that Endeavour’s proposal significantly increases financial and operating risk without any material benefits to our shareholders,” said El-Raghy on December 4 when the company submitted a more fulsome rejection of the proposal. Centamin had paid out $500m to shareholders since 2014 whereas Endeavour had not yet approved a dividend policy.

In terms of the merger proposal submitted by Endeavour, there is a 28-day period of ‘put up or shut up’ in terms of UK Takeover Panel regulations. Thereafter, Endeavour may take the matter to a formal hostile takeover attempt.

On December 3, Endeavour made public a proposal for an all-share merger with Centamin equal to a 5% premium to the 30-day volume-weighted average price. This represented a 13.1% premium to Centamin’s share price as of its December 3 close – a proposed offer of some £1.48bn.


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