Endeavour Mining unveils merger with SEMAFO to create 1 million oz/year gold producer

Sebastien de Montessus, president and CEO, Endeavour Mining

ENDEAVOUR Mining injected fresh life into its expansion ambitions unveiling today a definitive agreement for an all-share merger with SEMAFO, a Toronto-listed firm operating in West Africa’s Burkina Faso.

Endeavour’s plans for a combination with Centamin, a UK-listed firm that mines in Egypt, came to nought in January, but a special committee formed by SEMAFO to assess Endeavour’s subsequent approach said it had given approval to an offer that valued the company at about C$1bn assuming Endeavour’s closing price on March 20.

The offer – consisting of 0.1422 Endeavour shares per SEMAFO share – represented a 27.2% premium to SEMAFO’s 20-day volume weighted average share price. Endeavour shareholders will own about 70% of the combined company with SEMAFO shareholders controlling the balance.

Benoit Desormeaux, president and CEO of SEMAFO, said shareholders were in support of the offer which had been under discussion since the beginning of 2019 with a view to a May 2019 conclusion. Merger discussions resumed in February.

Endeavour’s 31% shareholder, La Mancha, which is controlled by the Egyptian telecoms mogul, Naguib Sawiris, had promised to invest $100m into the combined company in order to maintain a 25% stake, down from the 31% he owns in Endeavour currently. Some 31.8% of Endeavour’s shareholders including management, supported the proposal. The transaction requires a two-thirds majority support of SEMAFO shareholders.

Endeavour Mining CEO, Sébastien De Montessus, will be CEO of the new company whilst Desormeaux, will be its chairman. The corporate offices would be headquartered in SEMAFO’s home town of Montreal, Canada. The combined company would have a board of 10 directors consisting of eight directors drawn from Endeavour Mining and the balance representing SEMAFO.


If approved by shareholders of Endeavour and SEMAFO – the transaction is earmarked for a second quarter conclusion – the combined company will have one million ounces a year in gold production, although current pro forma output is closer to 800,000 oz. At one million oz/year, the combined company will become one of the 15 largest gold producers globally.

“With both companies have recently completed build-out phases and mine ramp-ups, the combined business is well positioned for a sustained period of strong cash flows,” said De Montessus in a conference call today. Liquidity would be boosted to $508m, of which about $400m would be in cash. The combined firm’s net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) will come in at around 0.7x.

The heart of the merged company would consist of four mines: Endeavour’s Ity and Houndé in Côte d’Ivoire and Burkina Faso respectively, and the Boungou and Mana mines from SEMAFO, both in Burkina Faso.

Endeavour also operates the Agbaou mine as well as Karma mine in Burkina Faso. “We have a cautious approach on Karma. It was the lowest priority asset,” said De Montessus. Endeavour impaired the mine which was then being assessed at a gold price of $1,700/oz. “It is now at $1,500/oz,” remarked De Montessus of the gold price.


The news of the merger provides some welcome distraction from the stream of downbeat headlines regarding temporary mine curtailments and closures in the wake of the COVID-19 pandemic. Commenting on the timing of the transaction, De Montessus said it was “perfect” as both companies had recently completed capital intensive projects and expected to generate cash.

De Montessus said dividend payments were on the radar. “It’s a bit premature to talk about it now given the financial and COVID-19 crisis. Let’s wait for the closing of merger,” he said adding that Endeavour’s thinking “had not changed” on cash returns to shareholders.

He was similarly measured about sanctioning a UK listing in the future “We said we needed a bigger size (before listing) which this transaction gives us,” he said.


The merger will raise eyebrows insofar as Endeavour may be exposing itself to increased geopolitical risk.

Although Endeavour already operates in Burkina Faso, it was at SEMAFO’s Boungou mine in the eastern part of the country in November that 37 employees were killed in an ambush by an Islamic extremist group. The employees had been travelling to the mine in a convoy. A further 60 people were wounded.

The mine has not been operating since – and may explain SEMAFO’s willingness to enter into merger discussions – although resumption of activities has been targeted for the fourth quarter. Desormeaux said the two companies would work on options regarding whether Boungou was mined in-house, or by contractors.

Said De Montessus: “We are confident with the arrangements and that a restart of the mine is achievable in the fourth quarter. We have had some sensible discussions with contractors whom we also know well. So I am reasonably comfortable and confident that can be achieved quickly.”