Endeavour Mining Corp. confirms merger discussions with C$2.2bn Teranga Mining

ENDEAVOUR Mining Corporation said it was in ‘merger of equals’ discussions with the 375,000 to 400,000 ounce a year gold producer, Teranga Mining Corporation.

“These discussions may or may not result in an agreement in respect of a potential transaction,” said Endeavour in a statement in which it added that a transaction would only be pursued if it was “compelling”.

It declined to comment further.

Shares in Teranga Mining were last trading in Toronto at C$13,14 valuing the company at C$2.2bn ($1.69bn). Endeavour, which is also listed on the Toronto Stock Exchange, is capitalised at C$5,25bn.

A combination of Endeavour and Teranga would create a firm producing between 1.37 million to 1.5 million oz of gold annually with a diverse spread of geographies spanning Burkina Faso and Côte d’Ivoire to Senegal.

Last year, Teranga bought the Massawa mine in Senegal for $430m in cash and shares from Barrick Gold. The mine is being developed to form a single complex with Teranga’s Sabodala mine. It also operates Wahgnion mine in Burkina Faso.

Commenting in a third quarter results announcement today, Teranga said production increased 69% year-on-year to a record 104,773 oz. Owing to elevated dollar gold prices, the firm booked a $9.2m attributable net profit, equal to about five US cents/share compared to a net loss of $9.7m or 9c/share a year ago.

“The third quarter was record-breaking for Teranga as we started mining high-grade ore at Massawa, delivered solid results at Wahgnion and realised strong gross profit, earnings and cash flow,” said Richard Young, President and CEO of Teranga. “We expect to complete our transformation into a low-cost mid-tier producer by year end and will continue to advance our organic growth pipeline in pursuit of our third mine,” he said.

Endeavour Mining has been on an aggressive growth push by acquisition over the last 12 months. In December last year, it went public with plans to merger with Centamin, the UK-listed firm operating Egypt’s Sukari mine.

That offer was eventually repelled by Centamin, but two months later it unveiled an all-share merger with SEMAFO, a Toronto-listed firm operating in Burkina Faso in which gold production was taken to about a million oz annually.

Were a merger to take place with Teranga it may pose questions regarding how Endeavour plans to reward its long-standing shareholders.

Sébastien de Montessus, CEO of Endeavour Mining, hinted in August that the adoption of a dividend policy might be imminent. “The dividend is the right instrument to put in place once we are net cash, which can come quite quickly depending on the gold price,” he said.

Endeavour is due to announce its third quarter numbers on Thursday.