FOLLOWING an incident-filled 12 months, which Endeavour Mining looks set to end scoring two out of three proposed takeover deals, CEO Sébastien De Montessus, said he was content establishing a 1.5 million ounce a year gold producer, effectively bringing the curtain down on additional merger and acquisition activity.
“One point five million ounces is probably spot on as you need to replace those ounces every year in reserves which is about three million ounces in resources,” said De Montessus when asked about future growth in a conference call today.
His firm had earlier announced a definitive agreement with Teranga Mining for its all-share acquisition. Endeavour alerted investors to the possible combination of the two Toronto-listed firms on November 10. In April, Endeavour bought SEMAFO, another Canadian firm with assets in Burkina Faso. Nearly a year ago, it went public with plans to buy Centamin, a UK-listed firm that operates the Sukari mine in Egypt. Centamin rejected the offer.
De Montessus also disclosed today that investors had reservations about his firm’s exposure to Burkina Faso, the West African country which has shown itself vulnerable to jihadist insurgence, the most tragic of which was in November 2019. Scores of SEMAFO’s employees were injured, and 37 were killed following an attack on a convoy heading towards one of its mines.
“Geography was the missing point post the SEMAFO deal as investors felt we were exposed to Burkina Faso. We did not think so because we are comfortable there,” said De Montessus. “This merger ticks that box,” he said. “This [acquisition] has everything we need to grow organically.”
Among near-term projects for the combined Endeavour/Teranga is either one of Fetekro or Kalana, projects currently the subject of pre-feasibility studies with a view to building a mine in 2022. Teranga brings another prospect called Golden Hill which De Montessus said could become a satellite deposit to Houndé, a 250,000 oz/year mine Endeavour operates in Burkina Faso.
De Montessus said that including Golden Hill and the existing resource renewal potential of Houndé, the area would create a “new, world class gold belt”.
PERSONALITIES
The combination of Endeavour with Teranga also sees as backdrop the assemblage of interests held by some of the African continent’s staunchest gold bulls in the form of 24% Endeavour shareholder La Mancha, owned by Naguib Sawiris, as well as Teranga’s shareholders Barrick Gold, led by Mark Bristow, and David Mimram, who is owner of Tablo Corporation. The latter two companies will have shares totalling 4% and 7% of the combined unit respectively.
De Montessus acknowledged Barrick’s strategy was to realise value progressively, over time, but he did not think this, nor Mimram’s diluted share in the combined company, represented a potential overhang in Endeavour shares. “He is a personal friend and he is committed to the transaction,” said De Montessus of Mimram.
Richard Young, CEO of Teranga Mining, said Barrick and Tablo were backers of the transaction. “As we moved to becoming a mid-stream producer, we had options that would have involved [paying a] premium,” said Young alluding to Teranga’s own growth ambitions.
“Of all the options, they [Barrick and Tablo] were most in favour of this. They are not only happy, but they fundamentally believe in the re-rating of Endeavour shares,” he said.
LONDON LISTING
The premium listing of Endeavour on the London Stock Exchange, announced simultaneously with the definite agreement to take over Teranga today, would help trigger the re-rating, De Montessus said. The combined firm lagged its peer group on a number of metrics, but the trigger would be a possible inclusion in the FTSE 100 Index which would attract tracker funds, he said.
The listing was likely to be finalised at the close the firm’s second quarter in mid-2021 at around the same time it paid a second dividend – the first in which the combined firm’s new shareholders would participate, said De Montessus.
Endeavour Mining unveiled plans to pay a maiden dividend of $60m, equal to a dividend yield of 1.6%, on conclusion of its financial year. It also installed the 1.6% dividend yield as the benchmark for future dividends, to be paid semi-annually, until a kitty of $250m was established – a development that would trigger a reassessment of its payout policy.
