Endeavour Mining Corporation (TSX:EDV) (OTCQX:EDVMF) announced on Monday that it will acquire all of the issued and outstanding shares of Canadian gold producer SEMAFO (TSX, OMX: SMF). With this C$1-billion transaction Endeavour and Semafo will create one of the top 15 global gold producers, the largest gold company in West Africa.
The transaction brings together a portfolio of six mines with production estimated at over 1 million ounces a year, making it larger than Newmont Goldcorp, Barrick and Goldfields in West Africa.
Endeavour shareholders will own 70% of the combined entity while SEMAFO’s shareholders will hold the rest. La Mancha, Endeavour’s largest shareholder, will invest $100-million in the new gold producer whilst reducing its stake in Endeavour from 31% to 25% to provide for larger free float and greater stock liquidity.
According to Endeavour CEO Sébastien de Montessus, the merger has significant synergies and benefits to the shareholders of both companies. “With both companies having recently completed build-out phases and mine ramp-ups, the combined business is well positioned for a sustained period of strong cash flows. Our enhanced capital markets profile should provide added trading liquidity, free float and size, characteristics that investors are seeking in today’s market environment, and we will continue to allocate capital in a disciplined and efficient manner with a focus on maximising shareholder returns.”
The union of the two companies also provides a much stronger base in dealings with governments and key stakeholders and brings together experienced management teams with complementary skills. Synergies are also obtained on the corporate and asset level through optimised procurement and supply chains, centralised technical services and enhanced security measures.
“With both companies having recently completed build-out phases and mine ramp-ups, the combined business is well positioned for a sustained period of strong cash flows.”
Benoit Desormeaux, President and CEO of SEMAFO, stated, “This transaction has received strong support from our key shareholders who recognise it as an exciting value creating opportunity to bring together two companies with common values and shared cultures built on decades of successful West African experience. For our shareholders, this transaction offers the benefits of both an upfront premium and a significant re-rating opportunity within a stronger merged company.”
Since November 2019, SEMAFO’s shares have halved in value after employees of the company’s ‘Boungou’ mine in Burkina Faso were attacked by a militant group causing the death of 39 people and halting operations at the facility.
See also: Interview with Endeavour Mining President & CEO
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