Endeavour Mining Corporation (TSE:EDV) (OTCMKTS:EDVMF) (FRA:E5Y1) is acquiring West Africa-focused gold miner Teranga Gold Corporation (TSE:TGZ) (OTCQX:TGCDF) (FRA:0TGA) in a C$2.4 billion deal to form a top 10 gold producer.
The news confirms speculation last week that Endeavour would buy Teranga, a low-cost, mid-tier gold producer with two producing gold mines in Burkina Faso and Senegal to complement Endeavour’s six gold mines in West Africa.
Once the deal is finalized, the combined company will boost its gold production to more than 1.5 million ounces per year and boast one of the largest exploration portfolios throughout West Africa’s Birimian greenstone belt.
READ: Endeavour confirms that it is in talks with Teranga Gold regarding a potential merger of equals
As part of the term sheet, Endeavour is offering 0.47 of its own shares per Teranga share, a 5.1% premium to Teranga based on the November 13 closing price on the TSX and 9.4% premium based on the 20-day volume weighted average price of both companies by November 13, 2020, giving existing Endeavour and Teranga shareholders about 66% and 34% ownership of the combined company, respectively.
Major Endeavour shareholder La Mancha will invest an additional US$200 million into the company, while Teranga’s largest shareholder Barrick has indicated its support for the deal.
Endeavour CEO Sébastien de Montessus told shareholders the deal gives both sets of shareholders a better capital markets profile with a healthy balance sheet and strong cash flow to support dividend payments.
“By combining our complementary assets, we will enhance our strategic position on West Africa’s highly prospective Birimian Greenstone Belt and we will have the ability to deliver material synergies,” the CEO said in a statement. “The Teranga management team has done an outstanding job unlocking value and we look forward to continuing to deliver returns for shareholders through the creation of a business with outstanding prospects.”
READ: Endeavour Mining posts strong third quarter, as it declares maiden dividend and extends mine life at two flagship assets
Teranga has evolved from a single-asset company to a mid-tier gold producer over the past few years, its CEO Richard Young touted.
“This combination with Endeavour, strongly supported by our two largest shareholders, allows Teranga shareholders to benefit from an improved valuation as owners of a best in class senior gold producer with among the lowest costs as well as among the best balance sheet, free cash flow yield, growth pipeline and dividend yield.”
The deal is expected to close in 1Q 2021.
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