Canada's Endeavour Mining, 24.12 percent owned by the Sawiris family, announced on Monday it had agreed to buy Teranga Gold Corp. in the latest deal to reshape the mining sector. Last week, Endeavour said it was discussing a "merger of equals style" deal with Teranga after the talks were first reported by Bloomberg. Endeavour will be offering 5.1 percent premium to Teranga's closing price on Friday, valuing its equity at C$2.44 billion ($1.86 billion), according to Bloomberg calculations. Under a definitive agreement, the existing Endeavour and Teranga shareholders will own approximately 66 percent and 34 percent, respectively, of the combined company on a fully diluted in-the-money basis, Endeavour said in a statement. Pursuant to the plan of arrangement, Teranga common shares will be exchanged at a ratio of 0.470 Endeavour ordinary shares for each one Teranga common share (the Exchange Ratio). The Exchange Ratio represents a modest premium of 5.1 percent based on the closing price of Endeavour and Teranga's shares on the TSX on November 13, 2020 and 9.4 percent based on the 20-day volume weighted average price of both companies for the period ended November 13, 2020, the statement read. "This combination offers an attractive opportunity to both sets of shareholders. 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." Sébastien de Montessus, president and CEO of Endeavour, said. "The combined entity will become a new senior gold producer and enjoy an improved capital markets profile, underpinned by a healthy balance sheet and strong cash flow capabilities to support a sustainable dividend." "This transaction is immediately accretive to our shareholders on a NAV basis and broadly CFPS and EPS neutral over the next two years. It will be strongly accretive from 2023 when Sabodala-Massawa is ramped up into a top asset in the region while immediately adding geographic diversification into mining-friendly Senegal." "The Wahgnion mine provides immediate cash flow and the rapidly advancing Golden Hill and Afema projects offer further growth optionality. 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." Meanwhile, Richard Young, president and CEO of Teranga, said: "We have taken Teranga from a single asset producer to a low cost, mid tier gold producer over the past few years." "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." Teranga is a low cost, mid-tier gold producer in West Africa with two producing gold mines and an attractive growth pipeline in Senegal, Burkina Faso, and Côte d'Ivoire. Teranga is expected to produce 533,000 ounces of gold per year at average all-in-sustaining costs of $785 per ounce throughout the next five years. Endeavour is a leading West African gold producer with six mines across Burkina Faso and Côte d'Ivoire with a production profile of over 1 million ounces at below $900 per ounce. Endeavour-Teranga Agreement to create a new top 10 senior gold producer The combination creates a new top ten senior gold producer with average annual production of more than1.5Moz per year with industry-low production costs. The combined entity will be diversified across six core operating mines in three countries, and strategically positioned as the largest gold producer in each of Senegal, Côte d'Ivoire, and Burkina Faso. It will also have an industry-leading development pipeline of six greenfield projects (Fetekro, Golden Hill, Afema, Kalana, Bantou, and Nabanga) and the largest exploration portfolio across the underexplored West African Birimian Greenstone Belt.
